Right To Sue U/S 9 Of IBC Begins When MSME Arbitral Award Becomes Final: NCLAT New Delhi

The MSME Council passed an arbitral award in favor of the appellant in the year 2011. The award was challenged before the city civil court and got dismissed. Then, the appeal was preferred before the Hon'ble Andhra Pradesh High Court, and the Hon'ble court also dismissed the appeal. The appeal against the dismissal was withdrawn from the Hon'ble Supreme Court on 11.03.2013. Hence, it attained finality on 11.03.2013.

The operational creditor issued a demand notice under section 8 of the IBC on 01.12.2019, and after that, it filed an application under section 9 of the IBC. The adjudicating authority dismissed the application, saying that it is time-barred. Hence, this appeal has been preferred by the operational creditor.

The appellant contended that though the award became final in the year 2013, the section 8 demand notice was served in 2019 only; hence, the section 9 application was within the time limit. It submitted that the limitation period should be calculated after expiry of 10 days from the service of demand notice.

The NCLAT observed that the date of issuance of the demand notice cannot be considered as the date for commuting for the limitation purpose of the section 9 application. The tribunal mentioned that the application under section 9 has to be filed in accordance with Article 137 of the Limitation Act, 1963, which prescribes a three-year limitation from the date when the 'Right to Sue Accures'. Here in the present case, the proceedings of the Hon'ble Supreme Court were withdrawn in 2013, and on the same date, the award became final. Hence, the 'Right to Sue Accrues' when the award became final and operative, i.e., the year 2013.

Bench also highlighted that if the limitation has lapsed, then the demand notice cannot give the fresh period of limitation to the operational creditor. Hence, the contention of the appellant with regard to the fresh period of limitation cannot be accepted.

Lastly, it dismissed the appeal and upheld the order of the adjudicating authority.

Case Name: Haabia Resources Pvt. Ltd. vs. Vidyut Metallics Pvt. Ltd.

Case No.: Company Appeal (AT) (Ins) No. 1027 of 2025

For Appellant: Mr. Ajit Anekar a/w Ms. Madhuri Negi, Advocates

For Respondent: Mr. Gaurav Mitra, Mr. Rohan Dakshini, Ms. Shweta Jaydev, Ms. Anjula Bhansali, Mr. Anirudh Bhat, Ms. Lavanya Pathak, Mr. Nirmal Prasad, Mr. Aman Sadiwala and Ms. Abhyarthana Singh, Advocates

Bench: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical)

Order Date: 01.09.2025