9911796707
TMI Blog2022 (10) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... retation other than what is conveyed in its literary sense. The section clearly stipulates that the application for triggering CIRP may be initiated by a financial creditor either individually or jointly with other financial creditors. Previously the threshold default limit for filing the CIRP application was only Rs.1 lakh and it has been drastically increased to Rs.1 crore vide Gazette Notification dated 24.03.2020. It can easily be envisaged that in cases of MSMEs, there may not exist financial creditors whose individual debt is Rs.1 crore or above. If the threshold limit was to be fixed at Rs.1 crore qua each individual financial creditor, then there was no reason whatsoever for allowing joint applications by financial creditors. The st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent of total number of such creditors in the same class, whichever is less; Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten percent of the total number of such al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub section (5) within such time, it shall record its reasons in writing for the same. (5) Where the Adjudicating Authority is satisfied that- (a) a default has occurred and the application under subsection (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below:- "Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore (from the existing threshold of Rs 1 lakh). This will by and large prevent triggering of insolvency proceedings against MSMEs. If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default." (Emphasis Added) Shri Kothari urged that in order to offset the adverse impact of Covid-19 pandem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and the CIRP cannot be triggered on the basis of joint liability towards multiple financial creditors. He urged that in the case of Swiss Ribbons Private Ltd. & Anr. vs. Union of India & Ors. reported in (2019) 4 SCC 17, Hon'ble the Supreme Court examined and upheld the validity of Section 7 but there was no occasion for Hon'ble the Supreme Court to comment upon the aspect of threshold liability of the corporate debtor towards multiple applicants. On these submissions, Shri Kothari implored the Court to interpret the provision in terms of the prayer made in the writ petition and as a consequence, drop the CIRP proceedings initiated against the petitioner. Per contra, Shri Mukesh Rajpurohit, ASG representing the Union of India, Shri Anu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition i.e., permissibility of a group of financial creditors jointly triggering CIRP without adhering to the requirement of default threshold of Rs.1 crore in individual capacity. On a plain reading of Section 7, it becomes clear that there is no ambiguity in the provision which requires any interpretation other than what is conveyed in its literary sense. The section clearly stipulates that the application for triggering CIRP may be initiated by a financial creditor either individually or jointly with other financial creditors. Previously the threshold default limit for filing the CIRP application was only Rs.1 lakh and it has been drastically increased to Rs.1 crore vide Gazette Notification dated 24.03.2020. It can easily be envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
