2017 (11) TMI 840 - Tri - Insolvency and Bankruptcy

Corporate Insolvency resolution process - application filed by operational creditor incomplete - Held that - As seen from the records that vide order dated 25.09.2017 the applicant was informed that the petition suffers from certain technicalities. Seven days time was duly afforded to the applicant to remove the objection with respect to the filing of certificate as required under section 9(3)(c) of the Code. Time was afforded to the applicant on 25.09.2017, for removal of the aforesaid defect. The applicant has filed certified copy of bank statement of the applicant company from 1.4.2017 to 27.9.2017, which cannot be termed as compliance of sub-sec. (3)(c) of Section 9 of the Code. In addition to the relevant bank account, the Code requires a certificate from the financial institution maintaining account of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Despite opportunity afforded, admittedly the applicant has failed to file the requisite certificate as mandatorily required under Section 9(3 )(c) of the Code. The word shall used in sub-section (3) of Section 9 of the Code shows mandatory requirement, which includes inter alia clause C of sub section 3. Therefore, on a bare perusal of the above-mentioned provision it is clear that furnishing of certificate from the relevant financial institution by the applicant inter-alia is a mandatory requirement under Section 9 of the Code and in the absence of such certificate from the financial institution maintaining accounts of the operational creditor, the application filed by the applicant is clearly incomplete. Thus the present application filed by operational creditor is rejected being incomplete.

Summary

Issues: Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency resolution process.

The judgment pertains to an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 seeking the initiation of Corporate Insolvency resolution process against a corporate debtor. The applicant alleged that despite fulfilling all obligations diligently, the respondent defaulted in making payments, leading to a significant outstanding amount. The respondent admitted to owing a substantial sum but failed to make payments despite reminders and legal notices. Subsequently, a winding-up petition was filed before the Hon’ble Delhi High Court, which was later transferred to the NCLT. The applicant sought dismissal of the petition with liberty to file a fresh one under the Insolvency and Bankruptcy Code, 2016, which was allowed. The applicant issued a demand notice as per the Code's provisions, but the respondent did not respond.

The NCLT informed the applicant of technical deficiencies in the petition, specifically regarding the filing of a certificate as required under section 9(3)(c) of the Code. Despite being granted time to rectify the defect, the applicant failed to provide the necessary certificate from the financial institution maintaining accounts of the operational creditor within the stipulated period. The NCLT highlighted that under sub-section (5) of Section 9, if the application is incomplete, the adjudicating authority must give the applicant 7 days to rectify the defect. Referring to a judgment by the NCLAT, it emphasized the importance of timely rectification of defects, failing which the application is liable to be rejected.

The NCLT observed that the applicant's submission of a bank statement did not fulfill the mandatory requirement of providing a certificate from the financial institution confirming the absence of payment of an unpaid operational debt by the corporate debtor. The Code explicitly mandates the furnishing of such a certificate under Section 9(3)(c), making it a mandatory requirement. The failure to provide this certificate rendered the application incomplete, leading to its rejection. Consequently, the NCLT rejected the application as incomplete, emphasizing the mandatory nature of the certificate requirement under the Code.