Super Floorings Private Limited Vs Napin Impex Limited
Recently, NCLAT delivered a landmark judgment on January 03, 2025 in the case of Super Floorings Private Limited v. Napin Impex Limited. The matter pertained to issues with respect to unpaid claim and the limitation of raising claim under the Insolvency and Bankruptcy Code (IBC), 2016. The primary question in this instant matter was whether or not the payment which is to be made by Super Floorings Private Limited would, in any case, grant additional time to Napin Impex Limited to invoke law of insolvency.
The factual context in brief is as given hereinafter. Napin Impex Limited is a company which primarily deals in production and trade of PVC vinyl floorings, multipurpose sheets and other allied insulation products for automotive and other industries. It supplied certain products to Super Floorings Private Limited during January 03, 2018 – August 16, 2018. The contract of such supply had a specific provision with respect to timely payment within a stipulated time specified therein. However, certain payments were made including the last payment of Rs. 3 lakh which was made through a bank transfer on August 26, 2019. Though, substantial amount of the same still remains unpaid. Thereafter, upon failure to make such payments, Napin Impex sent a notice under Section 8 of the IBC on September 16, 2022 for an amount of Rs. 2,14,16,735. The Super Floorings contested the claim through its reply dated September 28, 2022 asserting that the same was overdue under the Limitation Act, 1963.
Subsequently, Napin Impex filed an application under Section 9 of the IBC on November 29, 2023, to initiate insolvency proceedings against Super Floorings. The primary contention was that the claim pertains to the invoices issued during January to August 2018, and therefore the limitation period has elapsed in July 2023. The company further contended that the last payment was made on August 26, 2019 and further extension in any case, cannot be granted as there exists no continuous financial arrangement between the parties. Subsequently, Super Floorings vehemently argued that as per Section 19 of the Limitation Act, 1963, a payment can result in extension of limitation period only in case the same is acknowledged in writing, not otherwise and no such acknowledgement was made.
However, Napin Impex did not concur with the aforestated submissions. On the contrary, it argued that on August 26, 2019 the payment would be considered as an acknowledgement of debt. As per section 19 of the Limitation Act, where payment is made against a debt within the stipulated time, the period of limitation usually commences from the date of payment. Further,
Napin Impex emphasized upon a ruling of the Hon’ble Supreme Court in In Re: Cognizance for Extension of Limitation suo motu writ Petition (C) No. 3 of 2020 which extended limitation periods in light of the issues arising out of COVID-19, in between March 15, 2020, and February 28, 2022, and held that the same shall not be reckoned while calculating the limitation period. Following this would result in the fact of extension of period till August 10, 2024 and as Napin Impex had filed its application on November 29, 2023, accordingly it was well within the limitation period.
Upon careful perusal of the submissions made and evidence produced, the NCLAT ruled in favour of Napin Impex’s which created an acknowledgment under Section 19 of the Limitation Act. The tribunal also ruled that in its response to the demand notice of September 28, 2022, Super Floorings had acknowledged the final payment. Considering this acknowledgment and the ruling of Supreme Court in this regard, the tribunal ruled that Napin Impex had made its claim within time.
The NCLAT concurred with the previous order of the National Company Law Tribunal (NCLT) and allowed the insolvency process to continue. This case is significant in the light of application of limitation especially in insolvency proceedings. It further illustrates that where a company makes payments in part and seeks for additional time for further payments, the statutory time for filing legal proceedings may be extended. This is primarily to restrict companies from building technical loopholes to evade financial obligations. It also enlightens the impact of the Supreme Court’s COVID-19 ruling, which transformed the manner of calculation of limitation during the pandemic.
This decision cautions businesses to keep accurate financial records and to act promptly when they are called to do so. It further brings to light the fact that businesses in debt, that even a small fraction of payment can revive the limitation period. In generic sense, this decision protects the interests of creditors and emphasizes the importance of being financially cautious in business dealings.
FULL JUDGEMENT – https://ibbi.gov.in/uploads/order/e8c390c2d1f06b62f65ce9426f9862fc.pdf