Education Society is not a corporate person for IBC proceedings; CIRP plea rejected: NCLAT

Case Details: Asset Reconstruction Company (India) Ltd. v. Mohammadiya Educational Society - [2021] 132 taxmann.com 37 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • A.I.S. Cheema, Officiating Chairperson and Dr. Alok Srivastava, Technical Member
  • Abhijeet Sinha and Karan Malhotra, Advs. for the Appellant.
  • Ramji Srinivasan, Sr. Adv., Pawanshree Agarwal and Divyanshu Agrawal, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant-financial creditor filed an application under section 7 against the respondent corporate debtor claiming that the respondent defaulted in payment of an amount. The Respondent was a society governed by the AP Societies Registration Act, 2001.

The appellant claimed that as per section 18 of the A.P. Act, registration of society would render it to a corporate body and, thus, respondent was governed by the definition under section 3(7) and the application filed by it for initiating CIRP against the corporate debtor was maintainable. However, the respondent claimed before NCLT that it was a society registered under the Societies Registration Act, 1860 and that it did not fall under the purview of section 2 of the ‘I&B Code’.

The respondent claimed that it was not a body corporate and remained an unincorporated body. The respondent also claimed that section 18 of the A. P. Act confers the status of a body corporate for such societies registered thereunder and that the status of Body Corporate was not afforded to societies registered under the ‘1860 Act’.

The Adjudicating Authority by the impugned order held that the respondent was not a body corporate and dismissed the application filed by the appellant under section 7 against the respondent.

NCLAT Held

On appeal, the National Company Law Appellate Tribunal held that since respondent was not a company as defined in clause 2(20) of Companies Act, 2013 or ‘limited liability partnership’ as defined under Limited Liability Partnership Act, 2008 or any other person incorporated with limited liability under any law for time being in force, respondent society could not be said to be ‘corporate person’ to whom provisions of IBC could apply.

Case Review

• • Asset Reconstruction Co. (India) Ltd. (ARCIL) v. Mohammadiya Educational Society [2021] 132 taxmann.com 36 (NCLT – Hyd.) (para 33) affirmed.

List of Cases Referred to

• • Satyadeva Sannakaru Rythu Sangham v. State of Andhra Pradesh [WP No. 488 of 2006, dated 12-8-2011] (para 4)
  • Somasundaram Memorial Social Educational Rural Development Society v. APSRTC 2011 SCC Online AP 821 (para 23)
  • V. Kameswara Rao v. District Legal Services Authority-cum-VII Addl. District and Session Judge Court (Lok Adalat) 2014 SCC Online Hyd. 1467 (para 24)
  • All India SC and ST Railway Employees Association v. E. Venkateshwarlu 2003 SCC Online AP 97 (para 25)
  • Illachi Devi v. Jain Society, Protection of Orphans India [2003] 8 SCC 413 (para 27).