2018 (2) TMI 446 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - maintainability of joint application or joint Demand Notice by the Operational Creditor - Held that - Footnote given in Form 5 is not in consonance with the provision of Section 8 of the I & B Code, because Section 8 does not authorise joint application or joint Demand Notice by the Operational Creditor. Section 7 which deals with the financial creditor allows joint application by the financial creditor. The note provided at the end of Form V, Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 requires reconsideration by Appropriate Authorities. This petition under Section 9 of the I & B Code cannot be filed in the representative capacity of 284 workers. The petitioner has filed this petition in the representative position of 284 employees which is not maintainable under Section 9 of the I & B Code. The operational creditor himself can file a petition regarding the debt of other persons, only in case debt is assigned or transferred to him. On this ground, the petition is not maintainable.

Summary

Issues:
1. Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 for initiation of corporate insolvency process against Tayo Rolls Ltd.
2. Authorization of Shri Suresh Narayan Singh to represent 284 workers as operational creditors.
3. Legality of joint application by operational creditors under Sections 8 and 9 of the I & B Code.
4. Compliance of Form 5 and its note regarding joint application by operational creditors.

Analysis:
1. The petitioner filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 seeking initiation of corporate insolvency process against Tayo Rolls Ltd. due to unpaid wages and compensation claims by workers.
2. Shri Suresh Narayan Singh was authorized by 284 workers to represent them, but it was contested that he was not an operational creditor as the workers did not assign or transfer their debt to him, rendering the petition not maintainable.
3. The issue of joint application by operational creditors was raised, highlighting that Section 8 of the I & B Code allows for individual application by an operational creditor, and joint application is not provided for in Section 9, unlike in the case of financial creditors under Section 7.
4. The discrepancy between the provision of Section 8 and the note in Form 5 of the Adjudicating Authority Rules 2016 was noted, as the form allowed for joint applications by operational creditors, contrary to the singular nature of application specified in the Code.

Precedent and Conclusion:
The judgment referred to the case of Uttam Galva Steels Ltd, where the NCLAT clarified that joint petitions by operational creditors are not permissible under Sections 8 and 9 of the I & B Code. The NCLT rejected the petition under Section 9 as not maintainable due to the lack of individual assignment or transfer of debt to Shri Suresh Narayan Singh and the prohibition of joint applications by operational creditors. The order was to send a copy to the Ministry of Corporate Affairs for information.