2020 (7) TMI 360 - Tri - Insolvency and Bankruptcy

Proprietorship Firm Denied Insolvency Petition: Legal Capacity Key

S. Crane Engineering Works Versus Jyoti Ltd.

The Tribunal dismissed the application filed by M/s. S. Crane Engineering Works, an operational creditor, under section 9 of The Insolvency and Bankruptcy ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- On perusal of the definition it is clear that 'person' must fall on the above category(s). In the case on hand, the petition is filed in the name of M/s. S. Crane Engineering Works, a proprietary concern as operational creditor, who is not a 'person' for the purpose of filing the application u/s. 9 of the I & B Code. Hence, on this ground itself the application is not maintainable - It is also the duty of the Adjudicating Authority to dispose of cases 'jus dicers', in accordance with law as it is and not 'jus dare' in accordance with law as it should be. Also, the respondent has also raised some objections with regard to the amount of debt relating to one invoice. The application, so filed by the applicant is not maintainable and is bad in law as well as in facts. Issues:- Application filed under section 9 of The Insolvency and Bankruptcy Code, 2016 by operational creditor.- Dispute over unpaid operational debt for crane supplies.- Respondent's objections regarding invoices and purchase orders.- Legal issue of maintainability of application by a proprietorship firm.Analysis:1. The application was filed by an operational creditor, M/s. S. Crane Engineering Works, under section 9 of The Insolvency and Bankruptcy Code, 2016, claiming unpaid operational debt for crane supplies provided to the respondent company.2. The operational creditor alleged that the corporate debtor failed to pay an outstanding amount of Rs. 49,20,871, including interest, for supplies made between financial years 2009-10 to 2014-15. The respondent disputed the invoices' receipt and claimed the petitioner's reliance on incomplete and incorrect documents.3. The respondent argued that the operational creditor's claim was time-barred, citing discrepancies in the invoices and purchase orders. It contended that certain invoices lacked corresponding purchase orders, making the claim unsustainable in the absence of proper documentation.4. The Tribunal noted that the application was filed by M/s. S. Crane Engineering Works, a proprietorship concern. It raised a critical legal issue regarding the maintainability of the application, emphasizing that a proprietorship firm is not a legal entity and cannot file a suit in its name under existing laws.5. Citing legal precedents, the Tribunal highlighted that a proprietorship firm lacks legal entity status, and any legal proceedings initiated by it would be considered null and void. The application's dismissal was based on this ground of maintainability, with a clear indication that the petitioner could seek recourse through appropriate legal channels.6. The Tribunal concluded that the application was not maintainable due to the legal incapacity of a proprietorship firm to file such proceedings. The decision did not delve into the merits of the dispute but focused on the legal issue of the applicant's status as a non-legal entity. This ruling does not reflect an opinion on the underlying controversy's merits.7. The judgment underscores the importance of legal entities and the necessity for proper adherence to legal procedures in initiating insolvency proceedings. It serves as a reminder of the significance of legal capacity in pursuing claims under the Insolvency and Bankruptcy Code, 2016.