Case Law Details
Udit Jain (Sole Proprietor of M/s U.J. Trading Co.) Vs Apace Builders and Contractors Pvt. Ltd (NCLT Delhi)
HC held that in application filed under section 9 of IBC, 2016 only the date of filing needs to be considered and not the date of sending the Demand Notice. It is seen that notification of MCA dated 24.3.2020 makes it unambiguously clear that the threshold limit to be considered for section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed u/s 7 or 9 on or after 24.3.3020 even if debt is of a date earlier than 24.3.2020. Therefore, the threshold limit of Rs. 1 crore of debt will be applicable in the present case.
FULL TEXT OF THE NCLT DELHI ORDER
This is an application filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity the Code’) read with rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity the Rules’) with a prayer for initiation of Corporate Insolvency Resolution Process in respect of respondent company, claimed to be the corporate debtor.
2. The applicant, Sh. Udit Jain (Sole Proprietor of M/s U.J. Trading Co.) has filed the present application claiming as the operational creditor with the prayer for initiation of Corporate Insolvency Resolution Process under the provisions of the Code.
3. The details of transactions leading to the filing of this petition as averred by the petitioner are as follows:
a. The Operational creditor herein is involved in proprietorship firm and manufacturer of Fly ash bricks, blocks, pavers and locking etc.
b. The Operational Creditor submitted that the Corporate Debtor has ordered for the purchase of fly ash bricks and the same was provided by the operational creditor worth Rs. 12,76,408/-.
c. The Operational Creditor further submits that the Corporate Debtor has paid only Rs. 1,00,000/-to the Operational Creditor
d. The Operational Creditor sent a Demand Notice dated 17.02.2020 demanding payment of an unpaid operational debt i. . Rs. 16,86,145/- as per provisions under Rule of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
4. The Corporate Debtor has filed his reply against the said Application. The main objections raised by the corporate debtor are as follows:
a. The Corporate Debtor submits that the present petition is not maintainable before this Tribunal on 01.06.2020 claiming an amount of Rs. 16,86,145/- which is inclusive of the debt and the interest amount on the debt.
b. The Corporate Debtor further submits that as per the Notification No. S.O. 1205(E) dated 24.03.2020 issued by the Ministry of Corporate Affairs, the minimum amount of Default for an Application under Section 9 of the IBC, 2016 is Rs. One Crore.
c. The Corporate debtor has further relied on the Judgments passed by the Hon’ble NCLAT in Jumbo Paper Products v. Hansraj Agrofresh Pvt. Ltd. (Company Appeal (AT) (Ins) No. 813 of 2021) and by this Tribunal in the matter of Daxesh K. Desai V. M/s Shopzo Brand Private Limited(IB/533/ND/2021), wherein it was held that the Notification of MCA was always prospective in nature but having retrospective repercussion also.
5. We have heard Ld. Counsel for the Applicant and the Corporate Debtor. In the instant Application before examining the said application on merits, it is necessary to examine whether the said petition is maintainable in terms of Section 4 of the IBC, 2016, as the Applicant is claiming Rs. 16,86,145/-from the Corporate Debtor as evident in the Part IV of form 5 and the same has been filed before this Tribunal on 11.06.2020. With reference to the Judgment of Hon’ble NCLAT in the matter of Jumbo Paper Products V. Hansraj Agrofresh Pvt. Ltd. (Conri”..133T Appeal (AT) (Ins) No. 813 of 2021) wherein it was held that any statute/law can be applied retrospectively only if explicit provision regarding its retrospective application is made in the statute. It is seen that notification of MCA dated 24.3.2020 makes it unambiguously clear that the threshold limit to be considered for section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed u/s 7 or 9 on or after 24.3.3020 even if debt is of a date earlier than 24.3.2020.
6. We further refer to the Judgement of Hon’ble High Court of Kerala passed in the matter of M/s. Tharakan Web Innovations Pvt. Ltd. Vs. National Company Law Tribunal Kochi Bent.qi and Anr. in WP(C) NO. 27636 OF 2020 & 14158 of 2021 dated 01.02.2022.
“24. In Ext.P9 order, the Tribunal has held that the notification dated 24.03.2020 is prospective in nature and it is not retrospective or retro-active in .ature. It is further stated by the Tribunal that notification will not apply to pending applications before the concerned Adjudicating Authority under the IBC prior to the issuance of the aforesaid notification. Ext.P9 was an order of the Tribunal at New Delhi and the issue was concerning an application which had been filed and was pending before the Tribunal., The order of the National Company Law Appellate Tribunal, Principal Bench, New Delhi in Company Appeal (AT) (Ins) No.813 of 2021 was placed before the Court in which the order Ext.P9 was also considered. The Appellate Tribunal found that on facts, in the case considered in Ext.P9 demand notice under Section 8 was issued on 31.7.2019 and the application under Section 9 was filed on 5.9.2019 which were both before 24.3.2020, on which date the threshold limit was increased to Rs.1 Crore. The Tribunal hence found that the said decision cannot be relied upon to decide whether a petition can be maintained for an amount of less than Rs.1 Crore after 24.3.2020. The Appellate Tribunal went on to hold that the threshold limit will be applicable for applications filed under Section 7 or Section 9 on or after 24.3.2020, even if the debt is on a date earlier than 24.3.2020. The above view of the Tribunal is in consonance with the decision of the Hon’ble Supreme Court in Manish Kumar (supra). 25. Even otherwise, the Tribunal has in my opinion, gone wrong in its interpretation of Section 4 of the Act. Section 4, after amendment on 24.3.2020 clearly says that Part II of the IBC shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum cirlount of default is Rs.1 Crore. As per Section 3(12) of the IBC. -.”default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor; as the case may be. What is to be noted is that Corporate debtors who are in default of less than Rs.1 lakh prior to the amendment and Rs.1 Crore after the amendment, also are defaulters. However, whether a proceeding for insolvency or liquidation of such corporate debtor should be initiated would depend on the amount in default. It is only if the Corporate debt& flcet.s• ‘incurred a default of at least the minimum amount stated in Section 4 that a proceeding under the provisions of the 15C: under Part II can be initiated. The minimum amount of default is statutorily fixed, with power available to the Government to refiX, upto a sum of Rs.1 Crore. Once the Government has exercised the said power by issuance of a notification fixing the minimum amount of default as Rs. 1 Crore, the Section will have to be read by replacing the words “one lakh rupees” by “rupees One crore”. As such, from the date of amendment, Part II of the IBC can apply only to matters relating to insolvency and liquidation of corporate debtors, where the minimum amount of default is Rs.1 Crore. (emphasis supplied). Once that is the position, the application of Part II itself is taken away with effect from 24.03.2020 as far as defaults less than Rs.1 Crore are concerned and hence no application can be filed after 24.03.2020 regarding an amount where the default is less than Rs. 1 Crore. By application of Section 10A, even in cases where the default is more than Rs.1 Crore, an application cannot be filed for a period of six months from 24.3.2020. There can be no other understanding of the statutory provisions, as there is no ambiguity in the language. It is well settled that the grammatical and ordinary sense of the words of the Statute should be adhered to, unless that would lead to absurdity, or some repugnance or inconsistency with the rest of the provisions of the statute. In the words of Viscount Simon L.C. “The golden rule is that the words of a statute must prima facie be given their ordinary meaning…. Judges are not called upon to apply their opinion.s of sound policy so as to modify the plain meaning of statutory words, but where, in construing general words the meaning of which is not entirely plain there are adequate reasons for doubting whether the Legislature could have been intending so wide an interpretation as would disregard fundamental principles, then we may be justified in adopting a narrower construction” (see Nokes v. Doncaster Amalgamated Collieries Ltd., 1(1940) AC 1014 (HL)], Chandvarkar Situ Patna Rao v. Ashalata S. Guram [(1986) 4 SCC 447] and B. Parmanand v. Mohan Koikal [(2011) 4 SCC 266)]. The above observations are fully supported by the judgment of the Apex Court in Manish Kumar (supra), wherein the Hon’ble Supreme Court categorically held that the litmus test is whether there exists a default as defined in Section 4 of IBC, on the date of the application…”
7. Since the instant application filed under section 9 of the Code, which is the subject matter of our consideration ,was filed on 11.06.2020, even though the statutory demand notice U/s 8 was sent on 17.02.2020, only the date of filing needs to be considered and not the date of sending the Demand Notice. Therefore, the threshold limit of Rs. 1 crore of debt will be applicable in the present case. Hence, for the above-mentioned reasons the present Application is not maintainable.
8. Resultantly, this present petition stands dismissed as to no order to costs.
Let copy of the order be served to the parties.
Consign the file to the record room.
