Neeta Saha, Member Of Suspended Board Of ... vs Ram Niwas Gupta (Proprietor Of Ram Niwas ...

Neeta Saha, Member of Suspended ...Appellant Board of Palm Developers Pvt. Ltd. R/o G-22, Sector 27 Noida, Gautam Budha Nagar, U.P. Vs 1. Mr. Ram Niwas Gupta (Original (Proprietor of Ram Niwas Gupta & sons) Operational Z-115/1, Loha Mandi, Creditor) Naraina, New Delhi - 110 028

2. Palm Developers Pvt. Ltd. (Corporate Plot No. 1, Ground Floor, Kilkori, Debtor) Maharani Bagh, New Delhi -110 065 Represented by Interim Resolution Professional Mr. Manoj Kumar Singh .. Respondents

Present:

For Appellant: Mr. Sai Deepak, Mr. Rajesh P. Ms. Ananya Kuthiala, Mr. Ankit Tripathi, Advocates

For Respondents: Ms. Kapil Rustagi, Advocate for Respondent No. 1 Mr. Abhijeet Sinha, Mr. Raghevendra Bajaj and Ms. Pratishtha Vij, Advocate for Caveater/ Abhinav Mukherji.

Mr. Raghavendra M. Bajaj, Mr. agnish Aditya and Mr. Saikat Sarkar, Advocates for Financial Creditors

ORDER

25.02.2020 Heard Advocate Mr. Sai Deepak for the Appellant. Respondent

No. 1 filed Application under Section 9 of the Insolvency and Bankruptcy Code,

2016 (in short 'IBC') in the name of Proprietorship Mr. Ram Niwas Gupta & Sons.

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 1 of 7 When the Application was filed, it is stated that a settlement took place between

the Corporate Debtor -M/s Palm Developers Pvt. Ltd. and the Operational

Creditor. The Application was earlier disposed of as withdrawn with liberty

granted to the Operational Creditor to seek restoration of the petition in case any

of the cheques issued is dishonoured.

2. This happened on 04.06.2019. There is no dispute that later on as post-

dated cheques were dishonoured, the Operational Creditor filed the Application

under Rule 11 of NCLT Rules, 2016 seeking restoration and the Application was

restored and the matter was then heard between the parties.

3. Learned Counsel for the Appellant states that cheques were issued for

Rs. 1,18,00,554/- and the dishonoured cheque was for Rs. 78,000/-.

4. It appears that after the Application was restored, the parties were heard.

The Corporate Debtor took up a defence that the Application was filed in the

name of sole proprietorship firm and it was not a legal entity under the definition

of "person" under Section 3(23) of IBC. It was also claimed that the Operational

Creditor had added interest which was not stipulated in the agreement. The

Adjudicating Authority, after hearing the parties, has admitted the Application

under Section 9 of IBC and against the said admission, present Appeal has been

filed.

5. In this Appeal, learned Counsel for the Appellant is submitting that the

judgment was reserved on 20.01.2020 and the Respondent No. 1 amended the

Memo of Parties on 22.01.2020. The argument of the learned Counsel is that the

Proprietorship is not a legal person and thus Application under Section 9 of IBC

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 2 of 7 could not have been maintained. According to the learned Counsel, the Tribunal

had no jurisdiction because of the filing of the Application by entity which is not

"person" under the law.

6. Learned Counsel for the Respondent No. 1 is submitting that there was no

defect in the Application filed as the copy of the Application under Section 9 of

IBC shows that it was not an Application which was filed merely in the name of

Proprietorship but it was stated that the Proprietorship is through Proprietor

and the name of the Proprietor was added. It is also stated that even if it was to

be stated that there was any defect same was allowed to be cured by the

Adjudicating Authority and thus objection does not survive.

7. Learned Counsel for the Appellant refers to a judgment in the matter of

"R.G. Steels Vs. Berry Auto Ancillaries (P) Ltd." passed by National Company

Law Tribunal, New Delhi, Court No. III in IB-722/ND/2019 to submit that in

that matter when the petition was filed by Sole Proprietorship concern it was not

held to be a person and the petition was dismissed.

8. Learned Counsel for the Respondent No. 1 is further submitting that there

was provision of interest. He refers to the Settlement Agreement which was

entered during the pendency of the Application, a copy of which is at Annexure-

A3 (at pages 427 & 428) to state that there was specific agreement which

recorded that the amount crystalized included interest payable and due till

04.06.2018 on delayed outstanding payment.

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 3 of 7

9. Learned Counsel for Appellant claims that this agreement was made after

the withdrawal of the petition and before the Application for restoration under

Rule 11 of NCLT Rules, 2016 of the earlier Application was filed.

10. Learned Counsel for the Appellant further states that there are further

talks with the Respondent No. 1 to settle the matter. Learned Counsel is thus

requesting that time may be given to settle the payment.

11. It appears that 'Committee of Creditors' (in short 'CoC') has already been

constituted and the CoC is set to have its first meeting to-morrow i.e. on

26.02.2020. Some Financial Creditors, who are part of CoC, are present through

their Counsel raising objection that when the CoC is constituted, the only

recourse available is Section 12A of IBC.

12. Nothing is shown to us from the records to claim that there was pre-

existing dispute.

13. The Adjudicating Authority in paragraph-11 of the Impugned observed as

under:

...

"11. The Corporate Debtor in its reply filed on 25.11.2019

has raised objection with regard to the maintainability of

the present Petition on the ground that the Petition has been

filed by Sole Proprietorship Firm, which is not a legal entity

and is not covered under the definition of Person, under

Section 3(23) of the IBC, 2016. The Petitioner, in response,

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 4 of 7 has filed an Amended Memo of Parties on 22.01.2020 for

curing this technical defect. The same is taken on record."

...

14. Even the judgment shows the name of Respondent No. 1 as the

Operational Creditor in his personal name. The Adjudicating Authority in effect

has allowed the defects to be cured. The objection on this count does not survive.

We also note that Section 2 of IBC provides that the provisions of the Code apply,

inter alia, to "proprietorship firms". Further the definition of "person" in Section

3(23) of IBC is inclusive definition.

15. The Adjudicating Authority has further observed in paragraphs 13, 14 and

15 of the Impugned Order as under:

...

"13. The Corporate Debtor has, however, admitted its

liability and averred in its reply dated 25.11.2019 the

following:

"17. That the Respondent Company is looking

forward to get new projects and more business

opportunities, therefore, in coming few months the

Respondent would be able make the entire

outstanding payment to the Applicant herein. It is

pertinent to mention that the Respondent has the

intention to clear the outstanding amounts from

April, 2020 onwards"

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 5 of 7

16. After hearing submissions of both the Parties, this

Bench is of the view that the Corporate Debtor had clearly

acknowledged its liability (a) by entering into the settlement

agreement dated 01.08.2019, and (b) in its reply dated

25.11.2019 wherein, the Corporate Debtor has clearly

expressed its intention to clear the outstanding dues of the

Operational Creditor from April, 2020 onwards. Further, the

dishonoring of cheque dated 31.08.2019 bearing No.

218403, issued at the time of settlement amounts to default

on the part of Corporate Debtor. The plea raised by the

Corporate Debtor regarding the interest component added

to the claim amount does not merit consideration as the

default of principal amount itself is above Rs. 1,00,000."

17. In the given facts and circumstances, the present

petition being complete and establishing the default in

payment of the Operational Debt beyond doubt, the

Operational Creditor is entitled to claim its dues. The

amount of default being abo0ve Rs. 1,00,000/- for the

unpaid invoice, the petition is admitted in terms of Section

9(5) of the IBC and accordingly, moratorium is declared in

terms of Section 14 of the Code. " ....

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 6 of 7

18. Considering the above, we do not find that there is any substance or merit

in this Appeal.

19. For the above reasons, we decline to admit the Appeal.

The Appeal is disposed of. No orders as to cost.

[Justice A.I.S. Cheema] Member (Judicial)

[Justice Anant Bijay Singh] Member (Judicial)

(Kanthi Narahari) Member(Technical) Akc/Mn

Company Appeal(AT)(Insolvency) No. 321 of 2020 Page 7 of 7