2019 (9) TMI 1358 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - petition preferred by M/s. RG Steels stated to be a Sole Proprietary Concern - HELD THAT - By virtue of definition as contained in section 3(23) of I BC, 2016 a person even though includes an individual it does not include within its ambit a Sole Proprietary Concern. It is also required to note that from the definition as given in section 5(20) of I BC, 2016, an OC has been defined as a 'person' to whom an Operational Debt is owned and includes any person against whom such debt has been legally assigned or transferred. Thus, essential criteria for a Petitioner to satisfy while approaching the Tribunal is that he should be considered as a person under the provisions of IBC, 2016 ans in the instant case since the petition has been filed in the name of RG Steels given as an Applicant, the Applicant does not satisfy the said condition and on this court this petition is liable to be dismissed as not maintainable. Even in relation to merits, it is evident from the reply as sent by the CD to the Demand Notice as issued by the OC dated 20.9.2018, a dispute has been raised in relation to the rate as has been charged by the OC. It is evident from the reply that the supply which has been effected in the relation to Steel @ ₹ 30,800/- per MT and that sale consideration by the CD had been paid as per the rate agreed between the parties, taking into consideration the same for the quantity of steel supplied by the OC to the CD by virtue of 30 invoice a sum of ₹ 1,37,34,936/- was payable as against which the CD it is contended had paid a sum of ₹ 1,40,35,487/- thereby making an excess payment of ₹ 3,00,551/-. Based on the above namely a Sole proprietary concern taking into consideration the definition of a person is not entitled to approach this Tribunal on its own and also in view of the pre-existing dispute evident on consideration of the merits of claim made by the OC against CD, this petition stands dismissed - Petition dismissed.

Summary

Issues:
1. Maintainability of the petition filed by the Operational Creditor (OC) as a Sole Proprietary Concern under the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Dispute regarding the rates charged by the OC to the Corporate Debtor (CD) and the pre-existing nature of the dispute.

Issue 1: Maintainability of the petition:
The petition was filed by RG Steels, identified as a Sole Proprietary Concern. However, under the IBC, a Sole Proprietary Concern does not fall within the definition of a "person" eligible to file such a petition. As per the IBC, an OC is defined as a "person" to whom an Operational Debt is owed. Since the petition was filed in the name of RG Steels, which is a Sole Proprietary Concern, it fails to meet the criteria of being considered as "a person" under the IBC. Consequently, the petition is deemed not maintainable and liable to be dismissed.

Issue 2: Dispute over rates charged by OC to CD:
The CD disputed the rates charged by the OC in response to a Demand Notice issued by the OC. The CD claimed that the supply of steel was charged at a different rate than what was agreed upon, resulting in an alleged excess payment. The CD contended that the rate agreed upon for the quantity of steel supplied was different from what the OC invoiced. The CD highlighted a communication indicating a pre-existing dispute regarding the rates charged by the OC, which was evident from documents submitted by the OC itself. This pre-existing dispute, along with the lack of clarity on the agreed rates, indicated a significant disagreement between the OC and CD. The tribunal found this dispute to be substantial, leading to the dismissal of the petition based on the merits of the claim made by the OC against the CD.

In conclusion, the tribunal dismissed the petition due to the lack of maintainability as a Sole Proprietary Concern under the IBC and the presence of a pre-existing dispute regarding the rates charged by the OC to the CD. The judgment highlighted the importance of meeting the legal criteria for filing such petitions and the significance of resolving disputes prior to initiating insolvency proceedings.