INSOLVENCY AND BANKRUPTCY NEWS
Section 9(3)(c) of the Code provides that an operational creditor shall, along with the application, provide a certificate from a financial institution maintaining the accounts of the operational creditor, confirming that no payment of an operational debt has been received from the corporate debtor.
This is article of the series of editorials written by the Adv ACS Jeetam Kumar Saini on Corporate Laws(He also Written many articles Including Companies Act, 2013, SEBI, RBI Regulations, IBC) advocatejeetamsaini@gmail.com - 9785949998
"But there are Several Problems which hinder filing of applications by operational creditors"
First, the definition of ‘financial institution’ under section 3(14) does not include foreign banks and non-scheduled banks, thus creating a void for filing of applications by creditors with bank accounts in foreign or non-scheduled banks
Second, the process of availing such certification may be cumbersome if the creditor has multiple bank accounts, and a certificate from only a few of her bank accounts may not sufficiently prove non-payment of the debt.
Third, banks presently do not have a format for providing such certification which may lead to denial of such certification by banks.
The Hon’ble Supreme Court in Macquarie Bank Limited v. Shilpi Cable Technologies Ltd.30 held that section 9(3)(c) of the Code is an optional requirement and an alternate understanding would make it discriminatory. It was further noted that if it were to be a mandatory requirement, many classes of operational creditors would be barred from being able to apply under the Code which may be violative of Article 14 of the Constitution of India. Through this, the Hon’ble Supreme Court has overruled various other decisions by National Company Law Appellate Tribunal (“NCLAT”) such as Smart Timing Steel Ltd. v. National Steel and Agro Industries Ltd. and DF Deutsche Forfait AG v. Uttam Galva Metallics Limited.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
