09 (3)

A company which is solvent and has the ability to pay its debts cannot be dragged into insolvency | IBC Petition for claim of damages is not maintainable | An affidavit Section 9(3)(b) of IBC stating that no notice of dispute was given by Corporate Debtor is a mandatory requirement for Section 9 application – Identity Science Co. Ltd. Vs. Soanl Plasrub Industries Pvt. Ltd. – NCLT Mumbai Bench

Hon’ble NCLT Mumbai Bench held that:

(i) Even otherwise claim under IBC can only be filed with respect to debt amount which stands crystallized. The damages being claimed have also neither been adjudicated nor crystallized. Hence the petition under IBC claim of damages is not maintainable.
(ii) The Operational Creditor did not file an affidavit stating that no notice of dispute was given by the Corporate Debtor regarding the unpaid operational debt, which is a mandatory requirement for a petition under Section 9 of the IBC.
(iii) The insolvency process is meant for companies that are in financial distress and cannot meet their financial obligations, not for solvent companies with disputed claims.

A company which is solvent and has the ability to pay its debts cannot be dragged into insolvency | IBC Petition for claim of damages is not maintainable | An affidavit Section 9(3)(b) of IBC stating that no notice of dispute was given by Corporate Debtor is a mandatory requirement for Section 9 application – Identity Science Co. Ltd. Vs. Soanl Plasrub Industries Pvt. Ltd. – NCLT Mumbai Bench Read Post »

Byju’s Insolvency Case: Granting of the License for Advertisement and Promotional rights itself amounts to providing of services and falls within the definition of Operational Debt within the meaning of Section 5(21) of the IBC – The Board of Control for Cricket In India (BCCI) Vs. Think & Learn Pvt. Ltd. – NCLT Bengaluru Bench

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Byju’s Insolvency Case: Granting of the License for Advertisement and Promotional rights itself amounts to providing of services and falls within the definition of Operational Debt within the meaning of Section 5(21) of the IBC – The Board of Control for Cricket In India (BCCI) Vs. Think & Learn Pvt. Ltd. – NCLT Bengaluru Bench Read Post »

Communications through emails and letters issued by Corporate Debtor to Operational Creditor before receipt of Demand Notice pointing out deficiencies in service amounts to dispute under IBC – Indo Pack Ltd. Vs. M SEA Pharmaceuticals Pvt. Ltd. – NCLT Chandigarh Bench

In this case, one issue is whether the operational debt was disputed by the corporate debtor, it is deposed by operational creditor that till date no notice relating to a dispute by the Corporate Debtor has been received by the Operational Creditor in relation to the unpaid Operational Debt as the alleged dispute raised by the Corporate Debtor by way of reply is sham, vague, moonshine, got up and motivated and the same has been taken to evade the liability of the Operational Creditor.

The considered view of the Adjudicating Authority Bench is that the amount claimed is disputed. Although, an affidavit under Section 9(3)(b) of the Code is attached but communication dated 29.09.2018 issued by the corporate debtor to the applicant falsifies this averment that no notice regarding dispute was received. It is settled law that communications through emails and letters issued by corporate debtor to the operational creditor before receipt of demand notice dated 04.07.2019 pointing out deficiencies in service amounts to dispute. In the case in hand, as per communication on 29.09.2018, it is apparent that there was a pre-existing dispute. This factum of print cylinders lying with the applicant is also admitted by the applicant in its replication. In the light of the discussion foregoing, it is concluded that in the case in hand there is a dispute which is of civil nature and can be adjudicated upon by a civil court after taking evidence and appreciation thereof and is not within the domain of this Adjudicating Authority under the Code for trigging the Insolvency Resolution Process against the corporate debtor.

Communications through emails and letters issued by Corporate Debtor to Operational Creditor before receipt of Demand Notice pointing out deficiencies in service amounts to dispute under IBC – Indo Pack Ltd. Vs. M SEA Pharmaceuticals Pvt. Ltd. – NCLT Chandigarh Bench Read Post »

A CIRP application under Section 9 of IBC shall be maintainable without service of Demand Notice under Section 8 where winding up proceeding was transferred to NCLT u/s 434 of Companies Act, 2013 – Rajeev Srivastva Suspended Director of M/s Assotech Milan Resorts Pvt. Ltd. Vs. Ahluwalia Contracts (India) Ltd. – NCLAT New Delhi

In Sabari Inn Pvt. Ltd. Vs. Rameesh Associates Pvt. Ltd., Mosmetro Story (FZE) Vs. BASF India Ltd. & Anr. and Mr. Shailendra Sharma Vs. Ercon Composites, it has been held by this Tribunal that even if a winding up petition is transferred to the Adjudicating Authority for treating it as an application filed under Section 9, it has to be preceded by a notice under Section 8 of the Code. The decisions rendered in the aforesaid three cases have been doubted by a bench of the same strength by recording reasons in its order dated 25.11.2022, therefore, it referred this matter to the larger bench for considering again.
NCLAT held that after the transfer of winding up proceedings as per Rules 2016 read with amendments made in Section 434 of the Act, 2013 as applicable to the Code by Act 26 of 2018, if the winding up petition has been filed on the ground that the Company is unable to pay its debt, for treating the application under Section 9 of the Code, notice under Section 8 of the Code is not necessary or mandatory and a petition under Section 9 shall be maintainable without service of notice under Section 8 of the Code.

A CIRP application under Section 9 of IBC shall be maintainable without service of Demand Notice under Section 8 where winding up proceeding was transferred to NCLT u/s 434 of Companies Act, 2013 – Rajeev Srivastva Suspended Director of M/s Assotech Milan Resorts Pvt. Ltd. Vs. Ahluwalia Contracts (India) Ltd. – NCLAT New Delhi Read Post »

A Banker’s Certificate is not mandatorily required to trigger CIRP under Section 9 of the IBC, 2016 – M/s Quippo Infrastructure Ltd. Vs. M.R. Nirman Pvt. Ltd. – NCLAT New Delhi

NCLAT held that as mandated under Section 8 of the Code, was duly served upon the Respondent / Corporate Debtor, we are satisfied that the requirement under Section 8 of the code, is complete. Further, NCLAT referred the judgment of Hon’ble Supreme Court in Macquarie Bank Limited v. Shilpi Cable Technologies Ltd. [2017] ibclaw.in 14 SC and held that it is clear that a Banker’s Certificate is not mandatorily required to trigger CIRP under Section 9 of the Code. It is significant to mention that this Tribunal has not gone into the merits of the matter with respect to debt or default, we only addressed to the issue of the service of Demand Notice on the Corporate Debtor and that a Banker’s certificate is not essential to trigger CIRP under Section 9 of the Code.

A Banker’s Certificate is not mandatorily required to trigger CIRP under Section 9 of the IBC, 2016 – M/s Quippo Infrastructure Ltd. Vs. M.R. Nirman Pvt. Ltd. – NCLAT New Delhi Read Post »

Section 9(5)(i) vs. Section 7(5)(a) of IBC: The Adjudicating Authority may in its discretion not admit the application of a Financial Creditor filed u/s 7, however, Section 9(5)(i) is mandatory, almost identical provision relating to the initiation of CIRP by an Operational Creditor – Vidarbha Industries Power Ltd. Vs. Axis Bank Ltd. – Supreme Court

In this landmark judgment, Hon’ble Supreme Court clarifies various issues in filing of CIRP u/s 7 and 9. The Hon’ble Court held that If Section 7(5)(a) of the IBC is construed literally the provision must be held to confer a discretion on the Adjudicating Authority (NCLT). The fact that Legislature used ‘may’ in Section 7(5)(a) of the IBC but a different word, that is, ‘shall’ in the otherwise almost identical provision of Section 9(5) shows that ‘may’ and ‘shall’ in the two provisions are intended to convey a different meaning. It is apparent that Legislature intended Section 9(5) of the IBC to be mandatory and Section 7(5)(a) of the IBC to be discretionary. The IBC does not countenance dishonesty or deliberate failure to repay the dues of an operational creditor. Further, it held that the Adjudicating Authority may in its discretion not admit the application of a Financial Creditor. It is certainly not the object of the IBC to penalize solvent companies, temporarily defaulting in repayment of its financial debts, by initiation of CIRP. There is no fixed time limit within which an application under Section 7 of the IBC has to be admitted.

Section 9(5)(i) vs. Section 7(5)(a) of IBC: The Adjudicating Authority may in its discretion not admit the application of a Financial Creditor filed u/s 7, however, Section 9(5)(i) is mandatory, almost identical provision relating to the initiation of CIRP by an Operational Creditor – Vidarbha Industries Power Ltd. Vs. Axis Bank Ltd. – Supreme Court Read Post »

A debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt and limitation does not commence when the debt becomes due but only when a default occurs – Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions Pvt. Ltd. – Supreme Court

Hon’ble Supreme Court holds that Section 5(21) defines ‘operational debt’ as a “claim in respect of the provision of goods or services”. The operative requirement is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be the supplier or receiver. In the present case, the phrase “in respect of” in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. The respondent urged that the application under Section 9 is barred by limitation. as noted in B.K. Educational Services (supra), limitation does not commence when the debt becomes due but only when a default occurs. As noted earlier in the judgment, default is defined under Section 3(12) of the IBC as the non-payment of the debt by the corporate debtor when it has become due.

A debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt and limitation does not commence when the debt becomes due but only when a default occurs – Consolidated Construction Consortium Ltd. Vs. Hitro Energy Solutions Pvt. Ltd. – Supreme Court Read Post »

Only in a situation where the Corporate Debtor within 10 days of the receipt of demand notice, has not sent the reply to the Operational Creditor, then only, an affidavit to that effect can be submitted in terms of Sec. 9(3)(b) of the Code – Sangeeta Goel Vs. Roidec India Chemicals Private Limited – NCLAT

NCLAT considering decisions of Hon’ble Supreme Courts in Macquarie Bank Vs. Shilpi Cable Technologies Ltd.and Surendra Trading Company V. Juggilal Kamlapat held that it is clear that only in a situation where the Corporate Debtor within 10 days of the receipt of demand notice, has not sent the reply to the Operational Creditor, then only, an affidavit to that effect can be submitted in terms of Section 9(3)(b) of the Code. But in a case where such notice has been sent, in reply to the demand notice by the Corporate Debtor ‘an affidavit to that effect cannot be given’.

Only in a situation where the Corporate Debtor within 10 days of the receipt of demand notice, has not sent the reply to the Operational Creditor, then only, an affidavit to that effect can be submitted in terms of Sec. 9(3)(b) of the Code – Sangeeta Goel Vs. Roidec India Chemicals Private Limited – NCLAT Read Post »

To entertain an application u/s 9 of IBC requires strict proof of debt and default- Ramco Systems Ltd. Vs. Spicejet Ltd. – NCLAT

The Adjudicating Authority (National Company Law Tribunal), Bench-III, New Delhi, by impugned order dated 14th December, 2017, dismissed the application on the ground of inconsistency in the overall payments and the non-compliance with the provisions of Section 9(3)(c) by the ‘Operational Creditor’, in the absence of a certificate from the financial institution maintaining accounts of the ‘Operational Creditor’.NCLAT upheld the same.

To entertain an application u/s 9 of IBC requires strict proof of debt and default- Ramco Systems Ltd. Vs. Spicejet Ltd. – NCLAT Read Post »

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