NCLT Mumbai: 10-Day Demand Notice Period Cannot Be Excluded When Calculating The Limitation Period For Filing A Petition U/S 9 IBC.

The National Company Law Tribunal (“NCLT”), Mumbai Bench, comprising of Mr Kuldip Kumar Kareer (Judicial Member) and Mr Anil Raj Chellan (Technical Member) has dismissed a petition and held that Insolvency and Bankruptcy Code, 2016 (“IBC”) has no provision that a 10-day period of Demand Notice is liable to be excluded while reckoning the period of limitation for filing the petition under Section 9 of IBC.

Background Facts

Gammon India Limited (“Respondent/Corporate Debtor”) is a company registered with the Registrar of Companies, Mumbai.

On 19.01.2010, WPIL Limited (“Applicant”) and the Respondent entered into two Letters of Intent ("LOI"), wherein the Respondent appointed the Applicant as the Sub-Contractor for one of the works under the main contract entered between VISA Steel Limited and the Respondent.

As per the LOI the Applicant, agreed to provide certain materials along with the necessary services to the Respondent.

The Applicant issued running invoices for the payment of materials and services, however, only part payment was made by the Respondent. The last invoice of the Applicant is dated 30.11.2012. Despite the Applicant repeatedly reminding the representatives of the Respondent to clear the debt via emails, the Respondent failed to make payment.

On 7.08.2018, the Applicant sent a notice to the Respondent and demanded the outstanding amount along with interest @ 18% per annum. However, no reply to the notice has been received by the Applicant.

On 09.10.2019, the Applicant filed an Application under Section 9 of IBC against the Respondent for initiation of the Corporate Insolvency Resolution Process (“CIRP”).

Contentions of Applicant

The Applicant argued that the demand notice period of 10 days is liable to be excluded from the period of limitation.

The Applicant referred to the Supreme Court judgement in the matter of Disha Constructions and Ors. Vs. State of Goa and Ors. MANU/SC/1489/2011, whereby it was held that the notice period under Section 80 CPC is liable to be discounted from the period of limitation if the said notice was served within the period of limitation.

Contentions of Respondent

The Respondent opposed the submissions and argued that the Petition should be dismissed as it is barred by time of limitation.

The Respondent further argued that the last invoice of the Applicant is dated 30.11.2012 and the petition was filed on 09.10.2019 which is barred by time as per the Limitation Act, 2016.

The Respondent further argued that email exchange between the parties cannot be treated as acknowledgments on the part of the Respondent and even if the email dated 07.10.2016 is taken into consideration the petition is still barred by time.

NCLT Verdict

NCLT dismissed the petition and held that the IBC has no provision that a 10-day period of Demand Notice is liable to be excluded while reckoning the period of limitation for filing the petition under Section 9 of IBC.

It is well settled that the IB Code of 2016 is a complete code in itself, there is no provision in the Code that the period of demand notice is liable to be excluded while reckoning the period of limitation for filing the Petition under Section 9 of the Code.

Case Title: WPIL Limited vs Gammon India Limited

Case No.: C.P. (IB) 3621/MB/2019

Counsel For Operational Creditor: Adv. Akshay Doctor a/w Counsel, Sunil A. Vyas and Deep Morabia

Counsel For Corporate Debtor: Adv. P. G. Sabnis

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