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Unregistered Partnership Firm Can File Application Under Insolvency Code

Cause Title : Rourkela Steel Syndicate vs Metistech Fabricators Pvt. Ltd., Company Appeal (AT)(Insolvency) No. 924 of 2022, National Company Law Appellate Tribunal Principal Bench, New Delhi

Date of Judgment/Order : 06.02.2023

Corum : [Justice Ashok Bhushan] Chairperson, [Mr. Barun Mitra] Member (Technical)

Citied: 

  1. Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Limited and Anr.
  2. B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633

Background

Section 69(2) in The Indian Partnership Act, 1932 states that only a registered firm can file a suit against any third person to enforce a right. 

The appeal was filed against the order passed by the Adjudicating Authority (NCLT, Cuttack) rejecting the application filed under Section 9 of IBC on the ground that the application is barred by Section 69(2) of the Partnership Act. The Adjudicating Authority took the view that Section 69(2) of the Partnership Act bars a suit by an unregistered partnership, hence the above Application which was filed by the Appellant against the third party for enforcing a right arising out of contract is barred.

Judgment

The NCLAT observed that it has been decided by the Hon’ble Supreme Court judgment in Hargovindbhai Dave’s case that an application under Section 9 of IBC cannot be said to be a suit. Further, also it is well settled by the judgment of the Hon’ble Supreme Court in B.K. Educational (supra) that provision of Section 5 Limitation Act are also fully applicable in Section 7 & 9 IBC applications. Section 5 Limitation Act is not applicable in a suit which is also a clear indication that Application under Section 7 & 9 are not a suit.

Holding that the Adjudicating Authority had erred in rejecting the application held that in view of the above, the bar of Section 69(2) is not attracted in the present case since the application under Section 9 cannot be treated as suit.

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