The Supreme Court in its order passed on February 04, 2022 in the matter M/s. Consolidated Construction Consortium Limited vs. M/s. Hiltro Energy Solutions Private Limited, relying on the case of B.K. Educational Services (P) Ltd vs. Parag Gupta & Associates, observed that limitation under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC”) (i.e., for filing of application for initiation of corporate insolvency resolution process by operational creditor) does not commence when the debt becomes due but only when a default occurs. The Supreme Court further observed that default is defined under Section 3(12) of the IBC as the non-payment of the debt by the corporate debtor when it has become due.

In the instant case, the appellant – Consolidated Construction Consortium Limited placed orders with the Proprietary Concern (which was later taken over by the respondent M/s. Hiltro Energy Solutions Private Limited). The Proprietary Concern was the supplier of Thorn Lighting India Private Limited. The appellant has placed order through three purchase orders dated June 24, 2013. The contention raised in this case was that the date of default mentioned is November 7, 2013, when the cheque was issued to the Proprietary Concern and therefore the limitation of three years under Article 137 of the Limitation Act would expire on November 7, 2016. However, the application under Section 9 was filed only on November 1, 2017.

The Supreme Court noted that both the parties were in negotiation in relation to the re-payment and the minutes of meeting show that the Proprietary Concern was willing to make the re-payment if the appellant issued a letter stating that it would not pursue a claim in the future or if the applicant provided a bank guarantee for the amount.

The court further observed that a final letter was addressed by the appellant to the Proprietary Concern on February 27, 2017, demanding the payment on or before March 4, 2017. The Proprietary Concern replied to this letter on March 2, 2017, finally refusing to make re-payment to the appellant.

Consequently, the application under Section 9 of IBC which was filed on November 1, 2017, approximately eight months after the default was committed, would not be barred by limitation.