2019 (7) TMI 1128 - AT - Insolvency and Bankruptcy

Tribunal permits change of application format, clarifies insolvency resolution process under

The Tribunal allowed the Respondent to change the format of the application under Section 9 to that of Section 7, permitting the filing of a fresh ... Maintainability of application - initiation of Corporate Insolvency Resolution Process - change the format for treating application under Section 7 - existence of debt or not - HELD THAT:- For the purpose of application under Section 7 in the Form-1 no advance notice or demand notice is required to issue, like Section 8(1) notice. In such case, it is always open to the parties to file Format-1 i.e. application under Section 7 after serving a copy of the same to the other side. It is not in dispute that after change the copy was not served on the Corporate Debtor. Therefore, prima facie one may accept that the party can take leave of the Adjudicating Authority to file a separate application under Section 7 after service of the same. Even if there is a dispute about debt amount, if it is rupees one lakh or more, Respondent may proceed for initiation of insolvency resolution process against the Corporate Debtor - one opportunity provided to the Appellant to state whether they intend to settle with the Respondent. Post the case ‘for orders’ on 25th February, 2019. Issues:1. Whether the Respondent can change the format of the application under Section 9 to that of Section 7Rs.2. Can the Respondent file a fresh application under Section 7 without noticeRs.3. Is the debt barred by limitation, making the application under Section 7 not maintainableRs.4. Interpretation of the Insolvency and Bankruptcy Code regarding default, debt, financial creditor, and operational creditor.Analysis:1. The Appellant's grievance was that the Respondent, an 'Indian Base Metals Co. Ltd.,' issued a demand notice under Section 8(1) and later filed an application under Section 9 of the Insolvency and Bankruptcy (I&B) Code. The Adjudicating Authority allowed the Respondent to change the format for treating the application under Section 7. The Appellant argued against this change, stating that an application under Section 9 cannot be converted to Section 7. The Tribunal noted that for an application under Section 7, no advance notice or demand notice is required, unlike Section 8(1) notice. The parties can file Format-1 under Section 7 after serving a copy to the other side. However, in this case, the copy was not served on the Corporate Debtor. The Tribunal suggested that the Respondent could file a fresh application under Section 7 after serving a copy, even if the change was not initially permitted.2. Even if the change from Section 9 to Section 7 is not allowed, the Tribunal granted liberty to the Respondent to file a fresh application under Section 7 without notice by serving a copy under Rule 4(3). The Tribunal mentioned that even if this is allowed, the Corporate Debtor may not gain any advantage as they only disputed the amount, leaving the door open for such action.3. The Appellant contended that the debt is time-barred, questioning the maintainability of the application under Section 7. The Tribunal decided to leave this question open for further consideration, indicating that the issue of limitation could impact the validity of the debt in the eyes of the law.4. The Tribunal referenced the case of 'Innoventive Industries Ltd. Vs. ICICI Bank and Ors.,' highlighting the provisions of the Insolvency and Bankruptcy Code related to default, debt, financial creditor, and operational creditor. The judgment emphasized that the Code triggers the insolvency resolution process when a default occurs, defined as non-payment of a debt once it becomes due and payable. It outlined the procedures for financial creditors to initiate the process under Section 7, detailing the forms, documents, and timelines involved. The judgment clarified that even in cases of disputed claims, if the debt amount exceeds one lakh rupees, the Respondent can proceed with the insolvency resolution process against the Corporate Debtor.In conclusion, the Tribunal provided an opportunity for the Appellant to consider settling with the Respondent and scheduled the case for further orders, allowing the parties to discuss and resolve the dispute if they wish to do so.