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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2022 (3) TMI Tri This

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2022 (3) TMI 278 - Tri - Insolvency and Bankruptcy


Issues:
Application under Section 9 of Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process based on default in payment by the Corporate Debtor. Interpretation of the minimum default amount criteria under Section 4 of the Code post-amendment. Applicability of the threshold limit defined under Section 4 in determining the maintainability of the application.

The judgment pertains to an application filed by Eureka Forbes Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against M/s. B L Kashyap & Sons Ltd., the respondent Corporate Debtor. The applicant alleged that the Corporate Debtor defaulted on a payment of ?74,92,216 for supplied goods related to a Water Treatment Plant project. The applicant issued a Demand Notice under Section 8 of the Code, highlighting the default amount. However, a subsequent Demand Notice was issued with the correct claim amount due to an error in the initial notice. The total outstanding amount, including interest, remained unpaid by the Corporate Debtor since April 24, 2018.

The Tribunal deliberated on the application in light of Section 4 of the Code, which mandates that the default amount must be ?1 Crore or more for initiating the Corporate Insolvency Resolution Process. The Government, through a notification, raised the minimum default amount to ?1 Crore from ?1 Lakh to address financial stress during the pandemic. Citing a judgment by the Hon'ble Kerala High Court, the Tribunal noted that post the amendment, applications for defaults less than ?1 Crore are not maintainable. Applying this interpretation to the case at hand, where the fresh Demand Notice was served on February 22, 2021, and the application was filed on October 9, 2021, it was found that the claimed default amount fell below the prescribed threshold. Consequently, the Tribunal held that the application was not maintainable under Section 4 of the Code.

In conclusion, the Tribunal rejected the application as not maintainable due to the default amount being below the statutory limit defined in Section 4 of the Insolvency and Bankruptcy Code, 2016. The judgment emphasizes the critical role of adhering to the prescribed criteria, especially regarding the minimum default amount, in determining the viability of initiating the Corporate Insolvency Resolution Process.

 

 

 

 

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