The limitation only kicks in when there is a default and not when the obligation becomes due. In this instance, the respondent still owed the appellant money that it owed. As a result, the appellant filed a CIRP against the respondent in accordance with Section 9 of the IBC, and the court determined that even though three years had passed, the Limitation Act did not prevent it.
In the instant case titled Consolidated Construction Consortium Limited vs. Hitro Energy Solutions Private Limited the issue raised for clarification before the SC was:
Whether the appellant qualifies as an operational creditor under the Code?
With regard to this issue, The Supreme Court debated different Code clauses and rulings in order to reach a conclusion about what qualifies as a "Operational Debt" and who qualifies as a "Operational Creditor" under the Code. The Court, among other things, considered the clauses in Sections 5(20) and 5(21) of the Code and came to the following conclusion that operational debt is defined in Section 5(21) as a claim for the provision of goods and services. The key criteria is that the claim has some connection to the delivery of goods or services, without naming the provider or recipient. It is clear that a debt that results from a corporate debtor receiving an advance payment in exchange for the provision of goods or services would be regarded as an operational debt. Therefore, even though it was a purchaser, it was decided that the Appellant qualified as an "operational creditor" under Section 5(20) of the Code.
The Court categorically stated that,
"It could thus be seen that this Court has held that one of the objects of IBC qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It has been held that it is for this reason that it is enough that a dispute exists between the parties."