Paradise Consumer Products Ltd. vs J. Maheshkumar Petrochemichals Pvt. Ltd.

Per: Justice Rakesh Kumar Jain: (Oral)

This Appeal is directed against the order dated 23.09.2020 passed by the National Company Law Tribunal, Mumbai Bench – IV, in C.P. (IB) No. 476/MB.IV/2018, by which an application filed by Respondent under Section 9 of the Insolvency and Bankruptcy Code, 2016, (for short `the Code’) against the Appellant for the Resolution of an amount of Rs.52,94,356/- (principal) and Rs.28,43,287.77/- as (interest) has been admitted.

Counsel for the Appellant has submitted that the application filed under Section 9 is `barred by Limitation’. He has referred to the application filed by the Respondent (CD) on the prescribed form in which the following averments have been made:

It is submitted that the case setup by the CD is in respect of 10 invoices and the due date for the payment of the last invoice is 19.09.2014, whereas the application under Section 9 has been filed on 13.12.2018, beyond the period of three years as envisaged under Article 137 of the Limitation Act, 1963 (`the Act’) and is thus `barred by Limitation’.

It is alleged that the Appellant had issued a cheque dated 10.11.2015 for an amount of Rs. 65,54,884.87/-, which also do not attract the provision of Section 18 of the Act because if the Limitation is to be counted from 10.11.2015 of a period of three years then it would come to an end on 10.11.2018 whereas the Petition had been filed on 13.12.2018. It is also submitted that the Respondent filed a Complaint under the Negotiable Instrument Act, 1881, (`the Act of 1881’) before the Court of Metropolitan Magistrate, 33^rd Court, Ballard Pier, Mumbai registered as CC No. 1815/SS/2016 which has been dismissed inter alia on the ground that the alleged cheque was found to be forged and fabricated.

On the other hand, Counsel for the Respondent has submitted that the Appellant has not taken the defence of limitation either in the Reply to the Demand Notice or in the Reply to the application filed under Section 9, therefore, he is not permitted to raise this objection in Appeal.

He has further submitted that the Respondent was appointed as a Del Credere Agent of Reliance Industries Limited. He had made the payment to the Reliance Industries Limited of the goods supplied to the CD and then he had to recover the said amount from the CD. It is further submitted that the question of Limitation is a mixed question of law and fact. Had the Appellant pleaded this fact that the application filed by the Respondent is beyond the period of Limitation, the Respondent would have setup his defence along with relevant documents to show that the Petition filed under Section 9 was within the period of three years.

He has further submitted that the Order passed by the Metropolitan Magistrate has further been challenged by the Respondent in an Appeal which is still pending, therefore, it is yet to be established as to whether the cheque dated 10.11.2015 was actually forged or not.

We have heard Counsel for the Parties and perused the record with their able assistance.

There is no dispute that a Petition under Section 7 or 9 has to be filed within a period of three years in terms of Article 137 of the Act and the period of three years is to be counted from the date when the default had occurred. It is also not in dispute that the Appellant had not taken the defence either in their Reply dated 27.11.2018 filed to the Demand Notice dated 06.11.2018 or in the Reply filed to the application under Section 9. However, it is a well settled that the plea of Limitation can still be setup in Appeal in view of Section 3 of the Act which provides that `subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence’.

In view of the provision mentioned hereinabove of the Act, the plea of Limitation can be setup in defence even in the Appeal if it is not setup before the Tribunal.

Be that as it may, since the question of Limitation is a mixed question of law and fact, therefore, the Appellant was required to setup his defence. In this case, the Respondent has submitted that had the question of Limitation been setup by the Appellant in defence before the Tribunal, he would have led evidence to prove that the period of Limitation had not expired in view of the fact that he had made the payment to the Reliance Industries in the Year 2015 etc., and on the basis of which the Resolution is being sought about the aforesaid invoices. The other thing is that the Memo of dishonoured cheque is dated 18.12.2015.

Keeping in view the aforesaid facts and circumstances of this case and that the issue of Limitation is to be decided after allowing both the Parties to lead their evidence, if any, we find it just and expedient to set aside the impugned order and remand the case back to the Tribunal to decide the question of Limitation by affording the Parties an opportunity to lead evidence in support of their case, if any. The Parties are directed to appear before the Tribunal on 26^th February, 2024. It is needless to mention that we have not expressed our opinion on the merit of this case.

Counsel for the Appellant has submitted that with the passing of the Order in Comp. App. (AT) (Ins.) No. 901/2020, the present Appeal has become infructuous.

Dismissed as infructuous.