M/S Shiv Shakti Store vs Pratham Housing Private Limited

This is an application filed by M/s. Shiv Shakti Store in the capacity of an Operational Creditor against Pratham Housing Private Limited as its

Corporate Debtor. The transaction leading to the filing of the above petition it is seen that the petitioner is a supplier of TMT bars, electrical fitting and

components and that between the period of 07.04.2014 to 23.09.2014, it supplied goods upon receipt of the purchase order and in relation to the said

supply raised invoices for the goods supplied. It is further stated that the Operational Creditor had been maintaining a running account against the

supply of goods and it also recorded all the transactions as transpired between the parties and as per the ledger account, a balance of Rs. 7,38,910/- is

due as on date. Despite issue of notice Under Section 8(1) of Insolvency & Bankruptcy Code, 2016 the Corporate Debtor has failed to clear the

admitted debt and hence this petition has come to be filed before this Tribunal under Section 9 of the Insolvency and Bankruptcy Code, 2016 read with

Rule 6 of the Insolvency & Bankruptcy (Application to Adjudicating Authority Rules, 2016) for brevity hereinafter called as AAA Rules, 2016.

The claim amount as contained in Part IV of the application filed under AAA Rules, 2016 reflects the sum due as Rs. 7,38,910/- along with interest

at 24% per annum amount of Rs. 5,32,015/- thereby aggregating in all to a sum of Rs. 12,70,925/-.

Upon notice, the Corporate Debtor has duly entered appearance and has also filed a reply to which it is seen from the records of this Tribunal a

rejoinder has also been filed on the part of the petitioner. Perusal of the reply of the Corporate Debtor shows that the Corporate Debtor is denying the

liability on the ground that the amount claimed is barred by limitation. Further the Corporate Debtor also contends that the goods were never supplied

to the Corporate Debtor by the Operational Creditor. It is also contended that no physical movement of goods has also actually happened as one Mr.

Manish Jain who was made as a signatory to the Bank accounts of the Corporate Debtor has withdrawn huge amount of cash under the guise of

payment made to the supplier as well as various other payments. It is also pointed out that even though it is alleged in the petition that amounts have

been paid in cash during the period 15.10.2014 to 30.10.2014, however, from the beginning the transactions have been only through bank as a mode

which was adopted to make payments. Even in relation to the banking mode if any payments have been made by the said Mr. Manish Jain the same is

contested to that of enabling creation of bogus entries/bills.

A rejoinder has been filed by the petitioner in which it is seen that certain documents namely copy of the bill issued by the manufacturer namely

Shree Sidhbali Steels Limited, Roorkee Road, Bhopa Bye-Pass, Muzaffarnagar-251001(Uttar Pradesh) as well as Form No. 21 and transport challan

has been annexed in addition to sales tax return of the Operational Creditor which has also been annexed, as documents in support of supply of goods

to the Corporate Debtor. It is also stated in the rejoinder that towards acknowledgment of debt, a cheque amount of Rs. 15,91,734/- had been issued

by the Corporate Debtor which was the amount which was then payable. It is further stated, purchase order was made verbally by the Corporate

Debtor to the Operational Creditor based on which instructions, the supply of goods took place from that of the manufacturer directly from its factory

premises through a truck bearing No. UP 16 AT 7806 and that form No. XXI being the Transport Memo was also issued in this regard. Under the

circumstances, the Corporate Debtor cannot deny the supply of goods effected by the Operational Creditor.

On 04.04.2019 in view of completion of pleadings, the arguments of respective counsels were heard in detail. Learned counsel for the petitioner

during the course of submissions reiterated the averments as contained in the petition as well as in the rejoinder as filed by the petitioner. During the

course of submission made by the learned counsel for the Corporate Debtor a preliminary objection was taken in relation to the person named as sole

proprietor namely Mr. Sanjay Rastogi who has filed this petition on behalf of the sole proprietary concern namely M/s. Shiv Shakti Store. It was

further represented by learned counsel for the Corporate Debtor that Mr. Sanjay Rastogi is only the son of erstwhile proprietor of the sole proprietary

firm, namely Late Mr. Surender Nath Rastogi who had signed as such in the sales tax return forms on which reliance is placed.

Thus, a preliminary question is sought to be posed as to the competency of the sole proprietor concern to initiate the proceedings under the

provisions of the Insolvency & Bankruptcy Code, 2016. In order to address the same, a reference is required to be made to the provisions of Section 9

of the Insolvency and Bankruptcy Code, 2016 enabling an operational creditor to file a petition under IBC, 2016 which reads as follows.

(1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1)

of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of

section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution

process.

i. Perusal of 9(1) of IBC, 2016 shows that under the said provision an application can be initiated for CIRP by an Operational Creditor against the

Corporate Debtor.

ii. The definition of an Operational Creditor is given in Section 5(20) which is to be following effect:

‘Operational creditor’ means a person to whom an operational debt is owed and includes any person to whom such debt has been

legally assigned or transferred;

Operational debt as defined under Section 5 (21) of the Code,2016 which reads as follows:

“A claim in respect of the provisions of goods or services including employment or debt in respect of the payment of dues arising under

any law for time being in force and payable to the Central Government any State Government or any Local Authorityâ€​.

From 5(20) of IBC, 2016 it is clear that an Operational Creditor has been defined to mean as a person to whom an operational debt is owed and

includes any person to whom such debt has been legally assigned or transferred.

Further reference to the provisions of Insolvency and Bankruptcy Code, 2016 shows that a person has been defined under Section 3(23) of the

Insolvency and Bankruptcy Code, 2016 which is to be following effect:

3 (23) ""person"" includesâ€

(a) an individual;

(b) a Hindu Undivided Family;

(c) a company;

(d) a trust; (e) a partnership;

(f) a limited liability partnership; and

(g) any other entity established under a statute, and includes a person resident outside India;

A combined reading of these provisions namely Section 3(23), Section 5(20) read with Section 9 (1) shows that a petition can be preferred by a

‘person’ and who can be treated as an ‘Operational Creditor’ to whom an operational debt is owed by the Corporate Debtor and upon

issue of notice of payment as provided under Section 8 of IBC, 2016 on default can come before this Tribunal by way of an application preferred

under Section 9 of the Insolvency and Bankruptcy Code, 2016. It is thus seen from the above definition of a person as defined under Section 3(23) of

Insolvency and Bankruptcy Code, 2016 that while an ‘individual’ has been included, however, there is no mention of a sole proprietary firm

specifically to be treated as a person under IBC, 2016. It is by now trite that Insolvency and Bankruptcy Code, 2016 is a separate code by itself and

where there is a specific definition of word and expressions as defined in the Insolvency and Bankruptcy Code, 2016 namely IBC, 2016 the definition

of a such a word or expression cannot be imported from any other Act which is also explicitly clear from a perusal of Section 3(37) of Insolvency and

Bankruptcy Code, 2016.

Taking into consideration all the above it is evident that a sole proprietary concern, namely M/s. Shiv Shakti Store is not competent to be considered

as a ‘person’ to prefer a petition under Insolvency and Bankruptcy Code, 2016 and more so, as rightly pointed out by learned counsel for the

Corporate Debtor that even though in the prescribed application under “AAA†Rules it specifically provides in the form under Part V of the said

application the onus is to bring to the notice of this Tribunal the details of succession to the sole proprietary concern by Mr. Sanjay Rastogi who has

sought to depose on behalf of the petitioner concern, no document by way of succession certificate or probate of will or letters of administration has

been filed of Mr. Surendra Nath Rastogi. In any case as reasoned above, a sole proprietary concern is not a competent to file a petition in its own

name as it cannot be considered as a person under the provisions of Insolvency & Bankruptcy Code, 2016.

In the circumstances, this application should fail on this preliminary ground alone and this Tribunal is constrained to dismiss this petition.

Let the copy of this order be duly given to the Operational Creditor, as contemplated under the provision of Section 9 of the Insolvency and

Bankruptcy Code, 2016 at the earliest by the registry.