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2020 (2) TMI 1442 - AT - Insolvency and BankruptcyMaintainability of application - scope of person - Corporate Debtor took up a defence that the Application was filed in the name of sole proprietorship firm and it was not a legal entity under the definition of person under Section 3(23) of IBC - pre-existing dispute or not - HELD THAT - It appears that Committee of Creditors (in short CoC ) has already been constituted and the CoC is set to have its first meeting to-morrow i.e. on 26.02.2020. Some Financial Creditors who are part of CoC are present through their Counsel raising objection that when the CoC is constituted the only recourse available is Section 12A of IBC. Nothing is shown from the records to claim that there was preexisting dispute - Even the judgment shows the name of Respondent No. 1 as the Operational Creditor in his personal name. The Adjudicating Authority in effect has allowed the defects to be cured. The objection on this count does not survive. We also note that Section 2 of IBC provides that the provisions of the Code apply inter alia to proprietorship firms . Further the definition of person in Section 3(23) of IBC is inclusive definition. There is no substance or merit in this Appeal - appeal dismissed.
Issues Involved:
1. Jurisdiction of the Tribunal regarding the filing of an Application under Section 9 of the Insolvency and Bankruptcy Code by a sole proprietorship firm. 2. Validity of the Application under Section 9 of the IBC and the inclusion of interest in the claim amount. 3. Admittance of the Application by the Adjudicating Authority and objections raised by the Corporate Debtor. 4. Existence of a preexisting dispute and the role of the Committee of Creditors in the matter. Jurisdiction Issue: The Appellant argued that the Application under Section 9 of the IBC could not be maintained as it was filed by a sole proprietorship, which is not considered a legal person under the law. The Respondent contended that the Application was not defective as it mentioned the proprietor's name, and any alleged defect was cured by the Adjudicating Authority. Reference was made to a previous judgment where a petition by a sole proprietorship was dismissed. However, the Respondent highlighted that the IBC includes proprietorship firms under its provisions, and the definition of "person" in the IBC is inclusive. Validity of Application and Interest Claim: The Adjudicating Authority admitted the Application under Section 9 of the IBC, despite objections raised by the Corporate Debtor regarding the legal entity filing the petition and the inclusion of interest not stipulated in the agreement. The Corporate Debtor admitted liability and expressed intention to clear outstanding dues, but disputed the interest component. The Authority found the default in payment established, with the dishonoring of a cheque constituting a default. The plea regarding interest was dismissed as the default amount exceeded a certain threshold. Admittance of Application and Objections: The Adjudicating Authority acknowledged the liability of the Corporate Debtor and found the petition complete, establishing the default in payment beyond doubt. The Operational Creditor was deemed entitled to claim its dues, and the petition was admitted under Section 9(5) of the IBC, leading to the declaration of a moratorium. The Authority concluded that there was no substance or merit in the Appeal, ultimately declining to admit it. Existence of Preexisting Dispute and Creditor Committee's Role: The records did not show a preexisting dispute, and objections were raised by Financial Creditors about the recourse available when the Committee of Creditors is constituted. The Committee was set to have its first meeting, and some members objected, stating that Section 12A of the IBC should be the only recourse available when the Committee is constituted. In conclusion, the Tribunal declined to admit the Appeal, disposing of the matter without any costs.
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