Adjournment Petition

 

 

DISTRICT: NORTH 24 PARGANAS

BEFORE THE COMMERCIAL COURT AT RAJARHAT

INTERNATIONAL FINANACE CENTRE, 2^ND FLOOR, AA-II,

CBD-I, NEW TOWN, KOLKATA-700 156

 

MONEY SUIT NO. 07 OF 2023

 

NITESH MARKETING PRIVATE LIMITED,

.............PLAINTIFF

 

:: VERSUS ::

 

JSB CONSTRUCTIONS AND TRADING COMPANY, AND OTHERS,

..........DEFENDANTS

 

Petition for adjournment;

 

The Defendant No.1, most respectfully sheweth as under;

 

1.   That today is fixed for hearing of application under Order 1 Rule 13 of CPC submitted by the Defendant number 2, which the defendant has already been given his written objection on earlier occasion.

 

2.   That Since the Learned Senior Counsel is suffering from cold, cough & fever, for such reasons he could not attend the Hon’ble Court today i.e. 15-12-2023, therefore the Defendant number 1, seeks the adjournment of hearing in the above referred Suit, in the interest of administration of Justice.

 

3.   That this application is made bonafide and in the interest of administration of Justice.

 

It is therefore prayed that your Honour would graciously be  pleased to allow this application and to grant adjournment in the present Suit, in the interest of administration of Justice, and /or to pass such other necessary order or orders as your Honour may deem, fit, and proper for the end of Justice.

 

And for this act of kindness, the petitioner as in duty bound shall ever pray.

it is mandatory for the adjudicating authority to follow the Principles of rules of natural justice while passing an order under I&B Code, 2016

 

3

M/s MCL Global Steel Pvt. Ltd. & Anr. Appellants and CD

Vs.

M/s Essar Projects India Ltd. & Anr. Respondents and Op Cr

 

Appeal preferred by MCL Global against order of AA admitting CIRP

u/ 8 and 9

 

Grounds of appeal

 

The impugned ex parte order was passed by 'Adjudicating Authority without prior notice or intimation of hearing to the Appellants- Corporate Debtors against the principles of rules of natural justice.

 

The aforesaid correspondences clearly demonstrate the existence of dispute between the parties.

 

The word "includes" connote other dispute, if any, raised apart from the dispute mentioned in Section 8 of the 'I & B Code'.

 

Observations of NCLAT

 

Section 424 of the Companies Act, 2013 is applicable to the proceeding under the I&B Code, 2016, it is mandatory for the adjudicating authority to follow the Principles of rules of natural justice while passing an order under I&B Code, 2016.

 

AA passed order without Notice to the Appellant which is

violation of the principle of Natural Justice. If Notice would have been given then the Appellant wld have highlighted the fact of existence of Dispute before the AA. The Op Cr had concealed the fact that he had filed winding up Petition in which the Appellant had disputed the entire claim.

Adjudicating Authority failed to notice of the relevant facts that there was a dispute raised and replied by the Corporate Debtor, the impugned order passed by Adjudicating Authority cannot be upheld.

the petition under Section 9 of the I&B Code was not maintainable there being existence of dispute

 

2

M/s. Meyer Apparel Ltd. & Anr …Appellants and CD

Vs

M/s. Surbhi Body Products Pvt. Ltd. …Respondent and Op Cr

M/s. Meyer Apparel Ltd. & Anr. …Appellants and CD

Vs

M/s. Godolo & Godolo Exports Pvt. Ltd. …Respondent and Op Cr

 

The main ground taken by the Appellant is that the petition under Section 9 of the I&B Code was not maintainable there being existence of dispute between the parties with regard to the debt claimed by Operational Creditor.

 

From the impugned order dated 7th April 2017, we find that the Adjudicating Authority relied on the decision of the Punjab &

Haryana High Court in “Max India Limited vs Unicoat Tapes (P) CP No. 99 of 1994 decided on 4.7.1997” to find out the meaning of ‘dispute’, though we find specific definition of ‘dispute’ has been defined under subSection (6) of Section 5 of the I&B Code.

 

The question as to what does ‘dispute’ and ‘existence of dispute’ means for the purpose of maintaining a petition for Corporate Insolvency Resolution Process under Section 9 of I&B Code was considered by this Appellate Tribunal in “Kirusa Software Private Ltd. v. Mobilox Innovations Private Limited

 

The definition of “dispute” is “inclusive” and not “exhaustive”.

 

The same has to be given wide meaning provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a representation or warranty. 18. Once the term “dispute” is given its natural and ordinary meaning, upon reading of the Code as a whole, the width of “dispute” should cover all disputes on debt, default etc. and not be limited to only two ways of disputing a demand made by the operational creditor, i.e. either by showing a record of pending suit or by showing a record of a pending arbitration

 

The intent of the Legislature, as evident from the definition of the term “dispute”, is that it wanted the same to be illustrative (and not exhaustive)

 

Admittedly in Section 5(6) of the ‘I & B Code’, the Legislature

used the words ‘dispute includes a suit or arbitration proceedings’. If this is harmoniously read with Section 8(2) of the Code’, where words used are ‘existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings,’ the result is disputes, if any, applies to all kinds of disputes, in relation to debt and default.

 

The expression used in Section 8(2) of the Code ‘existence of a dispute, if any,’ is disjunctive from the expression ‘record of the pendency of the suit or arbitration proceedings’. Otherwise, the words ‘dispute, if any’, in Section 8(2) would become surplus usage.

 

It is a fundamental principle of law that multiplicity of proceedings is required to be avoided. Therefore, if disputes under sub-section

(2)(a) of Section 8 read with sub-section (6) of Section 5 of the Code’ are confined to a dispute in a pending suit and arbitration in relation to the three classes under sub-section (6) of Section 5 of the Code’, it would violate the definition of operational debt under Section 5(21) of the Code’ and would become inconsistent thereto, and would bar Operational Creditor from invoking Sections 8 and 9 of the Code.

 

27. Section 5(6) read with Section 8(2)(a) also cannot be confined to pending arbitration or a civil suit. It must include disputes pending before every judicial authority including mediation, conciliation etc. as long there are disputes as to existence of debt or default etc., it would satisfy Section 8(2) of the Code’.

 

“In the present case, we find that the Appellants/ Corporate Debtor in both the cases have already raised dispute relating to quality of goods which culminated into pendency of Company Petition before the Punjab & Haryana High Court, no matter whether it was withdrawn, we hold that the dispute as raised by the Appellants/Corporate Debtor fall within the ambit of expression “dispute, if any” as defined under sub-section (6) of Section 6 of the I&B Code and also within he ambit of expression ‘existence of a dispute, if any” as mentioned under sub-Section (2) of Section 8 of I&B Code. The aforesaid fact has also been admitted by both the Respondents. AA order set aside. AA asked to close proceedings. Both appeals

allowed.

there was ‘existence of dispute’ which the Corporate Debtor would have brought to notice of the Adjudicating Authority

 

NCLAT- 1

P.K. ORES PRIVATE LIMITED Applicant and (Corporate Debtor)

VERSUS

TRACTORS INDIA PRIVATE LIMITED. Respondent (Operational

Creditor)

Section 8 and 9 of the Code

- The present appeal was filed by P. K. Ores Private Limited –

(Corporate Debtor) against the judgment passed by NCLT, Kolkata

Bench, Kolkata (“Adjudicating Authority”) whereby the application

filed by Tractors India Private Limited – (Operational Creditor) was

admitted.

-

The Corporate Debtor assailed the impugned order on the ground that the same has been passed in violation of principles of natural justice, without giving any opportunity of hearing and further, that there was ‘existence of dispute’ which the Corporate Debtor would have brought to notice of the Adjudicating Authority, if given an opportunity.

 

- The Operational Creditor, however, contended that the Corporate Debtor was served with notice under Section 8 of the Code as well as copy of application under Section 9 of the Code, the Corporate Debtor failed to reply to the notice under Section 8.

 

- The NCLAT (“Appellate Authority”) perused the record of the Adjudicating Authority and noted that there was no order issuing notice to the Corporate Debtor.

 

- The Appellate Authority took note of section 424 of the Companies Act, 2013 which mandates that the Adjudicating Authority is supposed to follow the rules of natural justice before passing any order.

- It observed that in the case of “Innoventive Industries Limited vs. ICICI Bank”, the Appellate Authority held that a notice is required to be given to a Corporate Debtor before admitting any application for initiation of Corporate Insolvency Resolution Process under Section 7 and 9 of the Code.

 

- Since the Adjudicating Authority in the present case had not

issued any notice to the Corporate Debtor, it was held that the

impugned order was bad in law and thus, liable to be set aside.

 

- The Appellate Authority also took note of the reply given by the Corporate Debtor in November, 2016 to the letter issued by Operational Creditor in which the former had disputed the

satisfactory installation of machinery (Engine) by latter and also stated that various complaints were made regarding rectifying the

defects in the machinery.

 

- The Appellate Authority relying upon the judgment passed by it in “Kirusa Software (P) Ltd. versus Mobilox Innovations Pvt. Ltd.” held that the Corporate Debtor had in fact, raised dispute about the quality of goods and brought the same to notice of Operational Creditor.

 

It also claimed damages for inferior quality of goods and its loss much prior to receipt of notice under Section 8 of the Code.

 

Accordingly, the Appellate Authority held that there was violation of the principles of natural justice as well existence of dispute and thus, the order passed by Adjudicating Authority was set aside.

 

- In effect, the order appointing an Interim Resolution Professional (IRP), order declaring moratorium, freezing of account and other actions taken by IRP pursuant to order of Adjudicating Authority

were declared illegal.

To prevent multiple proceedings in respect of corporate debtor and to avoid duplication and multiplicity

 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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

(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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

(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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

(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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Company Petition No. (IB)-301(ND)/2018

M/s Mandhana Industries Limited Versus M/s Instyle Exports Private Limited

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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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Company Petition No. (IB)-301(ND)/2018

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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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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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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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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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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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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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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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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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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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