Corporate Debtor’s objection raised u/s 9 of the IBC 2016.

Introduction

The application for the initiation of the corporate insolvency resolution process by the operational creditor is addressed in Section 9 of the I&B code 2016. This section addresses the provision concerning the filing of an application by the operational creditor against the corporate debtor demanding payment of the operational debt in respect of which default has occurred. Section 8 also describes the procedures for the operational creditor to initiate the insolvency resolution process. Under section 5(20) of the IBC 2016, an operational creditor is defined as the person to whom an operational debt is owed, as well as any person to whom such debt has been legally transferred or assigned.

Following are the objections that shall be raised by the corporate debtor –

  • Pre-existing of disputes.

In the case of Yash Technologies Private Limited Vs. Base Corporation Limited 2019, as the appellant had filed a petition under sections 433(e) and 343(1) of the Companies Act 1956, the adjudicating authority dismissed the application filed under section 9 of the IBC 2016 on the ground of pre-existing disputes under the matter.  Section 9(5), sub-clause (d) of clause (ii) of the IBC 2016 states that the adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. In the case of Transmission Corporation of Andhra Pradesh Ltd Vs. Equipment Conductors & Cables Ltd. The court ruled that debt is only considered operational when there is no record of a dispute over the amount in question in the matter. The adjudicating authority is the only one who can entertain or conclude the existence of a default of the amount in question in relation to the operational debt.

  • Occurrence of default

In the existence of a default, the operational creditor may serve demand notice to the corporate debtor, demanding payment of the operational debt. For the initiation of insolvency resolution or initiation of corporate insolvency resolution process by the operational creditor there must be occurrence of default by the corporate debtor in the payment of operational debt. Section 9(2) states that the application filed u/s 9 of the IBC 2016 shall be filed in such form and manner and accompanied with such fees as may be prescribed[1].  

  • Jurisdiction

NCLT must have jurisdiction over the place where the registered office of the corporate person is located. In the case of M/S. Fortune Plastech Vs. M/S. Avni energy solutions Pvt. Ltd.  The NCLT had dismissed the application filed u/s 9 of the IBC 2016 against the respondent stating that the application which had been filed shall not have jurisdiction before the tribunal because the registered office area of the corporate person is in Andhra Pradesh and the jurisdiction of initiation of insolvency proceeding comes under the NCLT Hyderabad, but the application had been filed under the wrong bench.

  1. sub section (3) of the section 9 states that the operational creditor along with the application must include following documents-
  2. The copy of the invoice demanding payment or demand notice served by the operational creditor to the corporate debtor.
  3. An affidavit must be submitted stating that no notice was given by the corporate debtor regarding the unpaid operational debt.
  4. Certificate copy from the financial institution which maintaining account of the operational creditor confirming that there is no payment of unpaid operational debt by the corporate debtor.
  5. A copy of any record with information of the existence of default of unpaid operational debt by the corporate debtor.
  6. Or any other confirming information regards to no payment of unpaid operational debt.
  • Pending of proceeding

Section 9(5) of sub-clause (e) of clause (ii) of the IBC 2016 states that the adjudicating authority shall reject the application and communicate such decision to the operational creditor and the corporate debtor if any disciplinary proceeding is pending against any proposed resolution professional.  In the case of Mobilox Innovations Private Ltd. Vs. Kirusa Software Private Ltd. 2018 SC. The court focused on the admission of an application filed u/s 9 of the IBC 2016. The court orders that there must be an operational debt in excess of 100,000. There shall be a requirement for documentary evidence regarding the operational debt is due, and there shall be no record of the proceeding, suit, or arbitration proceeding prior to the receipt of demand notice regarding the dispute or any pending of proceeding against any proposed resolution professional. The adjudicating authority will reject the operational creditor’s application if any of the elements are not satisfied[2].

  • Time limitations for the operational creditor, corporate debtor, or adjudicating authority under sections 8 & 9 of the IBC 2016. To initiate the CIRP (Corporate Insolvency Resolution Process).

Within ten days, the corporate debtor must respond to the operational creditor’s demand notice or invoice demanding payment of unpaid operational debt. Existence of a dispute, record of the pendency of a suit or arbitration proceedings filed prior to the demand notice, or any evidence attached related to the payment of the operational debt; if this is not done, the operational creditor must file an application under Section 9 of the IBC to initiate the corporate insolvency resolution process against the corporate debtor. Section 9(5) states that the adjudicating authority must accept the application within 14 days of its receipt. And, if the application made under sub-section (2) is incomplete, the adjudicating authority, before rejecting the application, gives the applicant 7 days to correct the defect in his application.

Conclusion

The IBC gives right to the operational creditor to initiate the corporate insolvency resolution process against the corporate debtor, the condition specified in section 9 of the IBC 2016 must be satisfied. Section 9(6) of the IBC 2016 states that the corporate insolvency resolution process begins on the date of the admission of application, which is specified in sub-section (5) of section 9.


[1] Insolvency and Bankruptcy Code 2016 Bare act.

[2] IndianKanoon.com

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.