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2022 (3) TMI 278 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - monetary amount involved in the application - HELD THAT - As per Section 4 of the Code, in order to file application for initiation of Corporate Insolvency Resolution Process the applicant must prove that the default committed by the Corporate Debtor is ₹ 1 Crore or more - Before the publication of notification No. S4/1205 (E) dated 24.3.2020 published by the Ministry Corporate Affairs, Government of India, the threshold limit in Part-II was ₹ 1 lac only, however, to prevent large scale insolvencies due to the financial stress caused by the pandemic, the Government notified the minimum amount of default as ₹ 1 Crore instead of ₹ 1 Lakh. When the aforementioned litmus test in the facts of the present matter it is seen that the fresh Demand Notice was served upon the Corporate Debtor on 22.02.2021 and the application was filed for initiation of Corporate Insolvency Resolution Process on 09.10.2021. The amount of default as claimed by the applicant is less than the threshold limit defined under Section 4 of the Code. Therefore, the present case is not maintainable in terms of provisions of Section 4 of the Code. The present application stand rejected as not maintainable with no order as to costs.
Issues:
Application under Section 9 of Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process based on default in payment by the Corporate Debtor. Interpretation of the minimum default amount criteria under Section 4 of the Code post-amendment. Applicability of the threshold limit defined under Section 4 in determining the maintainability of the application. The judgment pertains to an application filed by Eureka Forbes Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against M/s. B L Kashyap & Sons Ltd., the respondent Corporate Debtor. The applicant alleged that the Corporate Debtor defaulted on a payment of ?74,92,216 for supplied goods related to a Water Treatment Plant project. The applicant issued a Demand Notice under Section 8 of the Code, highlighting the default amount. However, a subsequent Demand Notice was issued with the correct claim amount due to an error in the initial notice. The total outstanding amount, including interest, remained unpaid by the Corporate Debtor since April 24, 2018. The Tribunal deliberated on the application in light of Section 4 of the Code, which mandates that the default amount must be ?1 Crore or more for initiating the Corporate Insolvency Resolution Process. The Government, through a notification, raised the minimum default amount to ?1 Crore from ?1 Lakh to address financial stress during the pandemic. Citing a judgment by the Hon'ble Kerala High Court, the Tribunal noted that post the amendment, applications for defaults less than ?1 Crore are not maintainable. Applying this interpretation to the case at hand, where the fresh Demand Notice was served on February 22, 2021, and the application was filed on October 9, 2021, it was found that the claimed default amount fell below the prescribed threshold. Consequently, the Tribunal held that the application was not maintainable under Section 4 of the Code. In conclusion, the Tribunal rejected the application as not maintainable due to the default amount being below the statutory limit defined in Section 4 of the Insolvency and Bankruptcy Code, 2016. The judgment emphasizes the critical role of adhering to the prescribed criteria, especially regarding the minimum default amount, in determining the viability of initiating the Corporate Insolvency Resolution Process.
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