Supreme Court Clarifies Limitation Period for Operational Claims in Insolvency Cases In a pivotal ruling in March 2023, the Supreme Court of India provided much-needed clarity on the limitation period applicable to operational claims arising from multiple invoices under the Insolvency and Bankruptcy Code, 2016 (I&B Code). The decision, delivered by a division bench in the case of **M/s. Next Education India Pvt. Ltd. vs. M/s. K12 Techno Services Pvt. Ltd.**, establishes a crucial precedent for how adjudicating authorities should approach the limitation period when dealing with petitions filed under Section 9 of the I&B Code.

Facts of the Case M/s Next Education India Pvt Ltd (Operational Creditor) supplied digital classroom services to M/s K12 Techno Services Pvt Ltd (Corporate Debtor) over a span of several years, specifically from March 12, 2011, to June 30, 2017. In the course of providing these services, the Operational Creditor issued a total of 187 invoices. Due to non-payment by the Corporate Debtor, the Operational Creditor issued a Demand Notice under Section 8 of the I&B Code, citing March 12, 2011, the date of the first invoice, as the date of default. Subsequently, the Operational Creditor initiated proceedings under Section 9 of the I&B Code, listing June 30, 2017, the date of the last invoice, as the date of default. However, the National Company Law Tribunal (NCLT) dismissed the petition on the grounds that the claim was time-barred. The National Company Law Appellate Tribunal (NCLAT) upheld the NCLT’s decision, reasoning that the Section 9 petition derived from the Section 8 Demand Notice and thus the limitation period should start from March 12, 2011, rendering the claim time-barred as of March 12, 2014.

Supreme Court’s Decision The Supreme Court set aside the decisions of both the NCLT and the NCLAT. The apex court held that the adjudicating authorities should not have considered March 12, 2011, as the starting point of the limitation period. Instead, the authorities should have taken into account the subsequent invoices raised within three years preceding the date of filing the Section 9 petition. The Supreme Court’s judgment emphasized that when determining the limitation period for a Section 9 petition based on multiple invoices, the adjudicating authority must consider the invoices raised within the three-year period immediately preceding the petition’s filing date. This approach ensures that claims based on more recent invoices are not unfairly dismissed due to older, time-barred invoices.

Implications of the Ruling

1. Clarity on Limitation Period: The Supreme Court’s ruling provides clear guidance on how to calculate the limitation period for operational claims under the I&B Code, ensuring that more recent claims are considered on their merits even if older invoices are time-barred.

2. Protection for Creditors: This decision protects the rights of operational creditors by allowing claims based on invoices raised within the three-year period before the petition’s filing date, promoting fair treatment and avoiding unjust dismissals due to technicalities.

3. Streamlined Adjudication: By clarifying the limitation period, the ruling helps streamline the adjudication process under the I&B Code, enabling faster resolution of insolvency cases and reducing the backlog of disputes. In conclusion, the Supreme Court’s decision in **M/s. Next Education India Pvt. Ltd. vs. M/s. K12 Techno Services Pvt. Ltd.** sets a significant precedent for handling operational claims under the I&B Code, ensuring a fair and just approach to determining the limitation period for multiple invoices. This ruling underscores the importance of considering recent transactions while adjudicating insolvency petitions, thereby safeguarding the interests of operational creditors.