2022 (4) TMI 1158 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to maker repayment of its dues - Operational Creditors - existence of debt and dispute or not - Corporate Debtor has raised objection that the applicant being an unregistered partnership firm is not entitled to file present application in terms of Section 69 of the Indian Partnership Act, 1932 - HELD THAT - From the bare perusal of the Section 69 of Indian Partnership Act, it is apparent that the effect of non-registration of the firm would adversely effect to the suit and not to the applications alike that of under Section 9 of the Code. The application under Section 9 of the Code does not come under the purview of the 'suits'. The proceedings before the NCLT under Section 9 are concerned, that are not in the nature of the suit or miscellaneous proceeding rather that is application moved by the party against the defaulting Corporate debtor for initiation of CIR proceedings. It is settled principle of law that NCLT is not entitled to go into the depth of the matter and law does not permit Tribunal to decide the matter on contentious issues, which are to be decided by Civil Courts. A reference can also be made to B.K. Educational Services Pvt. Ltd. Vs. Parag Gupta Associates 2018 (10) TMI 777 - SUPREME COURT , wherein it is held that CIR proceedings does not constitute a 'suit'. Similarly, the Hon'ble Supreme Court of India further in the matter of Sagar Sharma Vs. Phoenix Arc Pvt. Ltd., 2019 (10) TMI 224 - SUPREME COURT endorsed that the application under the IBC are petitions. Thus, the proceedings under IBC Code are not of the nature of 'suits' and are summary in nature, therefore, the bar under Section 69(2) of the Indian Partnership Act, 1932 is not applicable with respect to the applications filed under the Code. Thus, it is established that applicant had raised the invoices from 17th May 2018 to 15th December 2018 and there was vague dispute regarding the quality of one consignment only, which was also stand resolved, hence, a sum of ₹ 22,066,872/- were still outstanding against the Corporate Debtor pertains to the above said invoices. In view of the facts and circumstances, the present petition stands admitted. Petition admitted - moratorium declared.

Summary

Issues:
1. Application under Section 9 of the Code by an operational creditor against a corporate debtor for alleged default.
2. Objection raised by the respondent regarding the applicant being an unregistered partnership firm under Section 69 of the Indian Partnership Act, 1932.

Issue 1: Application under Section 9 of the Code
The operational creditor, a partnership firm, filed an application under Section 9 of the Code seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the respondent corporate debtor for an alleged default in payment for the supply of cement bags. The applicant provided details of transactions, invoices, and a demand notice served to the respondent. The respondent raised objections regarding the applicant's legal status as an unregistered partnership firm under Section 69 of the Partnership Act, 1932.

Issue 2: Objection under Section 69 of the Partnership Act, 1932
The respondent contended that as per Section 69 of the Partnership Act, 1932, an unregistered partnership firm is barred from filing any suit or application. The respondent argued that the term "suit" in Section 69 should be interpreted broadly to include applications, citing a judgment by the Supreme Court. The Tribunal examined the provisions of Section 69, emphasizing that its effect pertains to suits arising from contracts and does not extend to applications under Section 9 of the Code. The Tribunal referenced previous judgments to establish that proceedings under the IBC are not equivalent to suits, emphasizing the summary nature of such proceedings.

The Tribunal concluded that the application under Section 9 of the Code does not fall within the scope of suits as per Section 69 of the Partnership Act, 1932. Citing precedents, the Tribunal clarified that insolvency proceedings under the IBC are summary in nature and distinct from traditional civil suits. Therefore, the objection raised by the respondent regarding the applicant's legal status as an unregistered partnership firm was dismissed. The Tribunal admitted the application, appointed an Insolvency Resolution Professional, and directed the applicant to deposit a specified sum for expenses. Additionally, the moratorium period under Section 14 of the Code was imposed on the corporate debtor. The Tribunal issued directives for communication of the order and compliance with relevant authorities.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal, including the application under Section 9 of the Code and the objection raised under Section 69 of the Partnership Act, 1932. The Tribunal's detailed reasoning and reference to legal precedents provide a thorough understanding of the decision-making process in this case.