Whether a Petition filed under Section 7of the IBC against a “Co-Operative Society” maintainable?

 

Whether a Petition filed under Section 7of the IBC against a “Co-Operative Society” maintainable?

 

Answer- No. Section7(1) of the IBC states as follows:-

 

“A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as maybe notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.”

 

Section 3(8) of the IBC states as follows:-

 

“corporate debtor” means a corporate person who owes a debt to any person;”

 

Section 3(7) of the IBC states as follows:-

 

“Corporate person” means a company as defined in clause(20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause(n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider;”

 

Upon perusal of Sections 3(7) and 3(8) of the IBC it can be said that “Co-operative Society” is not specifically included within the definition of “corporate person” or “corporate debtor”. Further, reliance may be placed on the judgment of Hon’ble NCLAT in the matter of Asset Reconstruction Company (India Ltd) vs. Mohammadya Educational Society (Company Appeal No. 495 of 2019) wherein it was held that a Co-operative Society may have all the trappings of a body corporate but only to the extent for purposes for which it has been incorporated under the particular Co-operative Society Act and to fulfil the objectives of the Act.  That would not imply a Co-operative society to fall within the ambit of definition of “Corporate Person” under IBC.

 

So was the aforesaid reasoning given by the Mumbai bench of Hon’ble NCLT in the matter of The Solapur Dist. Central Co – Operative Bank Limited v. Sangola Taluka Sahakari Sakhar Karkhana Limited in CP(IB) No. 263/MB/2019 in refusing to admit Section 7 application against the Corporate Debtor being a registered Co-operative society under the Maharashtra State Cooperative Societies Act, 1960.

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