The NCLAT, Principal Bench, New Delhi in Prafulla Purushottamrao Gadge v. Narayan Mangal observed that an application filed after 24.03.2020 under Section 7 of the Insolvency and Bankruptcy Code, 2016 below the threshold of Rs. One Crore is not maintainable.
The Financial Creditor filed an application under Section 7 of IBC for an amount of INR 63,20,388/- against the Corporate Debtor but the same was withdrawn on 13.12.2019 as the parties had claimed to have amicably settled the matter and filed the consent terms before the NCLT.
Subsequently, another application under Section 7 of IBC was filed on 25.06.2021 for an amount of INR 78,65,000/- which was admitted by NCLT and the CIRP was initiated against the Corporate Debtor. Therefore, the Suspended Director of the Corporate Debtor decided to come in appeal against the same.
The primary submission that had been raised by the Appellant was that in view of the Notification dated 24.03.2020 by which a threshold of Rupees One Crore has been provided and a minimum amount of default for the purpose of filing an Application under Part-II of the IBC, the Application filed on 25.06.2021 having not fulfilling the threshold ought to have been rejected. It is submitted that the Adjudicating Authority without considering the said threshold has admitted the Application.
The relevant portion of the notification is reproduced below for the convenience of the readers, read as:-
"In exercise of the powers conferred by the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby specifies one crore rupees as the minimum amount of default for the purposes of the said section."
The Court, in light of the submissions made by the Appellant, observed that “We, thus, are of the view that the Application filed under Section 7 by the Respondent No.1 not having fulfilled the threshold of Rupees One Crore ought not to have been entertained and the Adjudicating Authority committed error in admitting the Application. We, thus, allow the Appeal, set aside the order dated 04.04.2022 impugning this Appeal.”
It was also mentioned that the dismissal of the Application filed on 25.06.2021 filed by Respondent No.1 shall not preclude Respondent No.1 to take fresh proceedings under Section 7 in the event all conditions under Section 7 are fulfilled in accordance with the law.