2022 (2) TMI 1311 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Co-operative Societies registered under the Multi-State Co-operative Societies Act, 2002 - scope of Corporate Person as defined under Section 2(d) and Section 3(7) of the Code - applicability of IBC to Co-operative Societies registered under Multi-State Cooperative Societies Act, 2002 - Whether the Multi-State Co-operative Societies Act, 2002 prevail over the IBC? - HELD THAT - After bare reading of the provisions of the Code, even if we consider the Corporate Debtor to be a Corporate Person as defined under section 3(7) of the Code, the Corporate Debtor is itself a Co-operative Society and hence cannot come under the provisions of section 2(d) of the Code as the Central Government has not issued the Notification of the applicability of the Code to the Co-operative Society. The Corporate Debtor which is Co-operative Society, to become the Corporate Person under section 3(7) has to complete the criteria given under section 2 of the Code, which deals with applicability of the Code. If the Corporate Debtor in the matter is not covered under the section 2 of the Code, the question of applicability of section 3(7) does not arise. Thus, it is clear that the Corporate Debtor being Co-operative Society is not the Corporate Person nor the provisions of Code are applicable to the Co-operative Society as the Corporate Debtor in the matter is registered/incorporated under Multi-State Co-operative Societies Act, 2002 which is a special statute and provides specific provisions for the winding up of the Societies registered under the same. And hence, the Corporate Debtor being Co-operative Society cannot be put under Insolvency Resolution Process. This Bench finds no merit in admitting Petition filed by the Financial Creditor under section 7 of the Code against the Corporate Debtor who is a Co-operative Society registered under the Multi-State Co-operative Societies Act, 2002 - this Bench is of considered view that the Corporate Debtor who is Co-operative Society registered/incorporated under the Multi-State Co-Operative Societies Act, 2002, does not come under the purview of the Code and therefore the CIRP cannot be initiated against the Corporate Debtor. Application dismissed.

Issues Involved:
1. Whether Co-operative Societies registered under the Multi-State Co-operative Societies Act, 2002 fall within the meaning of "Corporate Person" as defined under Section 2(d) and Section 3(7) of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the provisions of the IBC are applicable to Co-operative Societies registered under the Multi-State Co-operative Societies Act, 2002.
3. Whether the Multi-State Co-operative Societies Act, 2002 prevails over the IBC.

Issue-wise Detailed Analysis:

Issue 1: Definition of "Corporate Person"
The tribunal examined whether Co-operative Societies fall within the definition of a "Corporate Person" under Section 2(d) and Section 3(7) of the IBC. Section 3(7) defines a "corporate person" as a company, LLP, or any other person incorporated with limited liability under any law for the time being in force. However, Section 2(d) requires a notification from the Central Government to specify such bodies. The tribunal concluded that since the Corporate Debtor is a Co-operative Society and no such notification has been issued by the Central Government, it does not fall under the definition of "Corporate Person."

Issue 2: Applicability of IBC to Co-operative Societies
The tribunal referred to the judgment of the Hon'ble NCLAT in the matter of Asset Reconstruction Company (India) Ltd. v. Mohammadiya Educational Society, which held that societies registered under the Societies Registration Act do not fall within the definition of "corporate persons" under the IBC. The tribunal emphasized that even if a Co-operative Society is considered a body corporate, it does not meet the criteria set out in Section 2(d) of the IBC, as it has not been notified by the Central Government. Therefore, the provisions of the IBC are not applicable to Co-operative Societies registered under the Multi-State Co-operative Societies Act, 2002.

Issue 3: Prevalence of Multi-State Co-operative Societies Act over IBC
The tribunal noted that Section 238 of the IBC states that the provisions of the IBC shall have an overriding effect over any other law. However, since the tribunal had already concluded that Co-operative Societies do not fall within the ambit of the IBC, the question of the Multi-State Co-operative Societies Act prevailing over the IBC does not arise for further discussion.

Conclusion:
The tribunal found no merit in admitting the petition filed by the Financial Creditor under Section 7 of the IBC against the Corporate Debtor, a Co-operative Society registered under the Multi-State Co-operative Societies Act, 2002. The tribunal concluded that the Corporate Debtor does not come under the purview of the IBC, and therefore, the Corporate Insolvency Resolution Process (CIRP) cannot be initiated against it. The application was dismissed with no cost, and it was clarified that the observations made in the order should not prejudice the rights of the Financial Creditor before any other judicial forum.

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