In a recent appeal case, the National Company Law Appellate Tribunal (NCLAT) in New Delhi, presided over by Justice Ashok Bhushan as Chairperson and Barun Mitra as Technical Member, delivered a judgment. The NCLAT ruled that an unsigned and unauthenticated statement of accounts attached to an email does not serve as a valid acknowledgement of debt under Section 18 of the Limitation Act. As a result, the Section 9 application, which aimed to initiate the Corporate Insolvency Resolution Process, was correctly dismissed on grounds of being time-barred.
Brief Facts:
The Appellant filed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging an order issued on June 6, 2022, by the Adjudicating Authority (National Company Law Tribunal, New Delhi Court-II) in CP (IB) No. 345 (NB)/2020. The order in question pertained to the dismissal of a Section 9 application filed by M/s G.L. Shoes, an Operational Creditor. The application sought the initiation of the Corporate Insolvency Resolution Process against Action Udhyog Private Limited, the Corporate Debtor. The Operational Creditor alleged that the Corporate Debtor had failed to make payment for the supplied goods and that a demand notice sent to them remained unanswered. The Adjudicating Authority dismissed the application, citing the expiration of the applicable time limit, as it was filed more than three years after the date of the default.
Contentions of the Appellant:
The Appellant's counsel argued that the Operational Creditor supplied footwear to the Corporate Debtor based on purchase orders with a payment due date of July 8, 2016. The Corporate Debtor allegedly defaulted on this payment, and on July 2, 2019, the Operational Creditor issued a demand notice for Rs. 22.26 lakhs, including interest. The Adjudicating Authority dismissed the Operational Creditor's Section 9 application, citing the expiration of the three-year limitation period. The Appellant contended that the Corporate Debtor acknowledged the debt in a May 5, 2017 email, which the Adjudicating Authority deemed invalid. The Appellant's counsel referred to the Sudarshan Cargo Pvt. Ltd. vs. M/s Techvac Engineering Pvt. Ltd case to support the validity of email acknowledgments under relevant laws.
Contentions of the Respondent:
The Respondent's counsel strongly argued against the Appellant's submissions, contending that the operational debt claim is clearly time-barred. They pointed out that the Appellant stated the date of default as July 8, 2016, in Part IV of the application, while the Section 9 application was filed on January 22, 2020, exceeding the three-year limitation period. Therefore, the application was deemed barred by limitation and not maintainable.
Observations by the Commission:
The NCLAT examined whether an unsigned attachment to an email sent from the corporate debtor's account could be considered an acknowledgment of debt. In response, the NCLAT concluded that the absence of a physical signature does not exempt the document from the legal requirements of authentication or the provisions of Section 18 of the Limitation Act, 1963. The NCLAT emphasized that the summary nature of proceedings under the Code does not allow for the adjudication of disputes regarding the authenticity of account statements attached to an email by the Adjudicating Authority. The NCLAT's judgment provides clarity on the validity of electronic acknowledgments in insolvency cases, establishing a precedent for future disputes in similar situations.
Decision of the Commission:
Appeal was dismissed.
Case Title: G.L. Shoes v. Action Udhyog Private Limited
Coram: Justice Ashok Bhushan and Barun Mitra
Case No.: Company Appeal (AT)(Insolvency) No. 846 of 2022
Advocates of the Appellant: Mr. Nitin Kaushik, Mr. Mayank Kshirsagar, Ms. Abha Goel, Advocates
Advocates of the Respondent: Ms. Varsha Banerjee, Mr. Udit Singh, Mr. Kaushik Khetan, Advocates
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