Joint Application U/S 9 Of IBC Not Maintainable If Individual Claims Do Not Meet Threshold Limit U/S 4 Of IBC: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Baurn Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that in a joint application filed by operational creditors under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code), the threshold limit prescribed under Section 4 must be independently satisfied by each operational creditor. The collective or aggregate debt of all operational creditors cannot be clubbed to meet the minimum threshold requirement for initiating the Corporate Insolvency Resolution Process (CIRP). Brief Facts: Appellants were appointed with different designations by the Company – M/s Desein Private Limited between the period 1979 to 2018. After June, 2018, the Company failed to pay the monthly salary, allowances and other dues of the Appellants. Appellants jointly sent a demand notice under Section 8 of the Code on 11.03.2022 claiming amount in default of Rs.2,89,73,950/- due with respect to the Appellants.Section 9 application was filed by the Appellants. The Adjudicating Authority heard the application and by order dated 14.07.2023 has rejected the application relying on judgment of the NCLAT in Sadashiv Nomaya Nayak & Ors. Vs. Gammon Engineers & Contractors Pvt. Ltd., and other judgment of this Tribunal in Mr. Suresh Narayan Singh Vs. Tayo Rolls Limited. The Adjudicating Authority held that in event of failure to fulfil the threshold prescribed under law by each and every joint Applicant, the application cannot be maintained. Against the above order, the present appeal has been filed. Contentions: The Appellant submitted that in case of workmen/ employees application may be made either in individual capacity or in joint capacity, hence, with regard to workmen/ employees there is a departure from the normal rule of fulfilling the threshold by each applicant. It was further submitted that when the application is allowed by rules to be filed jointly by the Applicants, the threshold has to be looked into on the basis of total dues of all Applicants jointly and in the present case total dues of the Applicants jointly is an amount of Rs.2,89,73,950/-, hence, the application was fully maintainable. Per contra, the Respondent submitted that scheme of the Code for filing Section 7 application and Section 9 application are entirely different. Section 7 application can jointly be filed which is permitted by statute itself but there is no indication in Section 9 of a joint application by Operational Creditors. It was further submitted that operational debt owed to each creditor is different debt and scheme contemplate issuance of separate notice under Section 8 and neither joint notice can be issued under Section 8 nor joint petition can be filed under Section 9 and even if, a joint application can be filed, each Applicant has to fulfil the threshold of Rs.1 Crore. Observations: The Tribunal noted that section 7(1) of the Code permits a financial creditor to initiate CIRP individually, jointly with other financial creditors, or through a notified representative. It further added that in contrast, Section 8(1) requires an operational creditor, upon default, to issue a demand notice to the corporate debtor, and if unpaid after 10 days, file an application under Section 9. Unlike financial creditors, operational creditors must proceed individually, as the IBC does not provide for joint initiation of CIRP under Sections 8 and 9. This distinction reflects the legislature's intent to treat the two categories differently. It further observed that the Note in Part V of Form 5 states that workmen/employees, as operational creditors, may file an application either individually or jointly through one authorised person. It further added that this merely facilitates filing and does not permit multiple operational creditors to jointly file an application to meet the Rs. 1 crore threshold under Section 4 of the IBC. The Note cannot be interpreted beyond its limited procedural purpose. Based on the above, it held that the said question has to be answered by statutory scheme. Thus, the Note which has been relied by learned counsel for the Appellants does not support his submission that application can be jointly filed by the Operational Creditors and amount jointly due on the Corporate Debtor if it exceeds Rs.1 Crore, the application is maintainable. The Tribunal further opined that the purpose of keeping a threshold of default for initiating Corporate Insolvency Resolution Process against a Corporate Debtor has its own statutory object. The debts of lesser amount cannot be basis for initiating any CIRP against the Corporate Debtor. It further opined that in event there are employees who have given notice under Section 8, the Corporate Debtor is entitled to avail the provision by making...

Joint Application U/S 9 Of IBC Not Maintainable If Individual Claims Do Not Meet Threshold Limit U/S 4 Of IBC: NCLAT

Mohd Malik Chauhan

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Joint Application U/S 9 Of IBC Not Maintainable If Individual Claims Do Not Meet Threshold Limit U/S 4 Of IBC: NCLAT

Mohd Malik Chauhan

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