2019 (2) TMI 1115 - Tri - Companies Law

Winding up petition - outstanding partnership debt - HELD THAT - Though this corporate debtor is a company, since the core agreement is in between a partnership firm and the petitioner herein, we are of the view that jurisdiction lies with the Debts Recovery Tribunal but not with this Bench to deal with this debt either under operational debt or financial debt as mentioned under Part II of the Code. May be, it is true that Part III has not been notified till date but it does not mean that this Bench will get jurisdiction to deal with the debt that fall under Part III because the Tribunals are limited to deal with issues to the extent of jurisdiction conferred upon it. Since this Bench is of the view that this company petition is not maintainable for want of jurisdiction to deal with liability against a partnership, this company petition is dismissed solely on the ground aforesaid without getting into other disputes such as barred by limitation and existence of dispute.

Summary

Issues:
Company petition for winding up under sections 433(e) and (f) and 434 of the Companies Act, 1956; Transfer of winding up jurisdiction to National Company Law Tribunal; Initiation of corporate insolvency resolution process under Insolvency and Bankruptcy Code, 2016; Dispute over repayment default of &8377; 54,86,09,635 with interest; Partnership agreement for construction project; Allegations of incomplete work and abandonment; Disputed final bill of &8377; 50.43 crores; Jurisdiction of National Company Law Tribunal vs. Debts Recovery Tribunal; Invocation of joint and several liability concept; Maintainability of the company petition.

The judgment involves a company petition filed by an operational creditor against a corporate debtor for winding up under the Companies Act, 1956, citing a default in repayment. The jurisdiction for winding up has shifted to the National Company Law Tribunal due to the Insolvency and Bankruptcy Code, 2016. The petitioner initiated the corporate insolvency resolution process under the Code. The dispute arises from a partnership agreement for a construction project, where allegations of incomplete work and abandonment are made against the corporate debtor. The petitioner issued a disputed final bill of &8377; 50.43 crores, leading to a legal battle over liability and jurisdiction.

The tribunal analyzed the historical facts of the case, including agreements and disputes between the parties. The corporate debtor argued against the maintainability of the petition, highlighting issues such as incomplete work, shoddy construction complaints, and disputed billing. The petitioner's counsel contended that joint and several liability allowed them to proceed against the partner companies before the tribunal under the Insolvency and Bankruptcy Code. However, the corporate debtor's counsel emphasized the exclusive jurisdiction of the Debts Recovery Tribunal for cases involving partnership debts, as outlined in relevant sections of the Code.

Upon a detailed examination of the Code's provisions, the tribunal concluded that jurisdiction to proceed against partnership debts lies with the Debts Recovery Tribunal, not the National Company Law Tribunal. The concept of joint and several liability was considered in light of the specific jurisdictional framework provided by the Code. The judgment clarified that the tribunal lacked the authority to deal with partnership liabilities under Part II of the Code, as it falls within the purview of the Debts Recovery Tribunal. Consequently, the company petition was dismissed on the grounds of jurisdictional limitations, without delving into other disputes raised in the case.