Application u/s 9 of IBC Based on Arbitral Award Cannot be Admittted After 3 Yrs from Date of Award: NCLT [Read Order]
The bench found that the MSME Council Awards were passed in 2011 and had attained finality in 2013, whereas the present Application was filed on 23.03.2022.
![Application u/s 9 of IBC Based on Arbitral Award Cannot be Admittted After 3 Yrs from Date of Award: NCLT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/Arbitral-Award-IBC-NCLT-TAXSCAN.jpg "Application u/s 9 of IBC Based on Arbitral Award Cannot be Admittted After 3 Yrs from Date of Award: NCLT [Read Order]")
The National Company Law Tribunal (NCLT) Mumbai bench has ruled that, in accordance with Article 137 of the Limitation Act, 1963 (Limitation Act) read with Section 238A of the Code, an application submitted under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) based on an arbitral award rendered in favor of the operational creditor cannot be admitted after three years from the...
The National Company Law Tribunal (NCLT) Mumbai bench has ruled that, in accordance with Article 137 of the Limitation Act, 1963 (Limitation Act) read with Section 238A of the Code, an application submitted under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) based on an arbitral award rendered in favor of the operational creditor cannot be admitted after three years from the date of the award.
The Corporate Debtor purchased packaging materials from Haabia Resources Private Limited, the Operational Creditor, between 2006 and 2008, but it had not paid down its outstanding debts. As a result, the Operational Creditor filed an arbitration case with the Andhra Pradesh Micro, Small, and Medium Enterprises Council (MSME Council) against the Corporate Debtor.
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In a notice issued by the Reserve Bank of India (RBI), the MSME Council ruled in favor of the Operational Creditor on February 26, 2011, and ordered the Corporate Debtor to pay ₹72,48,465 and ₹6,96,608 with compound monthly interest at a rate three times the bank rate.
The Operational Creditor requested that the Corporate Insolvency Resolution Process (CIRP) be started in relation to the Corporate Debtor under Section 9 of the Code since the Corporate Debtor had failed to pay its outstanding debts. Under Sections 65 and 76 of the Code read with Rule 11 of the National Company Law Tribunal Rules, 2016, the Corporate Debtor filed IA (I.B.C) No. 2362/MB/2023 on April 10, 2023, to contest the maintainability of the current application on the grounds of limitation, lack of debt, and default by the Corporate Debtor.
Under Section 76 of the Code, the Corporate Debtor further requests that the Operational Creditor and its directors be punished with the highest possible penalty for providing false information in the application that was submitted to this tribunal. Prior to the demand notice dated January 12, 2019, the Operational Creditor argued that the Corporate Debtor had not given any notice of any disputes or the pending suit or arbitration proceedings. Despite the fact that the Corporate Debtor responded to the Operational Creditor's demand letter, it was not completed within the allotted ten days.
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Additionally, it was claimed that the Corporate Debtor had not paid the Operational Creditor any sum in complete and final payment for its operational debt. The amount owed by the Corporate Debtor to the Operational Creditor was unaffected by the Consent Terms.
In contrast, the Corporate Debtor argued that the application was barred by limitation because the MSME Council Awards were issued by the MSME Council through an order dated 26.02.2011, and the current application was filed on 23.03.2022, which is significantly past the three-year statute of limitations stipulated in Article 137 of the Limitation Act, 1963.
Furthermore, it was argued that because the Corporate Debtor's assets and obligations had already been transferred to the SPCPL under the terms of the Business Transfer Agreement (BTA) dated December 30, 2010, it was not liable to the Operational Creditor with regard to the MSME Council Awards. During the restructuring process, the aforementioned BTA was signed between Supermax Personal Care Private Limited (SPCPL) and the Corporate Debtor.
Last but not least, it was argued that the Operational Creditor's claims against the Corporate Debtor & RCC Sales Private Limited (RCC) under the MSME Council Awards were misplaced because it had already received Rs. 1,90,00,000/- in full and final settlement from SPCPL, which was nearly equal to its claims under the MSME Council Awards.
After the Corporate Debtor withdrew its appeal before the Supreme Court on March 11, 2013, the Tribunal observed that the MSME Council awards against the Debtor, which had been issued on February 23, 2011, had become final.
The bench of Shri K. R. Saji Kumar (Judicial Member) and Shri Sanjiv Dutt (Technical Member) observed that the current application was submitted on March 23, 2022, after the three-year statute of limitations stipulated in Article 137 of the Limitation Act. As a result, the Operation Creditor's argument that Article 136 of the Schedule to the Limitation Act applies in this particular case cannot be recognized because Code proceedings are not related to the execution of decrees.
While rejecting the appeal, the bench found that the MSME Council Awards were passed in 2011 and had attained finality in 2013, whereas the present Application was filed on 23.03.2022. Hence, the Application is clearly hit by Section 238A of the Code read with Article 137 of the Limitation Act.
To Read the full text of the Order CLICK HERE
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