2019 (2) TMI 1116 - AT - Insolvency and Bankruptcy

Court dismisses appeal on Insolvency and Bankruptcy Code jurisdiction for partnership firms.

Gammon India Ltd. Versus Neelkanth Mansions and Infrastructure Pvt. Ltd.

The court dismissed the appeal in a case involving the jurisdiction under the Insolvency and Bankruptcy Code, 2016 for partnership firms. The Adjudicating ... Winding up petition - ‘Corporate Debtor’ defaulted in making repayment of ₹ 54,86,09,635 with interest @ 15% p.a. as on 15th August, 2016 till its realization - application under Section 9 of the ‘I&B Code’ against one of the partners of partnership firm - HELD THAT:- It is not in dispute that the amount due to the Appellant is from ‘M/s. Gammon Neelkanth Realty Corporation’. The bill was raised against the said partnership firm namely- ‘M/s. Gammon Neelkanth Realty Corporation’. ‘M/s. Neelkanth Realtors Pvt. Ltd.’, ‘Gammon Housing and Estates Developers Ltd.’ and ‘Neelkanth Mansions and Infrastructure Pvt. Ltd.’ are the partners, therefore, even if one of the partners or more than one partner is the ‘Corporate Debtor’ as the amount is due from the partnership firm, the application under Section 9 of the ‘I&B Code’ against one of the partners of such partnership firm will not be maintainable. In view of the aforesaid position of law, we hold that the Adjudicating Authority has rightly held that the application under Section 9 was not maintainable against one of the members of the partnership firm (Respondent herein) and rightly rejected the said application. We find no merit in this appeal Issues:1. Jurisdiction under Insolvency and Bankruptcy Code, 2016 for partnership firms.Analysis:The judgment pertains to a case where the appellant, a company, filed a petition for winding up a corporate debtor due to default in repayment. After the enactment of the Insolvency and Bankruptcy Code, 2016, the case was transferred to the National Company Law Tribunal. The appellant then filed for initiation of Corporate Insolvency Resolution Process under Section 9 of the I&B Code. However, the Adjudicating Authority dismissed the application on the grounds that it was not maintainable against a partnership firm, the respondent in this case.The appellant argued that as per the definition of a firm under Section 79(16) of the I&B Code, a firm refers to a body of individuals in partnership, whether registered or not under the Indian Partnership Act, 1932. Therefore, the provisions of the I&B Code apply only when a firm comprises natural persons. If a partnership includes artificial or legal persons, the insolvency resolution application cannot be entertained due to lack of jurisdiction. Since the respondent was a legal entity (corporate body) and not an individual, the application under Section 9 was challenged.The court clarified that even though one or more partners of the firm may be the corporate debtor, if the amount is due from the partnership firm as a whole, an application under Section 9 against only one partner of the firm is not maintainable. Therefore, the Adjudicating Authority rightly rejected the application under Section 9 against one of the partners of the partnership firm, as the law does not permit such action. The appeal was dismissed, and no costs were awarded.In conclusion, the judgment emphasizes the importance of understanding the jurisdictional limitations under the Insolvency and Bankruptcy Code, particularly concerning partnership firms. It clarifies that the provisions of the Code apply when a firm consists of natural persons in partnership and not when artificial or legal entities are involved. The decision underscores the need for precise interpretation of legal definitions and the correct application of the law to specific circumstances.