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TMI Blog2025 (5) TMI 1536X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt of Rs. 1,16,25,583/- which included principal operational debt of Rs. 1,10,81,333/- and interest of Rs. 4,61,229. 3. Notice was replied by the Respondent. Thereafter, the Appellant filed the application under Section 9 of the Code on 20.05.2022 in respect of the defaulted amount of Rs. 1,16,25,583/-. 4. The application was admitted on 31.10.2022 and CIRP proceedings were commenced. However, the Respondent challenged the order dated 31.10.2022 by way of CA (AT) (Ins) No. 209 of 2023 before the Appellate Tribunal which was allowed on 19.10.2023 solely on the ground that the Tribunal did not grant opportunity of being heard to the Respondent. 5. Apropos, the application filed under Section 9 of the Code was remanded back to the Tribunal with a direction to hear the matter afresh and to decide the same. 6. During the pendency of the proceedings before the Tribunal but after the completion of the pleadings, the Appellant received an email from the Respondent by which the Appellant was informed that the Respondent had deposited Rs. 20 Lakhs sou moto in the account of the Appellant by way of cheque towards part payment of the outstanding operational dues. 7. It is the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which are not in dispute about the filing of the petition and order of remand and that deposit of Rs. 20 Lakh in the account of the Appellant which was reduced the amount from the threshold of Rs. 1 Cr., has submitted that the threshold has to be seen at the time of the admission of the application and not at the time of filing of the application. It is submitted that judgments relied by the Appellant in the cases of Rajamundry Electric Supply Corporation Ltd. (Supra), Manish Kumar (Supra) and Hyline Mediconz Pvt. Ltd. (Supra) are not applicable to the facts of this case. It is also submitted that the proceedings under the Code cannot be substituted to a recovery forum, the object of the Code is to effect resolution of the CD and to bring the company out of distress. 12. We have heard Counsel for the parties and perused the record. 13. Section 4 of the Code provides the threshold of Rs. 1 Cr. for the purpose of maintaining an application under Section 9 of the Code. Before amendment brought by S.O 1205(E) dated 24.03.2020, the threshold was Rs. 1 lakh but with the amendment it has been raised to Rs. 1 Cr. In this regard, Section 4 needs to be referred to which is reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot affect either the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its own merits." 16. In the case of Manish Kumar (Supra) the Hon'ble Supreme Court has observed as under:- "THE POINT OF TIME TO COMPLY WITH THE THRESHHOLD REQUIREMENTS 178. The question, then arises, as to the alleged lack of clarity about the point of time, at which the requirements of the impugned provisos, are to be met. Is it sufficient, if the required number of allottees join together and file an application under Section 7 and fulfil the requirements, at the time of presentation? Or, is it necessary that the application must conform the numerical strength, under the new proviso, even after filing of the application, and till the date, the application is admitted under Section 7(5)? 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. In this regard, we find support from an early judgment of this Court, which was rendered under Section 153- C of the Companies Act, 1913. Section 153-C is the predecessor to Sections 397 and 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Code is applicable only when minimum amount of default of Rupees One Crore is fulfilled after 24.03.2020. Thus, right to initiate the CIRP after 24.03.2020 is only on the condition that minimum default is of Rupees One Crore. There is no right to initiate CIRP after 24.03.2020 when minimum default is not Rupees One Crore. 13. When we look into the scheme of the Code, provision of Section 4, 6, 7, 8, 9 and 10 indicate that the provisions which provides for initiation of Corporate Insolvency Resolution Process and Part II of the Code applied to matters relating to insolvency Resolution Process for Corporate Debtor, where minimum default is Rupees One Crore (as on 24.03.2020). Thus, Part II of the Code is applicable only when default is of Rupees One Crore or more. There is no right to initiate an application under Section 9 on 24.03.2020 or thereafter if the minimum default of Rupees One Crore is not fulfilled. Thus, crucial date to find out applicability of the threshold is the date when application to initiate CIRP is made. If we accept the submission of learned counsel for the Appellant that date of default or date of demand notice under Section 8 is to be taken and if d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its a default, a Financial Creditor, an Operational Creditor or the Corporate Debtor itself may initiate Corporate Insolvency Resolution Process in respect of such Corporate Debtor in the manner as provided under this Chapter. Thus, a default is a condition precedent. Part II of the Code becomes applicable only when 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." 18. It has been held in the aforesaid 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. 19. On the other hand, Counsel for the Respondent has not referred to any judgment to the contrary except for arguing that the aforesaid judgments relied upon by the Appellant are not applicable. 20. However, in our considered opinion, the ratio laid down in the aforesaid decisions relied by the Appellant squarely covers the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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