Applicability Of Minimum Threshold Of Rs. 1 Crore Is To Be Seen From Date Of Filing Of Petition, Not The Date Of Sending Demand Notice: NCLT Delhi
The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Dharminder Singh (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), while adjudicating an application filed in Udit Jain (Sole Proprietor of M/s U.J. Trading Co.) v Apace Builders and Contractors Pvt. Ltd., has held that the date of filing of petition needs to be considered and not the date...
The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Dharminder Singh (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), while adjudicating an application filed in Udit Jain (Sole Proprietor of M/s U.J. Trading Co.) v Apace Builders and Contractors Pvt. Ltd., has held that the date of filing of petition needs to be considered and not the date of sending the Demand Notice, while determining whether a petition requires to meet the increased minimum threshold of Rs. 1 Crore or not.
The minimum amount of default to file a petition before NCLT was previously Rs. 1 Lakh, which was increased to Rs. 1 Crore by the Ministry of Corporate Affairs from 24.03.2020 onwards.
Background Facts
Mr. Udit Jain ("Operational Creditor") is the Sole Proprietor of M/s U.J. Trading Co., which is engaged in manufacturing of fly ash, bricks, blocks, pavers and locking etc. Apace Builders and Contractors Pvt. Ltd. ("Corporate Debtor") had ordered for purchase of fly ash bricks and the Operational Creditor had provided the same for a worth of Rs. 12,76,408/-. The Corporate Debtor paid only Rs. 1 Lakh and subsequently the Operational Creditor had sent a demand notice dated 17.02.2020 to the former, demanding payment of Rs. 16,85,145/-, inclusive of interest.
When the payments were not received, on 11.06.2020 the Operational Creditor had filed a petition under Section 9 of the Insolvency and Bankruptcy Act, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor.
The Corporate Debtor opposed the Petition on the ground that the minimum threshold limit of default to file a petition before NCLT was increased to Rs. 1 Crore from the previous Rs. 1 Lakh, vide a notification dated 24.03.2020 of the Ministry of Corporate Affairs. Hence the petition being below the minimum threshold limit of Rs. 1 Crore and being filed after 24.03.2020, was not maintainable in view of Section 4 of IBC.
Decision Of NCLT
The Bench placed reliance on the NCLAT judgment in Jumbo Paper Products v Hansraj Agrofresh Pvt. Ltd., C.A. (AT) (Ins) No. 813/2021, wherein it was held that any statute or law could be applied retrospectively only if explicit provision regarding its retrospective application is made in the statute. The Bench opined that the MCA notification dated 24.03.2020 made it unambiguously clear that the threshold limit for Section 9 petition would be Rs. 1 Crore and would be applicable for petitions filed after 24.03.2020 even if the debt is of an earlier date.
The Bench observed that the Section 9 petition was filed on 11.06.2020, although the Demand Notice under Section 8 was sent on 17.02.2020; only the date of filing needs to be considered and not the date of sending the Demand Notice. The Bench held that the threshold limit of Rs. 1 Crore of debt would be applicable and the petition was held to be not maintainable.
Case Title: Udit Jain (Sole Proprietor of M/s U.J. Trading Co.) v Apace Builders and Contractors Pvt. Ltd.
Case No.: IB 894/ND/2020
Counsel for Corporate Debtor: Akshat Gupta and Pranav Jain, Advocates.