CIRP plea filed by Operational Creditor for an amount below Rs 1 Cr wasn’t maintainable: NCLAT

Case Details: Netfinity Solutions v. Karvy DigiKonnect Ltd. - [2023] 148 taxmann.com 67 (NCLAT-New Delhi) [27-09-2022]

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Ravi Raghunath, Adv. for the Appellant.

Facts of the Case

In the instant case, the appellant, who is an operational creditor supplied equipment to various offices of the respondent, who is a corporate debtor) and raised invoices upon the corporate debtor for payment. On default in making payment, the appellant issued a demand notice on 23.06.2021 u/s 8 demanding an amount of Rs. 46.64 lakhs along with an interest, and filed an application under section 9 on 08.09.2021.

However, the Adjudicating Authority (NCLT) dismissed the said application on the ground that there was no provision in the IBC to revive the application and that the amount claimed by the appellant was below the threshold limit of Rs. 1 crore as per section 4 of the IBC. Therefore, an application filed by the appellant was not maintainable.

Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The appellant contended that the default was committed by the respondent prior to 24.03.2020 and that the first notice was issued prior to that date, making the appellant entitled to file an application even after 24.03.2020 and a threshold limit of Rs. 1 crore could not be applied on such application.

The NCLAT observed that since the application u/s 9 was filed on 08.09.2021, it had to fulfil the threshold requirement of Rs. 1 crore as per section 4 of the IBC. The NCLAT, further observed that the fulfilment of conditions of the threshold limit of Rs. 1 crore from 24.03.2020 is a prerequisite for initiating proceedings u/s 9 by an operational creditor

NCLAT Held

The NCLAT held that while the existence of default is necessary to initiate section 9 proceedings, however, it alone does not entitle an operational creditor to initiate proceedings on a default of Rs 1 lakh after 24.03.2020.

The NCLAT, further held that an application filed by the appellant u/s 9 on 08.09.2021 for an amount of Rs. 46.64 lakhs was not entertainable as it didn’t satisfy the mandatory threshold of Rs 1 crore as statutorily required u/s 4 w.e.f 24.03.2020.

Therefore, the NCLAT upheld the impugned order passed by the Adjudicating Authority.

List of Cases Reviewed

• • Order of NCLT (New Delhi) in I.A.No. 3100/2022, dated 7-7-2022 (para 26) affirmed.

List of Cases Referred to

• • Sree Bhadra Parks and Resorts Ltd. v. Sri Ramani Resorts and Hotels (P.) Ltd. [Company Appeal (AT) (CH) (Ins.) No. 6 of 2021, dated 9-4-2021] (para 3)
  • Pooja Finlease Ltd. v. Auto Needs (India) (P.) Ltd. [Company Appeal (AT) (Ins.) No. 103 of 2022] (para 6), Garikapatti Veeraya v. N. Subbiah Choudhury AIR 1957 SC 540 (para 15)
  • Hitendra Vishnu Thakur v. State of Maharashtra [1994] 4 SCC 602 (para 16)
  • V-Con Integrated Solutions (P.) Ltd. v. Argos Technology Resources (P.) Ltd. [Company Appeal (AT) (Ins.) No. 910 of 2022] (para 20)
  • B. Sreekala v. Al Sadiq Sweets [2022] 139 taxmann.com 501 (NCLAT – New Delhi) (para 20)
  • Hyline Mediconz (P.) Ltd. v. Anandalok Medical Centre (P.) Ltd. [Company Appeal (AT) (Ins.) No. 1036 of 2022] (para 20)
  • Manish Kumar v. Union of India [2021] 123 taxmann.com 343 (SC) (para 20).