Sole Proprietorship Business not entitled to institute Insolvency Proceedings under IBC: NCLT

Team SoOLEGAL 4 Oct 2019 5:00pm

Sole Proprietorship Business not entitled to institute Insolvency Proceedings under IBC: NCLT

Sole Proprietorship business is not entitled to initiate insolvency proceedings under the Insolvency and Bankruptcy Code of 2016, the National Company Law Tribunal, New Delhi (NCLT) has held in a case concerning an application under section 9 of the IB Code for instituting corporate insolvency resolution process against a Corporate Debtor.

A division-bench comprising of Member (Judicial) Mr. R. Vardharajan and Member (Technical) Mr. K.K. Vohra had dismissed the instant petition with a detailed order on September 23 wherein one Operational Creditor M/S RG Steels had submitted an application against the Corporate Debtor M/S Berrys Auto Ancillaries Pvt. Ltd for instituting corporate insolvency resolution process (CIRP) under section 9 of the Insolvency & Bankruptcy Code, 2016.

The application was moved by the Operational Creditor for the amounts allegedly unpaid and in default. The amount claimed by O.C. was under two invoices of approx. Rs. 5 Lakhs and Rs. 10 lakhs respectively thereby aggregating to Rs. 15 Lakhs which was stated to be the total amount of debt due.

The bench observed that “Notice was issued in the instant application and the C.D had entered appearance through its counsel and reply to the application was also filed on their behalf. The final completion of pleading was heard on September 6, 2019. Also, it was evident from the record that the O.C. was stated to be a Sole Proprietory Concern. However, by virtue of definition as contained in Section 3(23) of IBC, 2016, a person even though includes an individual it does not include within its ambit a Sole Proprietary Concern.”

The Tribunal further went to note that there seemed a pre-existence of dispute as between the OC and CD in relation to rates charged (and total debt) by the OC to CD and the same being evident from the documents filed by the petitioner itself before the tribunal.

Therefore, the bench resolved that “based on the above namely a Sole proprietory concern taking into consideration the definition of a “person” is not entitled to approach this Tribunal on its own and also in view of the claim made by the OC against CD, this petition dismissed, however, without costs.”

Tagged: NCLT   IBC   CIRP   Sole Proprietorship   Operational Creditor   Corporate Debtor   Section 9  
Did you find this write up useful? YES 5 NO 0
Ramesh Srivastava   8 Oct 2019 3:55pm
Very good reporting
  10 Oct 2019 11:25am
Thank you Sir. We are continuously engaged in providing you with efficient and relevant services.
New Members view all


C2RMTo Know More

Something Awesome Is In The Work









Sign-up and we will notify you of our launch.
We’ll also give some discount for your effort :)

* We won’t use your email for spam, just to notify you of our launch.

SAARTHTo Know More

Launching Soon : SAARTH, your complete client, case, practise & document management SAAS application with direct client chat feature.

If you want to know more give us a Call at :+91 98109 29455 or Mail