2019 (5) TMI 1883 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - the Operational Creditors is sole proprietary firm - scope of term 'person', competent to prefer petition - HELD THAT - A combined reading of the provisions namely Section 3(23), Section 5(20) read with Section 9 (1) shows that a petition can be preferred by a 'person' and who can be treated as an 'Operational Creditor' to whom an operational debt is owed by the Corporate Debtor and upon issue of notice of payment as provided under Section 8 of IBC, 2016 on default can come before this Tribunal by way of an application preferred under Section 9 of the Insolvency and Bankruptcy Code, 2016 - It is thus seen from the definition of a person as defined under Section 3(23) of Insolvency and Bankruptcy Code, 2016 that while an 'individual' has been included, however, there is no mention of a sole proprietary firm specifically to be treated as a person under IBC, 2016. It is by now trite that Insolvency and Bankruptcy Code, 2016 is a separate code by itself and where there is a specific definition of word and expressions as defined in the Insolvency and Bankruptcy Code, 2016 namely IBC, 2016 the definition of a such a word or expression cannot be imported from any other Act which is also explicitly clear from a perusal of Section 3(37) of Insolvency and Bankruptcy Code, 2016. In the present case, it is evident that a sole proprietary concern, namely M/s. Shiv Shakti Store is not competent to be considered as a 'person' to prefer a petition under Insolvency and Bankruptcy Code, 2016 and more so, as rightly pointed out by learned counsel for the Corporate Debtor that even though in the prescribed application under AAA Rules it specifically provides in the form under Part V of the said application the onus is to bring to the notice of this Tribunal the details of succession to the sole proprietary concern by Mr. Sanjay Rastogi who has sought to depose on behalf of the petitioner concern, no document by way of succession certificate or probate of will or letters of administration has been filed of Mr. Surendra Nath Rastogi. In any case as reasoned above, a sole proprietary concern is not a competent to file a petition in its own name as it cannot be considered as a person under the provisions of Insolvency Bankruptcy Code, 2016. This application should fail on this preliminary ground alone and this Tribunal is constrained to dismiss this petition - Petition dismissed.

Summary

Issues:
Application by Operational Creditor against Corporate Debtor under Insolvency and Bankruptcy Code, 2016 - Competency of sole proprietor concern to initiate proceedings under IBC, 2016.

Detailed Analysis:
1. The application was filed by M/s. Shiv Shakti Store, an Operational Creditor, against Pratham Housing Private Limited, the Corporate Debtor, seeking recovery of dues amounting to ?12,70,925. The Operational Creditor supplied goods to the Corporate Debtor between 07.04.2014 to 23.09.2014, raising invoices for the same. Despite issuing a notice under Section 8(1) of the Insolvency & Bankruptcy Code, 2016, the Corporate Debtor failed to clear the debt, leading to the filing of the petition under Section 9 of the Code.

2. The claim amount reflected in the application under AAA Rules, 2016 was ?7,38,910 along with interest, totaling ?12,70,925. The Corporate Debtor, in response, denied the liability, citing the debt as barred by limitation and claiming that goods were never supplied. Allegations were made regarding cash withdrawals by a signatory to the bank accounts, disputing the transactions.

3. The petitioner filed a rejoinder providing documents to support the supply of goods, including bills, transport challan, and sales tax return. A cheque issued by the Corporate Debtor towards acknowledgment of debt was also mentioned. The Corporate Debtor's denial of goods supply was refuted based on the evidence presented.

4. A preliminary objection was raised regarding the competency of the sole proprietor concern, M/s. Shiv Shakti Store, to initiate insolvency proceedings under the Code. The definition of an Operational Creditor under Section 5(20) was examined, highlighting that a person to whom an operational debt is owed can file a petition under Section 9 of the Code.

5. The Tribunal analyzed the provisions of the Insolvency and Bankruptcy Code, 2016, emphasizing that a sole proprietary concern cannot be considered a 'person' eligible to file a petition under the Code. Despite the absence of specific mention of a sole proprietary firm, the Code's definitions and provisions do not include such entities as eligible persons to initiate insolvency proceedings.

6. Consequently, the Tribunal ruled that M/s. Shiv Shakti Store, being a sole proprietary concern, lacked the competency to file the petition under the Insolvency and Bankruptcy Code, 2016. The application was dismissed on this ground alone, emphasizing the need for compliance with the Code's provisions regarding the eligibility of petitioners.

7. The Tribunal ordered the copy of the dismissal order to be provided to the Operational Creditor in accordance with the provisions of Section 9 of the Insolvency and Bankruptcy Code, 2016, concluding the judgment on the basis of the sole proprietor concern's incompetency to initiate the insolvency proceedings.