2018 (10) TMI 1834 - Tri - IBC

Supreme Court Rules Financial Institution Certificate Not Mandatory for CIRP Initiation Under IBC Section 9(3)(c.

The SC clarified that under IBC, Section 9(3)(c), a certificate from a financial institution is not mandatory for initiating CIRP. This interpretation, ... Maintainability of second petition on same cause of action - Corporate Debtor failed to make repayment of its debt - existence of dispute or not - HELD THAT:- On perusal of the order of the Hon'ble Supreme Court in the case of Macquarie Bank Ltd. [2017 (12) TMI 850 - SUPREME COURT], it is clear that Hon'ble Supreme Court has discussed the judgment of Hon'ble NCLAT passed in the case of Smart Timing Ltd. However, Hon'ble Supreme Court has not overruled its earlier judgment and the judgment of NCLAT, whereby the SLP was dismissed. It is clear that this case has been based on the same cause of action. This case has been finally decided by the Hon'ble Supreme Court by order dated 18.8.2017 whereby the appeal filed against the Hon'ble NCLAT has been dismissed. It is also clear that Hon'ble Supreme Court has further laid down the law in case of Macquarie Bank Ltd. (supra), but Hon'ble Apex Court has not overruled the judgment passed in case of Smart Timing [2017 (8) TMI 1590 - SC ORDER]. Thus, second petition on the same cause of action is not maintainable - this petition is dismissed on the threshold. Issues:Initiation of CIRP based on non-payment of operational debt without the required certificate from a financial institution under Section 9(3)(c) of the IBC, 2016.Analysis:The Operational Creditor filed CP 229/2018 for initiation of CIRP against the Corporate Debtor due to non-payment of operational debt. However, the Operational Creditor failed to produce a certificate from a Financial Institution, as mandated by Section 9(3)(c) of the IBC, 2016. The Tribunal rejected the Company Petition on this basis, stating the necessity of the certificate for filing under the Code. The Company Appeal before the NCLAT and subsequent Civil Appeal before the Supreme Court were also dismissed, emphasizing the mandatory requirement of the certificate.The Hon'ble Supreme Court, in the case of Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., clarified the interpretation of Section 9(3)(c) of the Code. The Court held that the certificate from a financial institution confirming non-payment of operational debt is not a condition precedent for triggering the insolvency process. The Court emphasized that the Code should not be interpreted in a discriminatory manner, especially for operational creditors outside India. The Court stated that an impossible condition precedent cannot bar the processing of an application under Section 9 of the Code.Regarding the NCLAT's order in the instant matter, the Supreme Court highlighted that the order does not hold precedential value under Article 141 of the Constitution. The Court emphasized that the order was a threshold dismissal and not a 'law declared' judgment. The Supreme Court did not overrule its earlier judgment or the NCLAT's decision, maintaining consistency in its approach.In conclusion, the Supreme Court's decision in the Macquarie Bank Ltd. case clarified the interpretation of Section 9(3)(c) of the Code, emphasizing that the certificate from a financial institution is not a mandatory requirement for initiating CIRP. The Court's ruling established that a second petition on the same cause of action is not maintainable, leading to the dismissal of the petition in question based on the same reasoning.