2022 (9) TMI 1296 - AT - Insolvency and Bankruptcy

Tribunal Upholds Dismissal of Insolvency Application for Failing to Meet Financial Threshold

The Tribunal upheld the Adjudicating Authority's decision, ruling that the application under Section 9 of the Insolvency and Bankruptcy Code was not ... Revival of Insolvency Application - whether Application filed by the Appellant under Section 9 was entertainable by the Adjudicating Authority? - time limitation - HELD THAT:- There is no enabling provision in the Code to revive the Application, Learned Counsel for the Appellant has relied on a Judgment of “Shree Bhadra Parks and Resorts Ltd.” [2021 (4) TMI 402 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI]. This Tribunal had held that the Adjudicating Authority has jurisdiction under Rule 11 of NCLT, Rules to revive the Application. In the above case, the Adjudicating Authority had passed an Order dated 28th January, 2021 restoring the Company Petition. Initiation of proceeding under Section 9 by filing an Application to the Adjudicating Authority has to be made by Operational Creditor which must comply with requirement of Section 4. Part-II of the Code which deals with Insolvency Resolution and Liquidation for Corporate Persons applies only when minimum amount of default is Rs. 1 Crore (w.e.f. 24th March, 2020). Thus initiation of an Application under Section 9 has to conform to the requirement under Section 4. Section 4, as it is in operation with effect from 24th March, 2020, is not a mere procedural provision but provides a substantive condition to be fulfilled by an Applicant to initiate CIRP. The period of default after 25.03.2020 as provided in Section 10-A was entirely for different purpose. The purpose was to protect the corporate debtor from insolvency initiation for default committed on or after 25.03.2020 when whole country was suffering from Covid-19 and all corporate debtors were unable to function effectively, hence default in the said period legislatively was treated to be not giving rise to initiate insolvency. The threshold in Section 4 is entirely different from the protection given under Section 10 A hence Section 10-A has no relevance with regard to interpreting requirement of Section 4. Application filed by the Appellant under Section 9 on 08.09.2021 for an amount of Rs. 46,64,249/- was not entertainable due to not fulfilling the threshold of Rs. 1 Crore as statutorily required under Section 4 of the Code with effect from 24.03.2020 - there is no merit in the Appeal, the Appeal is dismissed. Issues Involved:1. Jurisdiction of the Adjudicating Authority to revive the Application.2. Pecuniary jurisdiction and threshold requirements under Section 9 of the Insolvency and Bankruptcy Code (IBC).Issue-Wise Detailed Analysis:1. Jurisdiction of the Adjudicating Authority to revive the Application:The Appellant challenged the Adjudicating Authority's decision, which held that there is no provision in the IBC for reviving an application once withdrawn. The Appellant relied on the judgment in 'Shree Bhadra Parks and Resorts Ltd. vs. Sri Ramani Resorts and Hotels Pvt. Ltd.' where it was held that the Adjudicating Authority has jurisdiction under Rule 11 of the NCLT Rules to revive an application. The Tribunal observed that the inherent power of the Tribunal is based on the principle that 'an act of Court shall prejudice no person' and can be exercised to meet the ends of justice. Another judgment cited was 'Pooja Finlease Ltd. Vs. Auto Needs (India) Pvt. Ltd. & Anr.' where the Tribunal had set aside the order refusing to revive the company petition. Consequently, the Tribunal concluded that the Adjudicating Authority did not lack jurisdiction to revive the company petition, and the observation that there is no enabling provision in the Code to revive the application was erroneous.2. Pecuniary Jurisdiction and Threshold Requirements under Section 9 of the IBC:The second issue addressed was whether the application under Section 9 was maintainable given that the claimed amount was only Rs. 46,64,249/-, below the threshold of Rs. 1 Crore as stipulated by the notification dated 24th March 2020. The Appellant argued that the right to apply for initiating CIRP arose before the notification and that the demand notice was issued prior to the notification. The Tribunal examined Section 4 of the IBC, which specifies that the minimum amount of default for initiating insolvency proceedings is Rs. 1 Crore, effective from 24th March 2020. The Tribunal held that the threshold of Rs. 1 Crore is a substantive condition that must be fulfilled for initiating CIRP. It was emphasized that the notification is prospective and applies to applications filed after 24th March 2020, even if the default occurred before this date. The Tribunal referred to several judgments, including 'V-Con Integrated Solutions Pvt. Ltd. vs. Argos Technology Resources Pvt. Ltd.' and 'B. Sreekala vs. Al Sadiq Sweets and Ors.', where it was held that applications filed after 24th March 2020 must meet the Rs. 1 Crore threshold, regardless of when the default occurred.The Tribunal also discussed the judgment in 'Manish Kumar Vs. UoI,' which clarified that a right of action can be a vested right subject to the conditions existing at the time of filing. Therefore, the application filed by the Appellant on 08.09.2021 did not meet the threshold requirement of Rs. 1 Crore and was not maintainable. The Tribunal concluded that reviving the application would serve no purpose as it did not meet the statutory threshold.Conclusion:The Tribunal upheld the Adjudicating Authority's order, stating that the application under Section 9 was non-entertainable due to not fulfilling the Rs. 1 Crore threshold requirement. The appeal was dismissed, affirming that the Adjudicating Authority had jurisdiction to revive applications but the specific application in question did not meet the necessary pecuniary threshold.