2022 (6) TMI 103 - Tri - Insolvency and Bankruptcy

Dismissal of Insolvency Application for Exceeding Threshold Limit

The application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was dismissed as not maintainable by the Tribunal. The dismissal was based on ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - maintainability of application in terms of Section 4 of the IBC, 2016 - threshold limit of amount involved - HELD THAT:- Notification of MCA dated 24.3.2020 makes it unambiguously clear that the threshold limit to be considered for section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed u/s. 7 or 9 on or after 24.3.3020 even if the debt is of date earlier than 24.03.2020 - Since the application under section 9 has been filed on 17.08.2020, though the demand notice was send on 03.01.2020, therefore, the threshold limit of Rs. 1 crore of debt will be applicable in the present facts. The intent of legislation to fix the threshold limit was to save the Companies from being rotted to NCLT for initiation of CIRP proceedings, due to COIVD-19 effect. The said notification was always prospective in nature but having retrospective repercussion also. Hence, even if the amount was due prior to 24.03.2020 and the demand notice was send prior to that the petition u/s. 7 or 9 of the Code, it cannot be filed against the Corporate Debtor. Henceforth, for the above-mentioned reasons, the present Application cannot be admitted. Accordingly, the same being not maintainable stands dismissed with no order to costs. Issues:- Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.- Maintainability of the application based on various objections raised by the Corporate Debtor.- Threshold limit for filing under Section 9 of the IBC in light of MCA notification dated 24.03.2020.Analysis:1. The application was filed under section 9 of the Insolvency and Bankruptcy Code, 2016 by the operational creditor, claiming an outstanding amount against the corporate debtor. The operational creditor alleged non-payment of dues and submitted a demand notice as per the provisions of the Code. The details of transactions leading to the petition were presented, highlighting the outstanding amount and the demand notice served.2. The Corporate Debtor raised objections to the application, contesting the service of the demand notice, compliance with Section 9(3)(c) regarding the certificate from a financial institution, and the threshold limit increase as per MCA Notification No. S.O.1205(E). Additionally, the Corporate Debtor claimed that the operational creditor had already filed another case before the Micro and Small Enterprises Facilitation Council, which rendered the present application not maintainable.3. The operational creditor, in response, reiterated the contents of the application and provided evidence of the demand notice service, compliance with Section 9(3)(c), and the maintainability of the application based on the default date. Citing a previous judgment, the operational creditor argued that the default date precedes the MCA notification, making the application valid. Moreover, the operational creditor clarified the timeline of events, emphasizing the absence of dispute and praying for petition acceptance.4. The Tribunal analyzed the maintainability of the application in light of Section 4 of the IBC, 2016 and the MCA notification dated 24.03.2020. Referring to relevant judgments, the Tribunal concluded that the threshold limit of Rs. 1 crore for filing under Section 9 applies to applications filed on or after 24.03.2020, regardless of the debt date or demand notice issuance. The retrospective application of the threshold limit aimed to protect companies during the COVID-19 impact. Consequently, the Tribunal dismissed the application as not maintainable due to exceeding the threshold limit, despite the demand notice predating the notification.5. The Tribunal emphasized that the filing date, rather than the default date or demand notice issuance, determines the application's validity concerning the threshold limit. The legislative intent behind setting the threshold limit was to prevent unnecessary CIRP proceedings during the pandemic. The retrospective nature of the notification had implications on applications filed against corporate debtors, leading to the dismissal of the present application based on the threshold limit breach.6. In conclusion, the Tribunal dismissed the application, considering it not maintainable due to exceeding the threshold limit set by the MCA notification, despite the operational creditor's arguments regarding the default date and demand notice timeline. The dismissal was based on the retrospective application of the threshold limit, emphasizing the importance of the filing date for determining application validity.Judgment: The application under section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process was dismissed as not maintainable due to exceeding the threshold limit prescribed by the MCA notification dated 24.03.2020, despite the operational creditor's contentions regarding the default date and demand notice timeline.