NCLT Jaipur Rejects Application Filed By RP Seeking Recovery Of Amount From Corporate Debtor’s Debtor

“The Resolution Professional in the present matter had approached this forum for recovery of debt which is allegedly owed by the Respondent No. 2 to the Corporate Debtor whereas it has forgotten the underlying principle which enunciates that this is not a debt recovery forum. There is no doubt that the Resolution Professional has ample powers to proceed and protect the debts of the Corporate Debtor, but it cannot do so by merely filing an Application under Section 60(5) of the Code in the pending CIRP of the Corporate Debtor.”

Background Facts

The Jadoun International Pvt. Ltd (“Corporate Debtor”) had rendered freight services to Kanak Marbles & Granites Pvt Ltd. (“Company”), against which certain payments were outstanding.

In 2019, the Corporate Debtor was admitted into the Corporate Insolvency Resolution Process (CIRP) by the NCLT. Resolution Professional assessed that the assets of the Corporate Debtor are significantly insufficient to its liability.

On 26.03.2019, the Resolution Professional sent a letter to the Company asking it to clear the outstanding dues amounting to Rs. 14,55,229/- for rendering the freight services. The outstanding amount was duly reflected in the books of accounts and ledger of the Corporate Debtor.

When the payment was not received, the Resolution Professional filed an application before NCLT, seeking a direction to the Company to pay the outstanding debt.

NCLT Verdict

The Bench observed that Section 18 of IBC states the duties of the Interim Resolution Professional (IRP) as collection of all financial information relating to the Corporate Debtor, receipt and collation of debt claims, constitution of a Committee of Creditors etc. Section 20 states that the IRP has to manage the affairs of the Corporate Debtor as a going concern, to protect and preserve the latter’s value. Further, Section 25 sets out the functions to be performed by the Resolution Professional to preserve and protect the assets of the Corporate Debtor.

The Bench opined that the duties imposed upon the Resolution Professional or IRP does not entitle the NCLT to exercise jurisdiction in matters where recovery of an amount is sought on behalf of the Corporate Debtor. For adjudication of disputes and recovery of sums, the Resolution Professional is empowered to approach relevant competent authorities. Moreover, NCLT is not a recovery forum.

“The Resolution Professional in the present matter had approached this forum for recovery of debt which is allegedly owed by the Respondent No. 2 to the Corporate Debtor whereas it has forgotten the underlying principle which enunciates that this is not a debt recovery forum. There is no doubt that the Resolution Professional has ample powers to proceed and protect the debts of the Corporate Debtor, but it cannot do so by merely filing an Application under Section 60(5) of the Code in the pending CIRP of the Corporate Debtor.”

The Bench held that it does not have the jurisdiction to allow the application by the Resolution Professional for recovery of amounts from Corporate Debtor’s debtors.

“We cannot divert from the principles and ratio which has evolved in pursuance to the IBC over a period of time. The Adjudicating Authority does not have the jurisdiction to allow the Application filed by the Resolution Professional. The Successful Resolution Applicant is at liberty to proceed against its debtors by filing appropriate application with the competent court of law and for the purpose of the same, the period of this Application shall be excluded from limitation.”

The application has been dismissed.

Case Title: M/S Indus Contrainer Lines Pvt. Ltd. V Jadoun International Pvt. Ltd.

Case No.: IB No. 707(PB)/2018

Counsel For Applicant: Ashish Saksena, Adv.

Counsel For Respondent: Archit Bohra, Adv.

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