Retired Partner can’t Initiate Proceedings against Other Partners under IBC for Retirement Dues: NCLT [Read Order]

Retired Partner - IBC - Retirement Dues - NCLT - Taxscan

The National Company Law Tribunal (NCLT), Mumbai Bench has held that the retired partner has no right under IBC to file a claim against the partner or the firm for the retirement dues.

The Operational Creditor was a Partner in a Partnership Firm M/s Kavya KCD Developers (Firm) upon the terms and conditions contained in the Deed of Partnership and also Deed of Partnership for admitting new partner. The Firm approached the Operational Creditor with a proposal whereby the Operational Creditor retire from the Firm and for this purpose it was agreed to execute a Retirement Deed, which was executed on 31.12.2015. As per the said Retirement Deed, the Firm agreed to jointly and severally pay a lump sum consideration of 75 lakh rupees including the amount standing towards the Operational Creditor’s credit in the Books of Accounts in full and final settlement of all the Operational Creditor’s claims in Capital, Goodwill Profits and Assets (including movable/immovable properties) and interest in the capital of the Firm as also the benefit directly or indirectly attached to the firm and its business or rights or properties as also its share in net assets of the Firm.

The Firm issued a cheque and was dishonored by a return memo by the Operational Creditor’s Bank with the remark ‘Fund Insufficient’. Pursuant to the above default, the Operational Creditor filed Insolvency Petition before NCLT which was dismissed as Infructuous by this tribunal as the CIRP was admitted against Corporate Debtor in another Company Petition. However, the Operational Creditor filed its claim before IRP. The Corporate Debtor challenged the admission order before the NCLAT wherein the Operational Creditor filed an Intervention Application. As the matter got settled between the parties, the Petition was set aside by the NCLAT and the Intervening Application was not taken into consideration.

Aggrieved by the order, the Operational Creditor herein filed a CivilAppeal before the Hon’ble Supreme Court of India wherein the Hon’ble Supreme Court granted liberty to the Operational Creditor to file the Petition afresh. Thus the Operational Creditor filed the petition before NCLT afresh.

The Bench consisting of Technical Member Rajesh Sharma and Judicial Member Kishore Vemulapalli held that,“the Operational Creditor and the Corporate Debtor were the Partners and also accepts the contentions of the Operational Creditor with respect to the joint and several liability with the other partners or with the Firm. However, the Bench considered that, even the liability of the Corporate Debtor is proved in all aspects, the IBC does not protect the interest or claim of the Partner against another Partner or the Firm. The claim and the cause of action arose on the transaction between the Partners. Therefore, the Petition itself is not maintainable in the eye of the law”.

While rejecting the application of Operational Creditor the bench also said that, “the Operational Creditor may be liable to the claims against the Corporate Debtor not under the IBC but under any other law which provides the remedy to the Operational Creditor. The Retired Partner has no right under the IBC to file a claim against the Partner or the Firm”.

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