9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 52 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repyament of its dues - Financial Creditors - existence of debt and dispute or not - Privity of contract - whether the insolvency proceedings under the code can be initiated against the sole proprietorship firm? - HELD THAT - The Proprietorship firms are not included within the ambit of the code. Therefore, in case the Inter Corporate Loan was issued in the name of the sole proprietorship, and that not being a legal entity cannot sue or be sued and cannot be considered as the corporate person. That the purported Corporate debtor is not a Limited liability partnership firm is also borne out from the pleadings of the purported financial creditor. The petition was maintainable if there was a privity of contract between the Financial Creditor and the individual. However the said debt is not given to an individual but to a concern namely Bulbulitala cold storages, who has incidentally, not been named as a Corporate debtor. The alleged transaction undertaken between the Petitioner and the Principal borrower will not fall under the definition of Section 3(7) of IBC, 2016. Privity of contract - HELD THAT - It is observed that the Financial Creditor has no privity of contract with the corporate debtor, and therefore no proceedings can be initiated against the corporate debtor and accordingly reject this petition. Petition dismissed.
Issues:
1. Initiation of Corporate Insolvency Resolution Process under section 7 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor. 2. Dispute regarding default in payment by the Corporate Debtor. 3. Privity of contract between the Financial Creditor and the Corporate Debtor. 4. Legal status of a sole proprietorship firm under the Insolvency and Bankruptcy Code, 2016. Analysis: Issue 1: The Company Petition was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor against the Corporate Debtor for default in payment amounting to Rs. 21,49,277 as on 1st August 2019. The Financial Creditor had provided evidence of the default and sought initiation of the Corporate Insolvency Resolution Process. Issue 2: The Financial Creditor submitted documents proving the default, including the Inter-corporate Deposits sanctioned to the Corporate Debtor, subsequent repayments, and dishonored cheques. The Corporate Debtor disputed the transaction, claiming it was with a sole proprietorship concern, not a corporate entity. The Tribunal analyzed the submissions and evidence presented by both parties. Issue 3: The Tribunal examined the privity of contract between the Financial Creditor and the Corporate Debtor. It was established that there was no direct contractual relationship between the parties, as the transaction was with a sole proprietorship concern, which is not considered a corporate person under the Insolvency and Bankruptcy Code. Therefore, the Tribunal concluded that the Financial Creditor lacked privity of contract with the Corporate Debtor, rendering the petition unsustainable. Issue 4: The Tribunal delved into the legal status of a sole proprietorship firm under the Insolvency and Bankruptcy Code. It clarified that insolvency proceedings cannot be initiated against a sole proprietorship firm as they are not encompassed within the definition of a corporate person under the Code. The Tribunal referred to relevant provisions and previous judgments to support its decision. In conclusion, the Tribunal dismissed the Company Petition as there was no privity of contract between the Financial Creditor and the Corporate Debtor, emphasizing that the transaction with a sole proprietorship concern did not fall under the purview of the Insolvency and Bankruptcy Code. The judgment highlighted the importance of legal entities and contractual relationships in insolvency proceedings, providing a comprehensive analysis of the issues involved.
|
