2022 (3) TMI 279 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - petitioner being sole proprietor is entitled to maintain the present petition as Operational Creditor? - doctrine of harmonious construction - HELD THAT - Though, the sole proprietorship firm has no legal entity as that of partnership firm, but it has been still recognized under the statute and have same identity as of person, because this is entity which require registration under the various acts like that of the person or individual. Further, Section 2(f) clearly laid down that the provisions of this Code are applicable to sole proprietorship firm also. Hence, Section 2(f) has to be read along with Section 3(23) of the Code. Section 2 (f) of IBC provides inter alia that the provision of the code are applicable to partnership firm and proprietorship firm - Apart that it is settled law that the doctrine of harmonious construction has to be adopted because the Parliament makes a separate set of statute rules and regulations as well as Constitution of Provision under their well-defined power. While framing of these provisions, it has to be done very carefully, conflict still occurs sometimes due to overlapping in the provisions of acts. The rule of interpretation is the doctrine of harmonious construction which laid down when there is a conflict between two or more statute or two or more parts of statute and the rule of harmonious construction need to be adopted. Every statute has a purpose and intent as per law and should be read as a whole. While using the harmonious rule, the interpretation should be consistent with all the provisions of the statute - Operational Creditor refers to a word person and the definition of person is laid down under Section 3(23) of the Code, which does not include sole proprietorship concern specifically, but that Section 3(23) as to be read in consonance of Section 2(f) to draw a harmonious construction among all these sections. The sole proprietorship firm is entitled to maintain the petition under Section 9 of the Code being Operational Creditor before NCLT - the issue is decided in the favour of the petitioner against the respondent. Whether the present petitioner is entitled to initiate CIRP proceedings against the respondent on the basis that the respondent owed debt for the goods supplied by the petitioner? - HELD THAT - It is to be mentioned that all the invoices placed on record pertains to M/s. Nikhil Footwear. Both the entities are having different GSTIN/UIN PAN Numbers. As the GSTIN/UIN number of M/s. Nikhil Footwear Private Limited is 06AAACN0749A1Z1, whereas of M/s. Nikhil Footwear is GSTIN/UIN is 06AANFN8088L1ZF and PAN Number of Nikhil Footwears is AANFN8088L, whereas the PAN Number of the Corporate Debtor is herein is AAACN0749A. All these bills contains GST and PAN No. of partnership firm and not of the respondent company - Even, during the course of arguments, Learned Counsel for the petitioner herein also fairly admitted that the invoices pertains to M/s. Nikhil Footwear i.e. partnership firm and not Nikhil Footwear Private Limited. Therefore, both these are different entities constituted under the different laws and having different GSTIN/UIN Numbers. Hence, all the dues pertaining to invoices placed on record pertains to M/s. Nikhil Footwear i.e. Partnership Firm not to M/s. Nikhil Footwear Private Limited. No transaction pertains to the respondent company herein. Partnership firm still does not come under the jurisdiction of NCLT as such no petition can be maintained - the issue stands decided against the petitioner and in favour of the respondent. Relief - HELD THAT - The present petitioner miserably failed to prove on record that M/s. Krishna Industries supplied any goods as per the invoices to the respondent company i.e. M/s. Nikhil Footwear Pvt. Ltd. and dues were against the Corporate Debtor herein qua those bills/invoices. The present petition stands dismissed.

Summary

Issues:
I. Whether the sole proprietor is entitled to maintain the petition as an Operational Creditor?
II. Whether the petitioner can initiate Corporate Insolvency Resolution Process (CIRP) against the respondent for the debt owed for goods supplied?
III. Relief sought in the matter.

Issue I:
The respondent argued that the petition filed by the sole proprietor concern is not maintainable as it does not fall under the "definition of person" and cannot be considered an Operational Creditor. The petitioner contended that the sole proprietor can maintain the petition under Section 9 as an Operational Creditor, citing relevant sections of the Insolvency and Bankruptcy Code. The Tribunal analyzed the definitions of "Operational Creditor" and "person" under the Code, emphasizing that the term "person" includes entities established under a statute. It was established that various statutes recognize sole proprietorship businesses, making them a legal entity for registration purposes. The Tribunal applied the doctrine of harmonious construction to interpret the Code's provisions, concluding that sole proprietorship firms are entitled to maintain applications as Operational Creditors against Corporate Debtors. Legal precedents were cited to support this interpretation.

Issue II:
The Tribunal examined whether the petitioner had valid dues against the Corporate Debtor for goods supplied. It was noted that the invoices presented pertained to a partnership firm, M/s. Nikhil Footwear, with different GSTIN/UIN and PAN numbers from the respondent company, M/s. Nikhil Footwear Pvt. Ltd. The petitioner acknowledged that the invoices were for the partnership firm, not the respondent company. As the transactions did not involve the respondent company, the Tribunal ruled that the dues were not against the Corporate Debtor. Consequently, the Tribunal decided this issue against the petitioner and in favor of the respondent.

Issue III (Relief):
The Tribunal found that the petitioner failed to provide evidence that goods were supplied to the respondent company, M/s. Nikhil Footwear Pvt. Ltd., and that dues were owed by the Corporate Debtor. As a result, the petition was dismissed, and no costs were awarded. The case file was consigned to records.

This detailed analysis of the judgment addresses the issues raised in the petition and provides a thorough explanation of the Tribunal's findings and reasoning.