NCLT Hyderabad: Airport Authority Of India Being A Statutory Body Does Not Fall Within Scope Of 'Corporate Person' U/S 3(7) Of IBC
The National Company Law Tribunal (NCLT), Hyderabad Bench, comprising of Smt. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member) has held that no proceedings can be initiated against the Airport Authority of India ('AAI') as it is a statutory body created under the Airport Authority of India Act, 1944, does not fall under the definition of 'corporate person'...
The National Company Law Tribunal (NCLT), Hyderabad Bench, comprising of Smt. Bidisha Banerjee (Judicial Member) and Shri Arvind Devanathan (Technical Member) has held that no proceedings can be initiated against the Airport Authority of India ('AAI') as it is a statutory body created under the Airport Authority of India Act, 1944, does not fall under the definition of 'corporate person' under Section 3(7) of Insolvency and Bankruptcy Code, 2016 (IBC).
Background Facts
Akash Electrotek Engineers Pvt. Ltd. ('Applicant') working as a sub-contractor to NCC Ltd. was responsible for specific electrical tasks in a project at Lucknow Airport commissioned by AAI as per a tri-partite contract. NCC Ltd. was responsible for the payments to the Applicant at different stages of work completion.
A letter was sent by the Applicant to AAI requesting its payment of Rs. 1.68 crores with also a reminder on 08.10.2021.
The Applicant filed a CIRP petition under Section 9 of the IBC against NCC Ltd. and AAI for the default in payment of its dues. A Demand Notice was sent to AAI and NCC Ltd. on 28.10.2021 demanding the "unpaid operational debt."
NCLT Verdict:
The NCLT Hyderabad dismissed the petition and held that no proceedings can be initiated against AAI as it is a statutory body created under the Airport Authority of India Act, 1944, does not fall under the definition of 'corporate person' under Section 3(7) of IBC. Thus, no proceedings under IBC can be initiated against it and the application suffers from a fatal flaw.
Section 3(7): "corporate person" means a company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider;
The Tribunal also pointed out that filing of single application against two different Corporate Debtors is not maintainable. An application without specifying who is responsible for the debt incurred renders the application ambiguous.
The NCLT observed that the intent of IBC is not to be a tool for recovering disputed debts. Rather, the primary objective is to facilitate the resolution of insolvency for corporate entities. Issues of non-payment for services rendered cannot be addressed through the initiation of insolvency proceedings under the IBC.
In conclusion, it observed that the Applicant could have used other legal recourses via appropriate Civil Court to recover its outstanding dues.
Case Title: Akash Electrotek Engineers Pvt. Ltd. vs. NCC Ltd.
Case No.: CP(IB) No. 66/09/HDB/2022
Counsel for the Applicant: Mr. Prem Chhetri, AdvocateCounsel for the Respondent: Mr. Avinash Desai, Senior Advocate