Unregistered Partnership Firm Cannot Initiate Insolvency Proceedings Under IBC: NCLT Kochi

Background Facts

Bangalore Sales Corporation (“Operational Creditor”) is a partnership firm engaged in the business of spices. M/s. Sark Spice Products Pvt. Ltd. (“Corporate Debtor”) had purchased spices from the Operational Creditor but had not made the complete payment. On 13.05.2021 the Operational Creditor had issued a Demand Notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) to the Corporate Debtor to which the latter had replied refuting the claims.

The Operational Creditor had filed a petition under Section 9 of IBC, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor over a default amount of Rs. 1,72,15,532/- .

The Bench observed that in the petition the status of the partnership firm was not stated. Neither any certificate of registration was placed on record and nor it was stated whether the firm is registered with registrar of firm or not. Further, the petition was filed in respect of due amount payable by the Corporate Debtor arising out of commercial contract. The Parties had not stated anything with respect to maintainability of petition by partnership firm without registration or without filing certificate of registration.

The Bench observed that Section 69(2) of the Partnership Act, 1932 bars the unregistered partnership firm or any of the partners of said unregistered firm to file any suit against any third parties. The word “court” is defined in Section 3 of Indian Evidence Act 1872 and the same “Court” includes all Judges and Magistrates and all persons, except arbitrators, legally authorized to take evidence. As per this definition this Tribunal also comes under the purview of court. The proceedings before the Tribunal is a suit attracts section 69(2) of Partnership Act 1932. Thus an unregistered Partnership Firm cannot institute insolvency proceedings under IBC.

The Bench dismissed the petition.

Case Title: The Bangalore Sales Corporation v Sark Spice Products Pvt Ltd.

Case No.: CP (IBC)/37/KOB/2022.

Counsel for Applicant: Mr. Anirudh Suresh and Mr. Nirmal V. Nair, Advocates.

Counsel for Respondent: Adv.P.V.Vinod for M/s. Indialaw LLP.

Click Here To Read/Download Order