9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1536 - AT - IBCDismissal of application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 by the Appellant on the ground of lack of threshold - HELD THAT - There is no dispute that when the application under Section 9 was filed by the Appellant it had crossed the threshold of Rs. 1 Cr. because the amount at that time was Rs. 1, 16, 25, 583/- as principal but during the pendency of the application the Respondent deposited Rs. 20 lakh towards the outstanding dues because of which it reduced to less than Rs. 1 Cr. In the case of Rajamundry Electric Supply Corporation Ltd. 1955 (12) TMI 21 - SUPREME COURT the Hon ble Supreme Court has categorically held that the threshold has to be seen at the time of filing of the application. It has been held in the various cases that the threshold has to be seen at the time of filing of the application and not at the time of the admission of the application. Consequently there is no hitch on our part to hold that the Tribunal has committed a patent error in dismissing the application - the matter is remanded back to the Tribunal to decide the application filed under Section 9 of the Code by the Appellant in accordance with law - appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered by the Tribunal was whether the threshold limit of default amount prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016 ("Code") for maintaining an application under Section 9 is to be determined at the time of filing of the application or at the time of admission of the application. Specifically, the issue arose because the operational creditor had filed the application with the default amount exceeding Rs. 1 crore, but during the pendency of the application, the corporate debtor deposited Rs. 20 lakhs, reducing the default amount below the Rs. 1 crore threshold. The Tribunal had dismissed the application on the ground that the threshold was not met at the time of admission. The appeal challenged this dismissal. 2. ISSUE-WISE DETAILED ANALYSIS Issue: Whether the threshold amount under Section 4 of the Code is to be examined at the time of filing or at the time of admission of the Section 9 application. Relevant Legal Framework and Precedents: Section 4 of the Code provides the minimum amount of default required for initiating insolvency proceedings. Initially, the threshold was Rs. 1 lakh, but after the amendment by S.O. 1205(E) dated 24.03.2020, it was increased to Rs. 1 crore. Section 9 allows an operational creditor to file an application for initiating Corporate Insolvency Resolution Process (CIRP) against a corporate debtor in case of default. The Court referred extensively to authoritative precedents:
Court's Interpretation and Reasoning: The Court emphasized the distinction between the date of filing the application and the date of admission. It noted that the "initiation date" of CIRP is the date when the operational creditor files the application (Section 5(11)), while the "insolvency commencement date" is the date when the application is admitted (Section 5(12)). The threshold prescribed under Section 4 is a condition precedent for filing the application, not for admission. The Court reasoned that allowing the threshold to be tested at admission would lead to uncertainty and undermine the legislative scheme. Applying the principles from the cited precedents, the Court held that since the operational creditor had crossed the Rs. 1 crore threshold at the time of filing the application, the subsequent partial payment of Rs. 20 lakhs by the corporate debtor (even if made without consent) could not affect the maintainability of the application. The Court rejected the argument that the threshold must be examined at admission, observing that no contrary binding precedent was cited by the respondent. Key Evidence and Findings: The undisputed facts were that the operational creditor had filed the Section 9 application with a default amount of Rs. 1,16,25,583/-, exceeding the Rs. 1 crore threshold. During the pendency of the application, the corporate debtor deposited Rs. 20 lakhs without the operational creditor's permission, reducing the outstanding amount below Rs. 1 crore. The Tribunal had dismissed the application solely on the ground that the threshold was not met at admission. Application of Law to Facts: The Court applied the settled legal principle that the threshold under Section 4 must be satisfied at the time of filing. Since the operational creditor met the threshold at filing, the application was maintainable. The subsequent reduction of the amount due did not vitiate the application. The Court found that the Tribunal erred in dismissing the application on the ground of threshold non-compliance at admission. Treatment of Competing Arguments: The respondent argued that the threshold should be examined at admission and that the partial payment reduced the default below the statutory minimum, thus rendering the application non-maintainable. The respondent also contended that the judgments relied upon by the appellant were not applicable and that insolvency proceedings should not be treated as a recovery forum. The Court rejected these contentions, holding that the cited precedents directly addressed the issue and supported the appellant's position. It also clarified that the object of the Code is to resolve insolvency and not merely to act as a recovery mechanism, but this did not affect the timing of threshold determination. Conclusions: The Court concluded that the threshold amount prescribed under Section 4 of the Code must be satisfied at the time of filing the application under Section 9. Subsequent payments or events reducing the amount below the threshold do not affect the maintainability of the application. The Tribunal's dismissal of the application on the ground of threshold non-compliance at admission was a patent error. 3. SIGNIFICANT HOLDINGS "The validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation." (Rajamundry Electric Supply Corporation Ltd.) "There can be no doubt that the requirement of a threshold under the impugned proviso, in Section 7(1), must be fulfilled as on the date of the filing of the application." (Manish Kumar) "Part II of the Code is applicable only when minimum default is Rupees One Crore or more w.e.f. 24.03.2020 and an Operational Creditor can initiate Corporate Insolvency Resolution Process against the Corporate Debtor after 24.03.2020 when default is more than Rupees One Crore. No application can be initiated after 24.03.2020 irrespective of the date of default if the threshold of Rupees One Crore is not fulfilled." (Hyline Mediconz Pvt. Ltd.) The Court held that the application under Section 9 was maintainable as the threshold was met at the time of filing, and the subsequent payment by the respondent did not affect this. The impugned order dismissing the application was set aside, and the matter was remanded for fresh adjudication in accordance with law. The Court explicitly refrained from expressing any opinion on the merits of the case, restricting its decision to the legal issue of threshold timing.
|
