CIRP Can be Initiated against Corporate Debtor even on Principal-Agent Relationship between CD and Client: NCLT
CIRP can be initiated against corporate debtor even on principal-agent relationship between CD and client, rules NCLT
NCLT- national companies – Corporate debtor – NCLT ruling on CIRP -TAXSCAN
NCLT- national companies – Corporate debtor – NCLT ruling on CIRP -TAXSCAN
The Mumbai Bench of the National Company Law Tribunal ( NCLT ) held that the Corporate Insolvency Resolution Process ( CIRP ) can be initiated against corporate debtor ( CD ) even on principal-agent relationship between the CD and the client.
The present petition has been filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC") by S.A. Consultants & Forwarders Pvt. Ltd. (Operational Creditor) praying inter-alia for initiation of Corporate Insolvency Resolution Process (CIRP) against Prime Cargo Movers & Logistics Pvt. Ltd (Corporate Debtor) by invoking the provisions of Section 9 of the Insolvency and Bankruptcy Code for resolution of an unresolved Operational Debt of Rs. 31,59,604/- (Rupees Thirty-One Lakhs Fifty Nine Thousand Six Hundred and Four only).
The Operational Creditor had raised 32 invoices for the services rendered on the Corporate Debtor amounting to Rs. 31,59,604/- (Rupees Thirty-One Lakh Fifty Nine Thousand Six Hundred Four only) and that on repeated follow up with the Corporate Debtor by the Operational Creditor, the Corporate Debtor assured payment of the invoices and explained the delay on account of uncontrollable circumstances.
It was submitted that the Operational Creditor vide demand notice dated 26.11.2019 asked the Corporate Debtor to repay the outstanding amount. It is further submitted that on 06.12.2019, the Corporate Debtor falsely denied liability allegedly on the ground that the Corporate Debtor was acting only as Commission agents and not principal i.e. Shipper and, therefore, the Petition is not maintainable against him.
The corporate debtor submitted that the Operational Creditor has rendered logistics services to the clients of the Corporate Debtor on the instructions of the Corporate Debtor and this clearly shows that the Corporate Debtor had not received any benefit and was purely acting as an agent on behalf of the principal.
A Two-Member Bench comprising Anil Raj Chellan, Technical Member and Kuldip Kumar Kareer, Judicial Member observed that “The Operational Creditor has been able to establish the existence of operational debt and its default having been committed by the Corporate Debtor and further that the Petition is filed within the period of limitation. Therefore, the Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 deserved to be admitted.”
“In this case, the agent of the principal i.e. owner of the vessel signed the contract on behalf of the principal and it was held that in the event of loss of any goods, the agent cannot be sued in view of Section 230 of the Contract Act. Besides that, in the cited case, agent was acting for his principal while providing services to other parties including the plaintiff whereas in the instant case, the Corporate Debtor is the recipient of the services provided by the Operational Creditor. Besides, the Corporate Debtor was never appointed nor acted as an agent of the Operational Creditor” the Tribunal noted.
To Read the full text of the Order CLICK HERE
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