Joint Application - Operational Creditor
Joint
Application -
Operational Creditor
UTTAM GALVA STEELS
LTD. V. DF DEUTSCHE FORFAIT AG.
Short
Summary:
In this flash tabloid, the writer initiates by speak of
the provisions of Insolvency & Bankruptcy Code, 2016 (hereafter referred as
“IBC”) in relation to power of NCLT to accept the Joint Application in case of
Operational Creditor.
As IBC code has prescribed the
Corporate Debtor. The main shove of the article, is upon the question “Whether join
application filed by operational creditor can be accepted by Hon’ble nclt”.
In
this editorial author discuss the provisions relating to power of NCLT to
accept or reject joint application filed by operational creditor. The same has
been decided in landmark judgement
delivered by NCLT, New Delhi Bench in case of Uttam Galwa Steel Ltd. (Here after referred as “OC”) V/s. DF Deutsche Forfait Ag. (Here after referred as “respondent”)
Introduction:
Power
is given to Operational Creditor’s u/s 8 and 9 to file application against the
corporate debtor in case of default in payment. As per language of Section 8 “An operational creditor may, on the
occurrence of a default, deliver a demand notice of unpaid operational debtor
copy of an invoice demanding payment of the amount involved in the default to
the corporate debtor in such form and manner as may be prescribed”.
After
reading the language of section 8 question hoist in the mind “Whether joint
application can be filed by the Operational Creditors or not”.
This is article no. 265 of the series of editorials written by the author
on corporate laws {Including Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.
Case
element:
Case Name
|
Uttam Galwa Steel Ltd. v. DF Deutsche Forfait Ag td.
|
Bench Name
|
The National Company Law Tribunal (NCLT), New Delhi Bench
|
NCLT Order No.
|
(INSOL) NO. 39 OF 2017
|
Heard &
Pronounced on Order
|
28th July, 2017
|
A.
Provisions
Under the Act:
Section 8: An operational creditor may, on the occurrence of a
default, deliver a demand notice of unpaid operational debtor copy of an
invoice demanding payment of the amount involved in the default to the
corporate debtor in such form and manner as may be prescribed.
Section 9: After the expiry of the period of ten days from the
date of delivery of the notice or invoice demanding payment under sub-section
(1) of section 8, if the operational creditor does not receive payment from the
corporate debtor or notice of the dispute under sub-section (2) of section 8,
the operational creditor may file an application before the
Adjudicating Authority for initiating a corporate insolvency resolution
process.
B.
SITUATION:
·
Operational
creditors filed a joint application under section 9 for the initiation of
corporate insolvency resolution process against appellant-corporate debtor.
·
Ld. Counsel
for the Respondents submitted that in terms of Rule 10 of the 'Adjudicating
Authority Rules, 2016', Rule 20, 21, 22, 23, 24 and 25 of the' NCLT Rules 2016'
stands adopted. Reliance was also placed on notification dated 20.12.2016
whereby NCLT Rules, 2016 was amended and Rule 23A was inserted, which is as
follows:—
"23A. Presentation
of joint petition. - (1) The Bench may permit more than one person to join
together and present a single petition if it is satisfied, having regard to the
cause of action and the nature of relief prayed for, that they have a common
interest in the matter.
(2) Such permission
shall be granted where the joining of the petitioners by a single petition is
specifically permitted by the Act. "
In view of Rule 23A it
was contended that a joint petition is maintainable.
·
Under
sub-section (1) of Section 8 of the I&B Code, an 'Operational Creditor' on
occurrence of a default, is required to deliver the notice of payment of unpaid
debt or get copy of the invoice payment of the defaulted amount served on the
Corporate Debtor. This is the condition, precedent under Sections 8 & 9 of
the I&B Code, unlike Section 7 before making an application to the
adjudicating authority under Section 9 of the I&B Code. Under sub-Section
(1) of Section 9 of the Code, the right to file an application accrues after
expiry of ten days from the delivery of Demand Notice or copy of invoice, as
the case may be. If the Operational Creditor does not receive payment from the
Corporate Debtor or notice of dispute under sub-section (2) of Section 8, the
Operational Creditor only thereafter may file an application before the
Adjudicating Authority for the initiation of corporate insolvency resolution
process.
C. Findings of the NCLT Bench:
From the
perusal of provisions of sections 8 and 9, it is clear that, a notice under
section 8 is to be issued by AN
'Operational Creditor' individually and the petition under section 9 has to be
filed by Operational Creditor individually
and not jointly.
Nowhere in the
section mentioned that join application can be filed by the OC. Even the work
AN is used by the legislature which shows that only an individual can file
application as operational Creditor.
As per para 20
of the Judgement: Otherwise also it is not practical for more than one
'operational creditor' to file a joint petition.
·
Individual
Operational Creditors will have to issue their individual claim notice under
section 8.
·
The
claim will vary.
·
Date
of notice under section 8 in different cases will be different.
·
Petition
under section 9 in the format would contain, separate individual data.
For the
reasons aforesaid, it is to be held that a joint application under section 9 by
one or more 'operational creditor' is not maintainable.
The
Respondents have relied on Rule 23A on the NCLT Rules, 2016 but as the said
Rule has not been adopted by Section 10 of the I&B Code, 2016, the Rule 23A
is not applicable to the application under Section 9 of the I&B Code,2016.
For the reasons aforesaid, we hold that a joint application under Section 9 by one or more
'operational creditor' is not maintainable.
Conclusion: However, Initiation of insolvency resolution
process by 'Financial Creditor' either by itself or jointly with other
Financial Creditors is provided in Section 7 of the I&B Code. As per
sub-section (1) of Section 7 of the I&B Code, the trigger of filing of an
application by a Financial Creditor by himself or jointly with other Financial
Creditors before the Adjudicating Authority is when a default in , respect of
any financial debt has occurred.
But in the case of the Operational Creditor due to follow the process of
issue of demand notice u/s 8 and other above mentioned reasons joint
application can’t be filed by the operational creditors.
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