2022 (4) TMI 428 - 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 - Service of demand notice - pecuniary jurisdiction of this Tribunal - HELD THAT - The claim amount in this Application is below the limits of the pecuniary jurisdiction of this Tribunal and hence the Application cannot be entertained. Demand notice under Section 8 of IBC - HELD THAT - The Counsel for the Operational Creditor relies on the judgment of Supreme Court in Macquarie Bank Ltd. Vs. Shilpi Technologies Limited 2017 (12) TMI 850 - SUPREME COURT wherein the Supreme Court held that a conjoint reading of Section 30 of Advocates Act and Section 8 and 9 of the Code together with the Adjudicating Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an Operational Creditor by a lawyer would be in order. It held that it has been held in Gariwala Case 1991 (9) TMI 349 - SUPREME COURT the expression an Operational Creditor may on the occurrence of a default deliver a demand notice under Section 8 of the Code must be read as including an Operational Creditor s authorized agent and lawyer as has been fleshed out in Form Nos. 3 and 5 appended to the Adjudicating Authority Rules. In this case the Power of Attorney was given to one Mr. A.M. Sridhar by the Operational Creditor to issue notice in Form No. 3. The Counsel for the Operational Creditor contends that the said Power of Attorney would also empower the Power of Attorney Agent to appoint any Advocate practicing to issue notice. However irrespective of the said Power of Attorney in view of the Judgment cited above the notice issued by the Advocate would be a valid notice. Whether any debt is due to the Operational Creditor from the Corporate Debtor and whether the Corporate Debtor has committed any default in respect of the said debt and whether CIRP can be initiated against the Corporate Debtor? - HELD THAT - There is no dispute that the debt is due to the Operational Creditor by the Corporate Debtor. But for the said debt and default committed by the Corporate Debtor the initiation of CIRP cannot be done due to the debt being less than the pecuniary Limits of jurisdiction of this Tribunal. It however can recover the same by moving the appropriate forums. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment from the National Company Law Tribunal, Amaravati Bench, primarily addresses the following legal issues:

• Whether the claim amount falls within the pecuniary jurisdiction of the Tribunal.
• Whether the demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC) is in accordance with the law.
• Whether any debt is due to the Operational Creditor from the Corporate Debtor, and whether the Corporate Debtor has committed any default in respect of the said debt, justifying the initiation of the Corporate Insolvency Resolution Process (CIRP).
• The overall result of the application.

2. ISSUE-WISE DETAILED ANALYSIS

I. Whether the claim amount is within the pecuniary jurisdiction of this Tribunal:

• Relevant legal framework and precedents: Section 4(1) of the IBC specifies the pecuniary limit as Rs. 1 Lakh, with a proviso allowing the Central Government to raise this limit up to Rs. 1 Crore via notification. The notification dated 24.03.2020 raised the threshold to Rs. 1 Crore.
• Court's interpretation and reasoning: The Tribunal considered whether the date of default or the date of application should determine the applicability of the notification. It concluded that the date of application is the relevant factor, based on precedents from the NCLAT and the Supreme Court.
• Key evidence and findings: The application was filed on 26.03.2021, post-notification, and the claim amount was less than Rs. 1 Crore.
• Application of law to facts: Since the application was filed after the notification date, the Tribunal lacked jurisdiction as the claim amount did not meet the new threshold.
• Treatment of competing arguments: The Tribunal considered arguments regarding the date of default but relied on binding precedents emphasizing the date of application.
• Conclusions: The claim amount was below the pecuniary jurisdiction, leading to the dismissal of the application.

II. Whether the demand notice under Section 8 of IBC is in accordance with law:

• Relevant legal framework and precedents: The judgment in Macquarie Bank Ltd. vs. Shilpi Technologies Ltd. established that a notice sent by a lawyer on behalf of an Operational Creditor is valid.
• Court's interpretation and reasoning: The Tribunal noted that the notice issued by the Advocate was valid under the IBC, as authorized by the Operational Creditor.
• Conclusions: The demand notice was deemed valid.

III. Whether any debt is due to the Operational Creditor from the Corporate Debtor and whether the Corporate Debtor has committed any default:

• Relevant legal framework and precedents: The Tribunal examined the existence of debt and default under the IBC framework.
• Court's interpretation and reasoning: The Tribunal acknowledged the debt and default but emphasized that the pecuniary limit barred the initiation of CIRP.
• Conclusions: While debt and default were established, the application for CIRP could not proceed due to jurisdictional limits.

IV. To what result:

• The application, CP (IB) No. 19/9/AMR/2021, was dismissed due to the claim amount being below the pecuniary jurisdiction of the Tribunal.

3. SIGNIFICANT HOLDINGS

• Core principles established: The date of application, not the date of default, determines the applicability of the pecuniary threshold under the IBC notification dated 24.03.2020.
• Final determinations on each issue: The Tribunal dismissed the application due to the claim amount being below the jurisdictional threshold, validated the demand notice issued by the Advocate, and recognized the debt and default but did not initiate CIRP due to jurisdictional constraints.

The judgment underscores the importance of the date of application in determining the applicability of jurisdictional thresholds under the IBC, aligning with precedents set by higher courts.