Section 9 of IBC – Insolvency and Bankruptcy Code, 2016 : Application for initiation of corporate insolvency resolution process (CIRP) by operational creditor

Section 9 of the Insolvency and Bankruptcy Code, 2016- Section 9: Application for initiation of corporate insolvency resolution process by operational creditor. Section 9 of IBC, 2016

PDFPrint

The Insolvency and Bankruptcy Code, 2016

Part-II Insolvency Resolution and Liquidation for Corporate Persons

Chapter-II Corporate Insolvency Resolution Process

Section 9: Application for initiation of corporate insolvency resolution process by operational creditor.

*9. (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditorJ1 may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.

(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.

(3) The operational creditor shallJ2, along with the application furnish—

(a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;

(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;

(c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt 1[by the corporate debtor, if available;]

2[(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and

(e) any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.]

(4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional.

(5) The Adjudicating AuthorityJ3 shall, within fourteen days of the receipt of the application under sub-section (2), by an order—

(i) admitJ4 the application and communicate such decision to the operational creditor and the corporate debtor if,—

(a) the application made under sub-section (2) is complete;

(b) there is no 3[payment] of the unpaid operational debtJ5;

(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;

(d) no notice of disputeJ6 has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending4 against any resolution professional proposed under sub-section (4), if any.

(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if—

(a) the application made under sub-section (2) is incomplete;

(b) there has been 3[payment] of the unpaid operational debt;

(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;

(d) notice of disputeJ6 has been received by the operational creditor or there is a record of dispute in the information utility; or

(e) any disciplinary proceeding is pending4 against any proposed resolution professional:

Provided that Adjudicating Authority, shallJ7 before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven daysJ7 of the date of receipt of such notice from the adjudicating Authority.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.


Reference

*Effective from 01.12.2016.

1. Subs. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018, for the words “by the corporate debtor; and”.

2. Subs. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018, for the clause (d) “(d) such other information as may be specified.”.

3. Subs. by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.e.f. 06.06.2018, for the word “repayment”.

4. Commencement of Disciplinary Proceeding-LA/010/2018, 23rd April, 2018.


Judicial Pronouncements:

J1. A registered trade union which is formed for the purpose of regulating the relations between workmen and their employer can maintain a petition as an operational creditor on behalf of its members. [JK Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills Company Ltd. & Ors. (2019) ibclaw.in 12 SC, p10].

Petition filed by an advocate would be maintainable. [Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2017) ibclaw.in 14 SC].

J2. For mandatory conditions/requirement under Section 9(3), refer Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2017) ibclaw.in 14 SC, (p12-14&26).

J3. All that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. [Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) ibclaw.in 01 SC, p25,29&40 and Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd. (2017) ibclaw.in 14 SC, p11-12].

Role of the Adjudicating Authority while examining an Application under Section 9, refer Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) ibclaw.in 01 SC.

J4. The Adjudicating Authority may in its discretion not admit the application of a Financial Creditor filed u/s 7, however, Section 9(5)(i) of the IBC is mandatory in case of application filed by Operational Creditor u/s 9 of IBC. [Vidarbha Industries Power Ltd. Vs. Axis Bank Ltd. (2022) ibclaw.in 91 SC, p74-76]

J5. 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. [Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd. (2022) ibclaw.in 09 SC]

J6. Once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(ii)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. [Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) ibclaw.in 01 SC, p40]

Operational creditors cannot use the Insolvency Code either prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. [K. Kishan v. Vijay Nirman Company Pvt. Ltd. (2018) ibclaw.in 01 SC, p13].

J7. Provision of removing the defects within 7 days under proviso to Section 7(5) or proviso to Section 9(5) or proviso to Section 10(4), is directory and not mandatory in nature. [Surendra Trading Company v. Juggilal Kamlapat Jute Mills Company Ltd. and Ors. [2017] ibclaw.in 08 SC, p26, also refer Pioneer Urban Land and Infrastructure Ltd. and Anr. v. Union of India and Ors. (2019) ibclaw.in 13 SC, p52]

J8. Interpretation of period of limitation under IBC:

 



Access complete Bare Act here. To research Section and sub-section wise judgments, visit here.


Follow for daily updates:


Scroll to Top