Case Law Details
Excel Metal Processors Ltd. Vs. Benteler Trading International GMBH (NCLAT Delhi)
BRIEF FACTS:
The Respondent , a German Company (Operational Creditor) filed application under Section 9 of the Insolvency & Bankruptcy Code, 2016 against Indian Company, M/s. Excel Metal Processors Ltd., alleging that the “ Corporate Debtor” has committed default in making payment to an extent of US$1,258,2019.42 inclusive of interest @15% p.a. The Adjudicating Authority has admitted the application. The Appellant has challenged above application .
SECTION 2(10) OF IBC,2016 –
“creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor, and a decree-holder.
SECTION 2 (23) OF IBC,2016
“person” includes—
(a) an individual.
(b) a Hindu Undivided Family.
(c) a company.
(d) a trust.
(e) a partnership.
(f) a limited liability partnership; and
(g) any other entity established under a statute,
and includes a person resident outside India.
Please note that: a person resident outside India ,includes Companies or body corporates in corporate outside India as well.
Section 9: Application for initiation of corporate insolvency resolution process by operational creditor.
9. (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.
(3) The operational creditor shall, along with the application furnish—
(a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor.
(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt.
(c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available;
2[(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.
(4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to function as an interim resolution professional.
(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—
(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,—
(a) the application made under sub-section (2) is complete.
(b) there is no 3[payment] of the unpaid operational debt.
(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor.
(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
(e) there is no disciplinary proceeding pending4 against any resolution professional proposed under sub-section (4), if any.
(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if—
(a) the application made under sub-section (2) is incomplete.
(b) there has been payment of the unpaid operational debt.
(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor.
(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
(e) any disciplinary proceeding is pending4 against any proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.
As per Section 5(20) and (21), Operational Creditors are those to whom corporate debtors owe an “Operational Debt” i.e., one that has been incurred with respect to provision of goods and services, including employment or with respect to payment of dues under any law to the government.
While financial debts are owed with respect to money, operational debts are owed with respect to provision of goods and services.
HELD THAT:– the application of the M/s. Excel Metal Processors Ltd.( Corporate Debtor) for quashing application filed by Operational Creditor M/s. Benteller Trading International GMBH ,under provisions of Section 9 of IBC,2016 has been dismissed.
REASON FOR DISMISSAL OF APPLICATION OF CORPORATE DEBOTR.
The appellant referred to the Agreement reached between the parties and submitted that as per the Agreement and as the office of the Respondent is in Germany, any suit or case is maintainable only in the Court at Germany. No case can be filed in any Court in India. Therefore , the Appellant has raised the question of jurisdiction of the NCLT, Mumbai Bench in entertaining the application under Section 9 of the IBC,2016.
THE NCLT VIEWS;– we are not inclined to accept the argument or statement submitted by the Corporate Debtor on the basis of decided case of M/s. Binani Industries Ltd. Vs. Bank of Baroda & Others -Company Appeal (AT) (Insolvency) No. 82 of 2018 etc. decided on 14th November,2018 ,wherein is was held that “ Corporate Insolvency Resolution Process” /Insolvency Proceedings is not a “ Suit” or a “ Litigation” or a “ Money Claim” for any litigation. No one is selling or buying the “ Corporate Debtor” a “ Resolution Plan;” it is not an “ Auction” , it is not a recovery , which is an individual effort by the Creditor to recover the dues through a process that had debtor and creditor on opposite sides; and it is not liquidation. The object is mere to get resolution brought about , so that company do not default on dues.
Pursuant to the provisions of Section 408 of the Companies Act, 2013 , the NCLT has been constituted in different States. In terms of the said provision, the Central Government has notified and vested the power on respective NCLTs to deal with matters falling in their territories, where registered office of companies is situated.
Section 408: Constitution of National Company Law Tribunal.
408. The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.
Section 60(1) of the IBC, 2016, “The Adjudicating Authority”, in relation to insolvency resolution and liquidation for Corporate Person including Corporate Debtors and Personal Guarantors thereof shall be NCLT having territorial jurisdiction over the place where the registered office of the Corporate Debtor is located.
Section 60: Adjudicating Authority for corporate persons.
60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate persons located.
As admitted the Registered Office of the Corporate Debtor is situated in the state of Maharashtra and in the city of Mumbai and hence the Mumbai Bench of NCLT has exclusive jurisdiction to handle cases falling in its territory. The Mumbai Bench of NCLT has authority to manage cases or application filed under Section 9 of IBC,2016 of all companies having registered office in its territorial jurisdiction.
Next , it was pointed out that the “ Corporate Debtor” was not served with Demand Notice in terms of Section 8(1) of IBC,2016. However , from the record we find that Demand Notice was issued by the Respondent ( Operational Creditor) on 6th March 2018 demanding the repayment of US $ 971, 412.98 plus ancillary obligations @15% p.a. amount US $ 286,804.44 and despite receiving the said Demand Notice, the “ Corporate Debtor” had not relied , nor repaid the outstanding dues. The Adjudicating Authority declined to accept the plea based on record that Operational Creditor has not issue Demand Notice according to the provisions of IBC,2016.
Section 8: Insolvency resolution by operational creditor.
8. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
In spite of the same, we gave option to the Appellant to suggest whether the Appellant or Corporate Debtor would agree to repay the debt as payable to the “Operational Creditor “, but it is informed that the “ Corporate Debtor or the Appellant is not in a position to do so.
The NCLT Bench has decided not to interfere in order of accepting application of the Operational Debtor under Section 9 of the IBC,2016 and the application of Appellant (Corporate debtor ) has been rejected.
CONCLUSION: from above decision it is clear that a person falling under definition of “Corporate Debtor “ as defined under provisions of IBC,2016 ,whether incorporated in India or outside India has right to file CIRP Application under provisions of Section 9 of the IBC,2016 in India. The jurisdiction of NCLT Bench for entertaining any such application will be decided on the basis of territorial jurisdiction of Benches. The Mumbai Bench of NCLT has exclusive jurisdiction to entertain all applications filed against a Corporate Debtor having registered office in Mumbai under IBC,2016. The Court has clarified that the main object of IBC is mere to get resolution brought about, so that the Company/Corporate Debtor do not default on dues. The main object of IBC ,2016 is find alternate way for resolution of difficulties of a Corporate Debtor in payment of dues. The IBC,2016 is emphasising more and more on resolution than on liquidation of defaulting companies. It means that foreign entities may also file CIRP Application under IBC,2016.
FULL TEXT OF THE NCLAT DELHI ORDER
An application for substitution has been filed by Mr. Imran Iqbal Khan, Director of ‘Corporate Debtor’ – M/s Excel Metal Processor Limited, to substitute him as the Appellant in place of M/s Excel Metal Processors Limited (‘Corporate Debtor’) and transpose M/s Excel Metal Processors Limited through ‘Interim Resolution Professional’ as Respondent. However, as we find that Mr. Imran Iqbal Khan is already Appellant No.2., we allow the Appellant to delete the name of the 1st Appellant – M/s Excel Metal Processors Limited from the Cause Title and to treat Mr. Imran Iqbal Khan as sole Appellant. M/s Excel Metal Processors Limited through ‘Interim Resolution Professional’ is allowed to be impleaded as 3rd Respondent. Counsel for the Appellant will make necessary corrections in the Cause Title of the paper book and the Cover Page in course of the day.
2. The Respondent – Benteler Trading International GMBH, a German Company (‘Operational Creditor’) filed application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short the ‘I&B Code’) against Excel Metal Processors Private Limited (‘Corporate Debtor’) alleging that the ‘Corporate Debtor’ committed default on 27th March, 2016 in making the payment to an extent of US $1,258,219.42 inclusive of interest @ 15% per annum. The Adjudicating Authority (National Company Law Tribunal), Mumbai Bench by impugned order dated 25th June, 2019 having admitted the application, the Appellant – Imran Iqbal Khan, Director has challenged the said order. Learned Counsel appearing on behalf of the Appellant referred to the Agreement reached between the parties and submitted that as per the Agreement and as the Office of the Respondent – Benteler Trading International GMBH is in Germany, any suit or case is maintainable only in the Court at Germany. No case can be filed in any Court in India. Therefore, Counsel has raised the question of jurisdiction of the National Company Law Tribunal, Mumbai Bench in entertaining the application under Section 9 of the I&B Code.
3. However, we are not inclined to accept the aforesaid statement as it is now settled and decided by this Appellate Tribunal in Binani Industries Limited vs. Bank of Baroda and Anr. – Company Appeal (AT) (Insolvency) No.82 of 2018 etc. decided on 14th November, 2018 wherein it was held that ‘Corporate Insolvency Resolution Process’/ insolvency proceedings is not a ‘suit’ or a ‘litigation’ or a ‘money claim’ for any litigation; No one is selling or buying the ‘Corporate Debtor’ a ‘Resolution Plan’; It is not an auction; it is not a recovery, which is an individual effort by the creditor to recover the dues through a process that had debtor and creditor on opposite sides; and it is not liquidation. The object is mere to get resolution brought about, so that the Company do not default on dues.
4. Pursuant to Section 408 of the Companies Act, 2013, the National Company Law Tribunal has been constituted in different States. In terms of the said provision, the Central Government has notified and vested the power on respective National Company Law Tribunals to deal with the matter within its territory, where the registered Offices of the Companies are situated. As per Section 60(1) of the I&B Code, “The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located”. As admittedly, the Registered Office of the ‘Corporate Debtor’ namely – Excel Metal Processors Private Limited is situated at 132, B, Mittal Towers Nariman Point, Mumbai-400021, we hold that the National Company Law Tribunal, Mumbai Bench has the jurisdiction to entertain an application under Section 9 of the I&B Code and the Appellant cannot derive advantage of the terms of the Agreement reached between the parties.
5. Next, it was pointed out that the ‘Corporate Debtor’ was not served with the Demand Notice in terms of Section 8(1) of the I&B Code. However, from the record we find that Demand Notice under Section 8(1) of the I&B Code was issued by the Respondent – ‘Operational Creditor’ on 6th March, 2018 demanding the repayment of US $971,412.98 plus ancillary obligations @ 15 % p.a. amounting to US $286.804.44 and despite receiving of the said Demand Notice, the ‘Corporate Debtor’ had not replied, nor repaid the outstanding dues. The Adjudicating Authority has as such not accepted such plea based on record.
6. In spite of the same, we gave option to the Appellant to suggest whether the Appellant or the ‘Corporate Debtor’ would agree to repay the debt as payable to the ‘Operational Creditor’, but it is informed that the ‘Corporate Debtor’ or the Appellant is not in a position to do so.
7. For the reasons aforesaid, we are not inclined to interfere with the impugned order dated 25th June, 2019 and in absence of any merit, the Appeal is accordingly dismissed. No cost.
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