Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + HC Insolvency and Bankruptcy - 2022 (8) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 1060 - HC - Insolvency and BankruptcyValidity of Section 7 of the Insolvency and Bankruptcy Code, 2016 - Initiation of CIRP by Financial Creditors - threshold limit for triggering Corporate Insolvency Resolution Process qua the private financial creditors - Section 10A of IBC - HELD THAT:- Validity of Section 7 of the IBC was examined by Hon'ble the Supreme Court in the case of Swiss Ribbons Pvt. Ltd. [2019 (1) TMI 1508 - SUPREME COURT] and the same was found to be compliant to the Constitution of India and the challenge to the validity of the statute was repelled by Hon'ble the Supreme Court in unequivocal terms. Despite that, the petitioner has ventured into questioning the validity of Section 7 of the IBC claiming that the challenge so laid is on a totally different proposition i.e., permissibility of a group of financial creditors jointly triggering CIRP without adhering to the requirement of default threshold of Rs.1 crore in individual capacity. On a plain reading of Section 7, it becomes clear that there is no ambiguity in the provision which requires any interpretation other than what is conveyed in its literary sense. The section clearly stipulates that the application for triggering CIRP may be initiated by a financial creditor either individually or jointly with other financial creditors. Previously the threshold default limit for filing the CIRP application was only Rs.1 lakh and it has been drastically increased to Rs.1 crore vide Gazette Notification dated 24.03.2020. It can easily be envisaged that in cases of MSMEs, there may not exist financial creditors whose individual debt is Rs.1 crore or above. If the threshold limit was to be fixed at Rs.1 crore qua each individual financial creditor, then there was no reason whatsoever for allowing joint applications by financial creditors. The statute i.e., Section 7 of the IBC as amended vide Gazette Notification dated 05.06.2020, admits no other interpretation except that a group of financial creditors can converge and join hands to touch the financial limit of Rs.1 crore stipulated under Section 7 so as to initiate a CIRP under the IBC. There are no merit in this writ petition - petition dismissed.
|