IN THE NATIONAL COMPANY LAW TRIBUNAL
NEW DELHI (COURT NO. IV)
Company Petition No. (IB)-301(ND)/2018
(Under Section 9 of the Insolvency and Bankruptcy Code, 2016 Read
with Rule 6 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016)
IN THE MATTER OF:
M/S MANDHANA INDUSTRIES LIMITED
…Operational Creditor/Applicant
VERSUS
M/S INSTYLE EXPORTS PRIVATE LIMITED
…Operational Debtor
Judgement Pronounced on: 30.08.2018
CORAM:
DR. DEEPTI MUKESH
MEMBER (Judicial)
For the Operational Creditor: MS. Pooja Mahajan, Advocate
For the Corporate debtor: Mr. Nakul Mohta, Advocate
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MEMO OF PARTIES
M/S MANDHANA INDUSTRIES LIMITED
Through its Resolution Professional, Ms. Charu Desai
Registered office at: Plot no. C-3,
MIDC, Tarapur Industrial Area,
Boisar, Thane,
Mumbai-401506 …Applicant/Operational Creditor
VERSUS
M/S INSTYLE EXPORTS PRIVATE LIMITED
Registered office at: D-6/8,
Okhla Industrial Area, Phase-II,
New Dlehi-110020 …Corporate Debtor
JUDGEMENT
1. This is a unique application is filed under section 9 of
Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC,
2016’) read with Rule 6 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016 (for
brevity ‘the Rules’) by the Resolution Professional, Ms.
Charu Desai, of M/s Mandhana Industries limited (for
brevity ‘Company’) with a prayer for initiation of Corporate
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Insolvency process against M/s Instyle Exports Private
Limited (for brevity ‘Corporate Debtor’).
2. The M/s Mandhana Industries limited, which is currently
undergoing corporate insolvency resolution process (CIRP)
with effect from 29.09.2017 passed by Hon’ble National
Company Law Tribunal, Mumbai Bench in C.P. No.
1399/I&BP/2017 and is represented by the Resolution
Professional, Ms. Charu Desai, is a private limited
company incorporated under the provisions of the
Companies Act, 1956 having CIN
L17120MH1984PLC033553
3. The Company is having registered office at plot no. C-3,
MIDC, Tarapur Industrial Area, Boisar, Thane-401506.
4. The Applicant Company is engaged in the manufacturing
and sales of textiles and garments.
5. It is further submitted that from 29.09.2017. Mrs. Charu
Desai (for brevity the Applicant) initially appointed as the
Interim Resolution Professional and subsequently
confirmed as the Resolution Professional of the
Operational Creditor, M/s Mandhana Industries limited,
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in conducting the affairs and management of the Company
and has filed the present application.
6. The corporate debtor, M/s Instyle Exports Private Limited,
is private limited company incorporated under the
provisions of the Companies Act, 1956 on 01.04.1981
having CIN U18109DL1981PTC011531 as per Master
Data at Annexure II(B).
7. The Corporate Debtor is having its registered office at D-
6/8, Okhla Industrial Area, Phase-II, New Dlehi-110020.
8. The Corporate Debtor is engaged in the manufacturing
and sales of garments.
9. The Nominal share capital of the Corporate Debtor is Rs.
13,00,00,000/- and Issued, Subscribed and Paid up share
capital of the company is Rs. 12,98,03,300/-.
10. The Corporate Debtor has duly authorized Mr. Ashok
Logani to file the reply of present application by the
resolution passed in the meeting of Board of Directors
dated 30.06.2018 of the company.
11. It is stated by the Applicant that an agreement was entered
into between the parties, for supply of fabric by the
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Operational Creditor as per the orders received from the
Corporate Debtor. Pursuant thereto, from time to time, the
respondent-corporate debtor placed specific orders for
supply of fabric by the company. Against the Goods
supplied, the company raised invoices for the payment by
the Corporate Debtor and requested for the payment. The
Corporate Debtor failed to pay the outstanding amounts
in respect of supplies of fabric to it by the company giving
rise to the operational debt from the date of invoices raised
during the period from November 2015 to December 2016.
12. The applicant has stated that as per record total debt due
and payable by the Corporate Debtor to the applicant is
Rs. 24,34,054/-, where Rs. 17,91,612/- is the Principal
amount and interest at the rate 18 % per annum is Rs.
6,42,442/-, as on 30.11.2017.
13. The Applicant states that as per record the default
occurred when the Corporate Debtor failed to pay the
outstanding amounts in respect of supplies of goods to it
by the company giving rise to the operational debt in
question with respect to invoices dated between
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05.12.2015 to 19.01.2016 amounting to total of Rs.
24,34,054/- including interest at the rate of 18 %.
Further, it was stated that towards the said payments for
supply of goods, that is, fabric, the corporate debtor issued
four cheques in favour of the Operational Creditor of total
amount of Rs. 24,34,054/- which is inclusive of interest
calculated at the rate of 18%, those are:
a. Cheque No. 012737 dated 06.12.2015 for
Rs.4,54,025/-
b. Cheque No. 012736 dated 06.12.2015 for
Rs.10,54,625/-
c. Cheque No. 055382 dated 07.12.2015 for
Rs.1,13,712/-
d. Cheque No. 013016 dated 06.12.2016 for
Rs.1,69,250/-
Further it was stated that all the above cheques were
returned unpaid and repeated commitments made by
corporate debtor of transferring the said payment through
RTGS payments were also not fulfilled.
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14. The corporate debtor has submitted that debt is disputed
and not payable as the goods delivered by the Applicant
were defective but has not substantially proved or placed
any supportive documents with regard to the defect in the
goods as stated to show the existence of pre-existing
dispute. However, there is strict onus placed on the
‘Corporate Debtor’ in present case while raising the plea of
dispute and that it must be genuine and bona fide and not
sham in order to avoid the debt, which is claimed by the
‘Operational Creditor’ as due from the ‘Corporate Debtor’
which is an admitted amount. However, in the instant
case there is no merit in the contention of the ‘Corporate
Debtor’ and hence it is not palatable to accede to the claim
of the ‘Corporate Debtor’ that there is a pre-existing
dispute as between the ‘Operational Creditor’ and the
‘Corporate Debtor’ as contemplated under the provisions
of Code, 2016.
15. Considering the submission of both parties, the defense of
the ‘Corporate Debtor’ to stave off the Insolvency
Resolution Process as sought to be unleashed by the
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Applicant, which primarily rests on the ground of a preexisting
dispute prior to the filing of the application and in
the circumstances the application should be dismissed as
not maintainable. In view of the above contention, it is
necessary to ascertain the definition of ‘dispute’. In
relation to Code, 2016, dispute has been defined in Section
5(6) as follows:
"dispute" includes a suit or arbitration proceedings
relating to—(a) the existence of the amount of debt; (b) the
quality of goods or service; or (c) the breach of a
representation or warranty.
16. As per the reply filed by the Corporate Debtor, it can be
inferred & concluded that the dispute raised by the
corporate debtor does not fall within the definition of
dispute as reproduced above, and the plea of dispute is
nothing but moonshine defense, created by Corporate
Debtor against the applicant without any merit, which is
clear after thought to defeat the claim of applicant even
though the claim was admitted by him including interest
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and cheques were issued to the said amount as is claimed
under this application.
17. It is submitted by the Applicant that the Applicant is
currently undergoing corporate insolvency resolution
process (CIRP) with effect from 29.09.2017. Mrs. Charu
Desai was initially appointed as the Interim Resolution
Professional and subsequently confirmed as the
Resolution Professional of the applicant. The corporate
debtor has averred that no specific power is provided
under the provisions of the IBC, 2016 to Resolution
Professional to file the present Application. However,
applicant have submitted that the resolution professional
derives such authority in terms of section17 and section
25 of IBC,2016 which is reproduced as below:
Section 17- Management of affairs of corporate debtor
by interim resolution professional- (1) From the date of
appointment of the interim resolution professional, —
(a) the management of the affairs of the
corporate debtor shall vest in the interim resolution
professional;
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(b) the powers of the board of directors or the
partners of the corporate debtor, as the case may be,
shall stand suspended and be exercised by the interim
resolution professional;
(c) the officers and managers of the corporate debtor
shall report to the interim resolution professional and
provide access to such documents and records of the
corporate debtor as may be required by the interim
resolution professional;
(d) the financial institutions maintaining accounts of
the corporate debtor shall act on the instructions of the
interim resolution professional in relation to such accounts
and furnish all information relating to the corporate debtor
available with them to the interim resolution professional.
(2) The interim resolution professional vested with the
management of the corporate debtor shall—
(a) act and execute in the name and on behalf of the
corporate debtor all deeds, receipts, and other documents,
if any;
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(b) take such actions, in the manner and subject to
such restrictions, as may be specified by the Board;
(c) have the authority to access the electronic records
of corporate debtor from information utility having financial
information of the corporate debtor;
(d) have the authority to access the books of account,
records and other relevant documents of corporate debtor
available with government authorities, statutory auditors,
accountants and such other persons as may be specified.
Section 25. Duties of resolution professional
(1) It shall be the duty of the resolution
professional to preserve and protect the assets of the
corporate debtor, including the continued business
operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution
professional shall undertake the following actions, namely:
—
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(a) take immediate custody and control of all the
assets of the corporate debtor, including the business
records of the corporate debtor;
(b) represent and act on behalf of the corporate
debtor with third parties, exercise rights for the
benefit of the corporate debtor in judicial, quasijudicial
or arbitration proceedings;
(c) raise interim finances subject to the approval of the
committee of creditors under section 28;
(d) appoint accountants, legal or other professionals in
the manner as specified by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee
of creditors;
(g) prepare the information memorandum in
accordance with section 29;
(h) invite prospective lenders, investors, and any other
persons to put forward resolution plans;
(i) present all resolution plans at the meetings of the
committee of creditors;
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(j) file application for avoidance of transactions in
accordance with Chapter III, if any; and
(k) such other actions as may be specified by the
Board
Further, it is contended by the Applicant that the
primary duty of resolution professional as prescribed
under section 25(1) IBC, 2016 is to protect and preserve
the assets of the company and further submits that “to
protect and preserve” is inclusive of such acts which are
required to be done to protect the asset which is
receivables and debts and owed from the parties. While
learned counsel of corporate debtor agued that there is no
specific power to initiate the present application in
aforementioned provision. However, on perusal of
aforementioned provision it is pertinent to mention that
recovery of debt due to the company is a key economic
function to keep the company as going concern but the
powers conferred under section 17 and 25 is of
representation in legal proceeding already initiated against
the company and it is not clear that whether legislature
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intended to enshrine powers to IRP/RP to initiate legal
proceedings on behalf of management like the liquidator.
18. In the present case there is debate as to whether the
Applicant has filed this application in the capacity of
“Operational Creditor” under section 5(20) of IBC, 2016 or
“Corporate Applicant” under section 5(5) of IBC, 2016
which are reproduced as under:
Section 5 (20) "operational creditor" means a person to
whom an operational debt is owed and includes any
person to whom such debt has been legally assigned or
transferred;
Section 5(5) "corporate applicant" means—
(a) corporate debtor; or
(b) a member or partner of the corporate debtor who is
authorized to make an application for the corporate
insolvency resolution process under the constitutional
document of the corporate debtor; or
(c) an individual who is in charge of managing the
operations and resources of the corporate debtor; or
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(d) a person who has the control and supervision over the
financial affairs of the corporate debtor;
Further as per section 6 of IBC, 2016 following
persons may initiate corporate insolvency resolution
process, where any corporate debtor commits a default, a
“financial creditor”, an “operational creditor” or the
“corporate debtor” itself may initiate corporate
insolvency resolution process in respect of such corporate
debtor in the manner as provided under this Chapter.
Section 3(8) of the IBC, 2016, provides that
"corporate debtor" means a corporate person who owes a
debt to any person;
19. The learned Counsel for the Corporate Debtor has
contended that the Applicant who is Resolution
Professional for the Company is debarred from filing the
present application as the Applicant herein is undergoing
corporate insolvency resolution process pursuant to order
dated 29.09.2017 passed by the NCLT, Mumbai Bench in
CP No. 1399/I&BP/2017 and the present application
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under Section 9 of IBC, 2016 is filed by Ms. Charu
Sandeep Desai who is “Resolution Professional” of the
Operational Creditor as per the provisions provided under
section 11(a) of IBC, 2016, is not eligible to file the present
application which is reproduced as under:
Section 11: Persons not entitled to make
application-- The following persons shall not be
entitled to make an application to initiate corporate
insolvency resolution process under this Chapter,
namely: —
(a) a corporate debtor undergoing a corporate
insolvency resolution process; or
(b) a corporate debtor having completed corporate
insolvency resolution process twelve months
preceding the date of making of the application; or
(c) a corporate debtor or a financial creditor who has
violated any of the terms of resolution plan which
was approved twelve months before the date of
making of an application under this Chapter; or
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(d) a corporate debtor in respect of whom a
liquidation order has been made. Initiation of
corporate insolvency resolution process by corporate
applicant.
Further, explanation to section 11 provides that
“For the purposes of this section, a corporate debtor
includes a corporate applicant in respect of such
corporate debtor.”
Further according to the explanation of section 11 of
the IBC, 2016 corporate debtor includes corporate
applicant and corporate applicant includes an individual
who is managing the affairs of the company. It is further
submitted that the present Application is being filed by the
resolution professional who is managing the affairs of
operational creditor. Therefore, it is averred by the
corporate debtor the present Application is not
maintainable as per section 11 of IBC, 2016.
In Unigreen Global (P.) Ltd. vs. Punjab National
Bank and Ors., Hon’ble NCLAT in para 20 and 21
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observed that, “Whether in an application under section 10,
the financial creditor or operational creditor may dispute
that there is no default or that debt is not due and is not
payable in law or in fact. Although, they may oppose
admission on the ground that the corporate applicant is not
eligible to make application in view of ineligibility under
section 11.”
20. The corporate debtor has submitted that the prohibition
enshrined in Section 11 of IBC, 2016 is clear and
unambiguous and does not warrant any clarification. It is
a trite law that when the language of statute is clear, the
plain words should be strictly relied. The applicant has
relied on the order of NCLT, Mumbai in the case of Jai
Ambe Enterprise vs. S. N. Plumbing Private Limited
wherein it is expressed prima facie that “para 4. The action
of the resolution professional against on of the Debtor of the
SN plumbing appears to be a correct legal action. It is one of
the duties of resolution professional to recover the
outstanding debts of a corporate debtor against whom
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already CIRP is in progress. Further, in para 5. it is opined
that, the language of section 60(2) and other allied
provisions under the Code has no ambiguity that no two
parallel insolvency proceedings must run against the same
corporate debtor. Hence a clarification is needed in this case
that SN plumbing has not submitted the impugned petition
before the respected NCLT Bench, Hyderabad in the
capacity of a corporate debtor but undisputedly, the said
petition is filed in the capacity of an operational creditor. It
further held that the action of resolution professional on
behalf of SN Plumbing is a right recourse of action for
managing the affairs of the financially stressed company.
The proceedings initiated against the Debtors of SN
plumbing is there fore a justifiable action of the insolvency
Resolution Professional hence duly approved by us.”
21. The learned counsel for the Applicant further stated that
corporate debtor taking the defense under section 11 of
IBC, 2016 to have unjust enrichment at the expense of the
Applicant which is against the key economic question in
the bankruptcy process, objects and design of the IBC,
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2016 as observed by Hon’ble Supreme Court of India in
Innoventive Industries Limited vs ICICI Bank and
others which is reproduced as below:
The key economic question in the bankruptcy process-
When a firm (referred to as the corporate debtor in the draft
law) defaults, the question arises about what is to be done.
Many possibilities can be envisioned. One possibility is to
take the firm into liquidation. Another possibility is to
negotiate a debt restructuring, where the creditors accept a
reduction of debt on an NPV basis, and hope that the
negotiated value exceeds the liquidation value. Another
possibility is to sell the firm as a going concern and use the
proceeds to pay creditors. Many hybrid structures of these
broad categories can be envisioned.
The Committee believes that there is only one correct
forum for evaluating such possibilities, and making a
decision: a creditors committee, where all financial creditors
have votes in proportion to the magnitude of debt that they
hold. In the past, laws in India have brought arms of the
government (legislature, executive or judiciary) into this
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question. This has been strictly avoided by the Committee.
The appropriate disposition of a defaulting firm is a
business decision, and only the creditors should make it.
Speed is of essence: Speed is of essence for the
working of the bankruptcy code, for two reasons. First,
while the ‘calm period’ can help keep an organization afloat,
without the full clarity of ownership and control, significant
decisions cannot be made. Without effective leadership, the
firm will tend to atrophy and fail. The longer the delay, the
more likely it is that liquidation will be the only answer.
Second, the liquidation value tends to go down with time as
many assets suffer from a high economic rate of
depreciation.
From the viewpoint of creditors, a good realization can
generally be obtained if the firm is sold as a going concern.
Hence, when delays induce liquidation, there is value
destruction. Further, even in liquidation, the realization is
lower when there are delays. Hence, delays cause value
destruction. Thus, achieving a high recovery rate is
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primarily about identifying and combating the sources of
delay.
The role that insolvency and bankruptcy plays in debt
financing Creditors put money into debt investments today
in return for the promise of fixed future cash flows. But the
returns expected on these investments are still uncertain
because at the time of repayment, the seller (debtor) may
make repayments as promised, or he may default and does
not make the payment. When this happens, the debtor is
considered insolvent. Other than cases of outright fraud, the
debtor may be insolvent because of
• Financial failure – a persistent mismatch between
payments by the enterprise and receivables into the
enterprise, even though the business model is generating
revenues, or
• Business failure – which is a breakdown in the
business model of the enterprise, and it is unable to
generate sufficient revenues to meet payments.
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Objectives the Committee set the following as
objectives desired from implementing a new Code to resolve
insolvency and bankruptcy:
1. Low time to resolution.
2. Low loss in recovery.
3. Higher levels of debt financing across a wide
variety of debt instruments.
The performance of the new Code in implementation will be
based on measures of the above outcomes.
Principles driving the design- The Committee chose the
following principles to design the new insolvency and bankruptcy
resolution framework:
I. The Code will facilitate the assessment of viability
of the enterprise at a very early stage.
1. The law must explicitly state that the viability of the
enterprise is a matter of business, and that matters of business
can only be negotiated between creditors and debtor. While
viability is assessed as a negotiation between creditors and
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debtor, the final decision has to be an agreement among creditors
who are the financiers willing to bear the loss in the insolvency.
2. The legislature and the courts must control the process of
resolution, but not be burdened to make business decisions.
3. The law must set up a calm period for insolvency
resolution where the debtor can negotiate in the assessment of
viability without fear of debt recovery enforcement by creditors.
4. The law must appoint a resolution professional as the
manager of the resolution period, so that the creditors can
negotiate the assessment of viability with the confidence that the
debtors will not take any action to erode the value of the
enterprise. The professional will have the power and
responsibility to monitor and manage the operations and assets
of the enterprise. The professional will manage the resolution
process of negotiation to ensure balance of power between the
creditors and debtor, and protect the rights of all creditors. The
professional will ensure the reduction of asymmetry of
information between creditors and debtor in the resolution
process.
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II. The Code will enable symmetry of information
between creditors and debtors.
5. The law must ensure that information that is essential for
the insolvency and the bankruptcy resolution process is
created and available when it is required.
6. The law must ensure that access to this information is
made available to all creditors to the enterprise, either
directly or through the regulated professional.
7. The law must enable access to this information to third
parties who can participate in the resolution process,
through the regulated professional.
III. The Code will ensure a time-bound process to
better preserve economic value.
8. The law must ensure that time value of money is
preserved, and that delaying tactics in these negotiations
will not extend the time set for negotiations at the start.
22. The learned counsel for the Applicant submitted that
legislative intent and rationale under section 11 in relation
to the present application as per Committee report on the
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Insolvency and Bankruptcy Bill, 2015 which is
enumerated as follows:
a. To prevent the misuse of the provisions of the Code by
corporate debtors who have already availed the benefits
of the Code;
b. To prevent misuse by corporate debtors and financial
debtors who have violated the resolution plans made for
the corporate debtor;
c. To prevent multiple proceedings in respect of corporate
debtor and to avoid duplication and multiplicity.
23. Thus, it is contended by the learned counsel for the
Applicant that, in light of abovementioned rationale, the
corporate debtor is already undergoing CIRP/ Liquidation,
the creditors cannot start another proceeding against such
corporate debtor as it will lead to multiplicity of
proceedings and present application is filed in the capacity
of “Operational Creditor” to initiate CIRP against another
Corporate Debtor, that is, M/s Instyle Exports Private
Limited (for brevity ‘Corporate Debtor’).
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The learned counsel for the Applicant has stated that
the Hon’ble Supreme Court in the case of Macquari Bank
Limited Vs. Shilpi Cable Technologies Limited (2 SCC
674/2017) departed from the literal interpretation of
words in section 9(3)(c) of the IBC, 2016 and chose to gave
it a meaning, keeping in mind the intention of the
legislature. In this case the Hon’ble Supreme court relied
on the case of State of U.P. v. Babu Ram Upadhya, 1961
2 SCR 679 where the principle of Contemporanea
exposito that is interpreting a statute or any other
document by reference to the exposition it has received
from contemporary authority can also be invoked though
the same will not always be decisive of the question of
construction.
In the Case of Fuerst Day Lawson Limited v. Jindal
exports limited, 2011 8 SCC 333, it is observed that the
plain language of the statute should be interpreted without
any external aid as has been observed by the Hon’ble
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Supreme court in Harbhjan Singh v. Press council of
India 2002 3 SCC 722
24. The learned Counsel for corporate debtor relied on the
order of Hon’ble NCLT, Principal Bench, New Delhi in the
case of Tecpro Systems Limited vs. Bajaj Infrastructure
Company Limited (2017) SCC Online NCLT 9998 which
is as follows-
“This is an application filed under section 9 of the
Insolvency and Bankruptcy Code, 2016 with a prayer for
triggering the insolvency process against the respondent.
The Petitioner company is already undergoing insolvency
process as is evident from the order passed by the Principal
Bench, NCLT on 07.08.2018 in IB-358 (PB)/2017. A petition
by such an entity is barred by Section 11 of IBC, 2016.”
However, the abovementioned order does reveal any
reason as to whether the Applicant has filed the present
application in the capacity of “operational creditor” or as
“corporate debtor”.
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The learned Counsel for corporate debtor further
relied on the order of Hon’ble NCLT, Allahabad Bench
under section 7 of IBC, 2016 wherein it was held that-
“This petition has been filed under section 7 of IBC,
2016, by JEKPL Pvt. Ltd. To initiate CIRP under this Code.
The same Applicant has earlier filed a petition under section
10 of IBC, 2016 disentitles the corporate debtor to move a
fresh application under this Code if it has been subject to
corporate insolvency process within 12 months.
Given the specific bar of section 11 of the IBC, 2016
present petition filed under section 7 of IBC, 2016 is not
maintainable and deserves to be dismissed at the verythreshold.
Further the Hon’ble Supreme of India in Mobilox
Innovations Private Limited vs. Kirusa Sortware
Private limited has observed that-
“The adjudicating authority, when examining an
application under Section 9 of the Act will have to
determine:
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(i) Whether there is an “operational debt” as defined
exceeding Rs.1 lakh? (See Section 4 of the Act)
(ii) Whether the documentary evidence furnished with
the application shows that the aforesaid debt is due and
payable and has not yet been paid? and
(iii) Whether there is existence of a dispute between
the parties or the record of the pendency of a suit or
arbitration proceeding filed before the receipt of the demand
notice of the unpaid operational debt in relation to such
dispute?
If any one of the aforesaid conditions is lacking, the
application would have to be rejected.
Apart from the above, the adjudicating authority must
follow the mandate of Section 9, as outlined above, and in
particular the mandate of Section 9(5) of the Act, and admit
or reject the application, as the case may be, depending
upon the factors mentioned in Section 9(5) of the Act.”
25. The corporate debtor has further contended that even if it
is considered that the resolution professional has the
power to institute legal proceedings he/she is required to
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
act upon the aid and advice of committee of creditors and
such express consent of committee of creditors to initiate
such legal proceedings has to be approved by the
Adjudicating Authority appointing resolution professional
before initiating the present proceeding. Arguing that the
applicant has filed on record the minutes of meeting of
committee of creditors of Applicant company held on
09.11.2017 wherein Agenda 1 contains para in relation to
“Account Receivables” where the Committee of Creditors
members directed the IRP/RP to consider undertaking
legal proceedings against Munirabad Traders And other
doubtful receivables totaling to INR 357.36 Crores which
does not convey the express approval to initiate the legal
proceeding under the Code, 2016. The intent of Legislature
is clearly manifested to give such powers to Liquidator
under section 35 of IBC,2016 which is reproduced as
below:
“Section 35. Powers and duties of liquidator:
(1) Subject to the directions of the Adjudicating Authority,
the liquidator shall have the following powers and duties,
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
namely:— (a) to verify claims of all the creditors; (b) to take
into his custody or control all the assets, property, effects
and actionable claims of the corporate debtor; (c) to evaluate
the assets and property of the corporate debtor in the
manner as may be specified by the Board and prepare a
report; (d) to take such measures to protect and preserve the
assets and properties of the corporate debtor as he
considers necessary; considers necessary; (f) subject to
section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by
public auction or private contract, with power to transfer
such property to any person or body corporate, or to sell the
same in parcels in such manner as may be specified; (g) to
draw, accept, make and endorse any negotiable
instruments including bill of exchange, hundi or promissory
note in the name and on behalf of the corporate debtor, with
the same effect with respect to the liability as if such
instruments were drawn, accepted, made or endorsed by or
on behalf of the corporate debtor in the ordinary course of
its business; (h) to take out, in his official name, letter of
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
administration to any deceased contributory and to do in
his official name any other act necessary for obtaining
payment of any money due and payable from a contributory
or his estate which cannot be ordinarily done in the name
of the corporate debtor, and in all such cases, the money
due and payable shall, for the purpose of enabling the
liquidator to take out the letter of administration or recover
the money, be deemed to be due to the liquidator himself; (i)
to obtain any professional assistance from any person or
appoint any professional, in discharge of his duties,
obligations and responsibilities; (j) to invite and settle claims
of creditors and claimants and distribute proceeds in
accordance with the provisions of this Code; (k) to institute
or defend any suit, prosecution or other legal
proceedings, civil or criminal, in the name of on
behalf of the corporate debtor; (l) to investigate the
financial affairs of the corporate debtor to determine
undervalued or preferential transactions; (m) to take all
such actions, steps, or to sign, execute and verify any
paper, deed, receipt document, application, petition,
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
affidavit, bond or instrument and for such purpose to use
the common seal, if any, as may be necessary for
liquidation, distribution of assets and in discharge of his
duties and obligations and functions as liquidator; (n) to
apply to the Adjudicating Authority for such orders or
directions as may be necessary for the liquidation of the
corporate debtor and to report the progress of the liquidation
process in a manner as may be specified by the Board; and
(o) to perform such other functions as may be specified by
the Board. (2) The liquidator shall have the power to consult
any of the stakeholders entitled to a distribution of proceeds
under section 53: Provided that any such consultation shall
not be binding on the liquidator: Provided further that the
records of any such consultation shall be made available to
all other stakeholders not so consulted, in a manner
specified by the Board.”
26. Further, the corporate debtor has neither paid the money
nor raised any dispute towards the liability of Rs.
24,34,054/- as claimed by the Applicant in demand
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
notice, dated 28.12.2017, in form 3 as prescribed under
under section 8 of IBC, 2016 at Annexure-I.
27. The Bank maintaining account of the applicant,
Corporation Bank, has confirmed vide its certificate under
9(3)(c) of the Code dated 16.02.2018 that Rs. 24,34,054/-
from Corporate Debtor has not been received from
corporate debtor between 05.12.2015 to16.02.2018
28. The Applicant has filed an affidavit dated 30.07.2018
affirming that in respect of the amount claimed or any part
thereof, the Applicant has not received nor had any
person, on its behalf had received in any manner the
amount due to them under section 9(3)(b) of the Code,
2016.
29. Applicant has filed on record consent form of the Interim
Resolution Professional (IRP), to be appointed by the order
of Tribunal, of Mr. Vivek Parti, having registration number
IBBI/IPA-001/IP-P00813/2017-18/11376, duly
registered with Insolvency and Bankruptcy Board of India,
as the Interim Resolution Professional subject to the
condition that no disciplinary proceedings are pending
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
against such an IRP named who may act as an IRP in
relation to the CIRP of the Corporate Debtor and specific
consent is filed in Form 2 of Insolvency and Bankruptcy
Board of India (Application to Adjudicating Authority)
Rule, 2016 in relation to specifically the Corporate Debtor
and the Applicant herein and make disclosures as
required under IBBI (insolvency Resolution Process for
Corporate Persons) Regulations, 2016 within a period of
one week from the date of this order. Written
Communication, dated 11.05.2018, by Mr. Vivek Parti in
Form 2 is annexed to the present application.
30. The registered office of corporate debtor is situated in New
Delhi and therefore this Tribunal has jurisdiction to
entertain and try this application.
31. The amount of default exceeds Rs. 1,00,000/- as per the
requirement under section 4 of the Code, 2016. Hence,
this application is within the purview of section 9 of the
IBC, 2016.
32. The default in payment of operational debt first became
due and payable from the date of the invoice dated
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
05.12.2015 raised by the Applicant and further admission
by corporate debtor when four cheques were issued in
respect of the said debt alongwith the interest. Hence, the
debt is not time barred.
33. On perusal of aforementioned judgements of the Hon’ble
Supreme Court of India, National Company Law Appellate
Tribunal and National Company Law Tribunal and
Insolvency and Bankruptcy Code, 2016 read with
corresponding Rules and Regulations therein, it is
observed that although there is clear debt and default in
payment of debt which is due and payable under the Code,
2016 but due to literal interpretation of section 11 of the
Code, 2016, the Applicant herein is treated as Corporate
Applicant as per the proviso to section 11 of the Code,
2016, and there is much needed clarification required as
to whether corporate debtor undergoing corporate
insolvency resolution process filing Application under
section 9 of the Code, 2016 can file it in the capacity of
“Operational Creditor” or “Corporate Debtor/ Corporate
Applicant for Corporate Debtor” against the same or
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
another corporate debtor. Form the wordings of the Code
it is not manifested whether the intent of legislature was
to debar the company who is undergoing CIRP, from
enforcing its right to recover legal debt which is
indispensable for the survival and revival of the company.
34. The point raised by the Ld. Counsel for the applicant that
company who is a corporate debtor, if is not allowed to
recover its debt & receivables which was the cause of its
undergoing ICRP, and recovery of its debt being the only
hope of such corporate debtor to come out of CIRP.
Subsequently if not permitted can subtly lead to the fatal
consequences of such corporate debtor. But in view of the
clear bar as mentioned in Section 11 clarified with further
explanation at the end of Section 11 and the inclusiveness
Section 11 with respect to applicability of the said Section
11 to the entire Chapter II which includes corporate
applicants under Section 7, 9 & 10.
35. Based on the above observation and discussion, inspite of
application being complete, the Application is to be
rejected in terms of Section 9(5) (ii) & Section 11 of IBC,
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Company Petition No. (IB)-301(ND)/2018
M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited
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