UTTAM GALVA STEELS LTD. V. DF DEUTSCHE FORFAIT AG.
In this flash tabloid, the writer initiates by speak of the provisions of Insolvency & Bankruptcy Code, 2016 (hereafter referred as “IBC”) in relation to power of NCLT to accept the Joint Application in case of Operational Creditor.
As IBC code has prescribed the Corporate Debtor. The main shove of the article, is upon the question “WHETHER JOIN APPLICATION FILED BY OPERATIONAL CREDITOR CAN BE ACCEPTED BY HON’BLE NCLT”.
In this editorial author discuss the provisions relating to power of NCLT to accept or reject joint application filed by operational creditor. The same has been decided in landmark judgement delivered by NCLT, New Delhi Bench in case of UTTAM GALVA STEELS LTD. (Here after referred as “OC”) V/S. DF DEUTSCHE FORFAIT AG. (Here after referred as “respondent”)
Power is given to Operational Creditor’s u/s 8 and 9 to file application against the corporate debtor in case of default in payment. As per language of Section 8 “An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor 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”.
After reading the language of section 8 question hoist in the mind “Whether joint application can be filed by the Operational Creditors or not”.
|Case Name||Uttam Galwa Steel Ltd. v. DF Deutsche Forfait Ag td.|
|Bench Name||The National Company Law Tribunal (NCLT), New Delhi Bench|
|NCLT Order No.||(INSOL) NO. 39 OF 2017|
|Heard & Pronounced on Order||28th July, 2017|
A. Provisions Under the Act:
Section 8: An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor 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.
Section 9: 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.
“23A. Presentation of joint petition. – (1) The Bench may permit more than one person to join together and present a single petition if it is satisfied, having regard to the cause of action and the nature of relief prayed for, that they have a common interest in the matter.
(2) Such permission shall be granted where the joining of the petitioners by a single petition is specifically permitted by the Act. “
In view of Rule 23A it was contended that a joint petition is maintainable.
C. Findings of the NCLT Bench:
From the perusal of provisions of sections 8 and 9, it is clear that, a notice under section 8 is to be issued by AN ‘Operational Creditor’ individually and the petition under section 9 has to be filed by Operational Creditor individually and not jointly.
Nowhere in the section mentioned that join application can be filed by the OC. Even the work AN is used by the legislature which shows that only an individual can file application as operational Creditor.
As per para 20 of the Judgement: Otherwise also it is not practical for more than one ‘operational creditor’ to file a joint petition.
For the reasons aforesaid, it is to be held that a joint application under section 9 by one or more ‘operational creditor’ is not maintainable.
The Respondents have relied on Rule 23A on the NCLT Rules, 2016 but as the said Rule has not been adopted by Section 10 of the I&B Code, 2016, the Rule 23A is not applicable to the application under Section 9 of the I&B Code,2016. For the reasons aforesaid, we hold that a joint application under Section 9 by one or more ‘operational creditor’ is not maintainable.
Conclusion: However, Initiation of insolvency resolution process by ‘Financial Creditor‘ either by itself or jointly with other Financial Creditors is provided in Section 7 of the I&B Code. As per sub-section (1) of Section 7 of the I&B Code, the trigger of filing of an application by a Financial Creditor by himself or jointly with other Financial Creditors before the Adjudicating Authority is when a default in , respect of any financial debt has occurred.
But in the case of the Operational Creditor due to follow the process of issue of demand notice u/s 8 and other above mentioned reasons joint application can’t be filed by the operational creditors.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at [email protected])