'Co-Operative Society' Is Not A 'Corporate Person' Under IBC To Which The Code Applies: NCLT Mumbai
LIVELAW NEWS NETWORK
12 Feb 2022 10:49 PM IST
NCLT, Mumbai in a Bench comprising of Mr. Rajesh Sharma (Technical Member) and Mr. H.V. Subba Rao (Judicial Member) in the case of The Solapur Dist. Central Co – Operative Bank Limited v. Sangola Taluka Sahakari Sakhar Karkhana Limited dismissed an application filed u/s 7 of the Insolvency and Bankruptcy Code, 2016 against Sangola Taluka Sahakari Sakhar Karkhana Limited/Corporate Debtor...
NCLT, Mumbai in a Bench comprising of Mr. Rajesh Sharma (Technical Member) and Mr. H.V. Subba Rao (Judicial Member) in the case of The Solapur Dist. Central Co – Operative Bank Limited v. Sangola Taluka Sahakari Sakhar Karkhana Limited dismissed an application filed u/s 7 of the Insolvency and Bankruptcy Code, 2016 against Sangola Taluka Sahakari Sakhar Karkhana Limited/Corporate Debtor on the ground that the same is a Co-Operative Society, and hence is not a 'Corporate Person' to whom IBC applies.
The Solapur Dist. Central Co – Operative Bank Limited/ Financial Creditor extended loan facilities to Sangola Taluka Sahakari Sakhar Karkhana Limited/ Corporate Debtor for setting up of plant for production of sugar, cutting of sugarcane, transport advance, machinery repair, pre-seasonal purchase and other expenses. The Financial Creditor disbursed the credit facilities from time to time to the Corporate Debtor.
On default of repayment of credit facilities, the Financial Creditor initiated legal action under the provisions of Maharashtra State Co-Operative Societies Act, 1960 and obtained a recovery certificate under the Act.
The Corporate Debtor appealed against this order before the Maharashtra State Co-Operative Appellate Court which set aside the order of the lower court, on the condition that the amount would be deposited within a period of two months from the date of the respective order. However, the Corporate Debtor failed to deposit the amount within the said time period.
Thereafter the Financial Creditor filed an application u/s 7 of the Code for initiation of CIRP against the Corporate Debtor. However, the Tribunal noted that the Corporate Debtor against which CIRP is sought to be initiated is a Co-Operative Society incorporated under the Maharashtra State Co-Operative Societies Act, 1960.
It dismissed the application, while placing reliance on the decision of the NCLAT in Asset Reconstruction Company (India) Ltd. v. Mohammadiya Educational Society. The issue before the Appellate Tribunal was whether a society registered under the Societies Registration Act would fall under the definition of a corporate person under the Code. It was held that a society under the A.P. Society Registration Act, 2001 is not a 'corporate person' under IBC. Thus, the IBC would not apply to it.
The NCLT also noted that while the Central Government has issued notifications with respect to CIRP against a Corporate Debtor and also Personal Guarantor to Corporate Debtor, no such notification has been issued with respect to a Co-Operative Society.
In view of this, the Bench dismissed the application filed u/s 7 for initiating CIRP against the Corporate Debtor, which is a Co-Operative Society registered under the Maharashtra State Co-Operative Societies Act, 1960.
