2018 (8) TMI 1908 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - primary contention of the Corporate Debtor was that the application filed by the Applicant was not maintainable in Law and under IBC since the Proprietorship concern was not a legal entity and thus could not sue or be sued in its own name and therefore the present petition deserved to be dismissed - HELD THAT - The Operational Creditor being a sole proprietorship concern should have filed the present Petition in the name of its sole proprietor and not in the name of proprietorship concerned. Hence the Petition is dismissed without costs.

Summary

Issues:
Petition invoking Section 9 of Insolvency and Bankruptcy Code, 2016 against Respondent for CIRP.
Contentions regarding outstanding payments and legal entity status of the Applicant.
Validity of the demand notice and compliance with mandatory requirements.
Debt due and payable to the Applicant.
Definition of 'Person' under Section 3(23) of the Insolvency and Bankruptcy Code.

Analysis:

The petition was filed invoking Section 9 of the Insolvency and Bankruptcy Code, 2016 against the Respondent for initiating Corporate Insolvency Resolution Process. The Applicant, M/s. Sai Kripa Associates, claimed outstanding payments against the Respondent for services rendered. The invoices raised were acknowledged by the Respondent, with part payments made, but a significant amount remained unpaid, leading to the petition. The Respondent disputed the debt, contending that excess payments were made to the Applicant and the claimed amount was vague and not clearly established.

The Respondent argued that the Applicant, being a sole proprietorship concern, was not a legal entity capable of suing or being sued in its own name. The Respondent claimed that the demand notice served by the Applicant was defective and did not comply with the mandatory requirements of the law, specifically lacking information utility as per Rule-5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Respondent also highlighted that payments made were in accordance with the agreed terms and conditions, disputing the amount claimed by the Applicant.

The judgment referred to the definition of 'Person' under Section 3(23) of the Insolvency and Bankruptcy Code, which includes various entities but does not explicitly mention sole proprietorship concerns. The Respondent's contention that the petition was not maintainable under IBC due to the legal status of the Applicant as a sole proprietorship concern was upheld. The Tribunal dismissed the petition without costs, granting the liberty to the Sole Proprietor to file a fresh petition after issuing a Notice under Section 8 of IBC and ensuring compliance with the applicable provisions of the Code.