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IBC Versus Rights Of Unregistered Partnerships

The Insolvency and Bankruptcy Code of 2016 (subsequently alluded to as IBC or Code) was adopted to bring together India's bankruptcy and restructuring rules. Its goal is to optimize the valuation of the commercial borrower's capital in a time-bound method, which may be a corporation, a collaboration company, or an entity. In addition, Section 6 of the Code specifies who can activate the IBC's CIRP that is, Corporate Insolvency Resolution Process. It specifies that when a situation arises, the accounting creditors functional lender or commercial lender themselves will submit an appeal with the National Company Law Tribunal (NCLT) within Section 7, 9, and 10. However, there seems to be a crucial issue: Can an unregistered firm file an application under Section 9?
It is necessary to address a particular section that is present within the Indian Partnership Act of 1932, that is, section 69(2), prior to digging deeper into the aforementioned issue. The segment is structured as follows:
No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
The provision prevents the relationship company and its members from exercising their contractual privileges via a lawsuit. This ensures that if a lawsuit emerges out of the corporate dealings of an unauthorized joint venture, it would be dismissed. Coming over to the analytical issue could it be said that an unauthorized collaboration company (Functional Issuer) can submit an appeal for privileges emerging out of agreements within Section 9 of the IBC?

Like in context of M/s Shree Dev Chemicals Corporation v. Gammon India Limited, [CP (IB) No. 3637/MB.IV/2018], the NCLT replied substantively to the aforementioned issue, stating that an unauthorized collaboration business would be eligible to process a provision of Section 9 of the Code. It responded by saying that Section 69(2) of the Act of Indian Partnership (1932), merely refers to lawsuits, not trials.

As a result, the law would not extend to proceedings submitted underneath the IBC because they are cases rather than lawsuits.
With this said, the NCLT tribunal in Mumbai even found such a problem in the context of M/s NN Enterprise v. Relcon Infra Projects Limited. The Commercial Lender objected on various bases: one, that because the phrase partnership firm within Section 3(23) of the Code, that specifies person, basically involves licensed collaboration firms, the Functional Issuer�s request within Section 9 cannot be approved, and two, that perhaps the request by the unauthorized collaboration company would�ve been prohibited under Section 69(2) within the Act of Indian Partnership of 1932.

The Functional Lender, on the other side argued that a request within Section 9 would not be considered a lawsuit because of the jury�s verdict in Shree Balaji Steels v. Gonterman-Peipers (India) Limited, [(2002) SCC OnLine Cal 821], referring to the judgment and verdicts of the Honourable Kolkata state high judiciary the court in the aforementioned case context, including that a request within Section 9 would not be considered a suit because of the jury�s ruling in the above-mentioned event.

The NCLT also cited the Honourable Judicial Branch of India's verdict in the dispute Gaurav Hargovindbhai Dave v. Asset Reconstruction Company, wherein the tribunal basically ruled that a request within Section 7 of the Code must come within the Limitation Act of 1963, particularly within the article 137, instead of Article 62, since it was clear by the fact that it was an application and not a lawsuit.

Throughout this situation, the Judicial Branch addressed the same evidence and ruled that an attempt to meet the criteria as a Section 7 or Section 9 request underneath the IBC would cause a three-year statute of limitations from the day of the appeal, and that just an application, not lawsuits can be lodged underneath the IBC. It moreover cited the Supreme court ruling in Sagar Sharma v. Phoenix ARC Private Limited, of the the year 2019, in which the Honourable Supreme Court ruled that requests filed underneath the IBC are grievances, not lawsuits.
Therefore, having taken the preceding instances into consideration, the NCLT determined that unauthorized collaboration companies can submit an appeal within Section 9 of the IBC, and therefore are not prohibited by the restriction set forth in the Indian Partnership Act of 1932, particularly in section 69(2).

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