# In the matter of Instyle Exports Private Limited CP No. (IB)-301-(ND)-2018

> NCLT judgment dated 2018-08-30. Citation: TCN-2018-NCLT-00859. M/s Mandhana Industries Limited, undergoing Corporate Insolvency Resolution Process (CIRP),…

- **Court:** NCLT
- **Order date:** 30 Aug 2018
- **Citation:** TCN-2018-NCLT-00859
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/instyle-exports-private-limited-cp-no-ib-301-nd-2018-acc7c2ef

## Summary

### Background

M/s Mandhana Industries Limited, undergoing Corporate Insolvency Resolution Process (CIRP), filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, against M/s Instyle Exports Private Limited, an operational debtor, for initiation of CIRP due to unpaid operational debt. The application was filed by the Resolution Professional of Mandhana Industries. The corporate debtor, Instyle Exports, contested the application, arguing that the debt was disputed and that Mandhana Industries, being under CIRP itself, was ineligible to file the application under Section 11 of the IBC. The applicant argued that as an operational creditor, it is entitled to recover legal debt which is indispensable for the survival and revival of the company.

## Facts

M/s Mandhana Industries Limited, an operational creditor, supplied fabric to M/s Instyle Exports Private Limited, the corporate debtor. An agreement existed between the parties for the supply of fabric. Instyle Exports failed to pay outstanding amounts for the supplies, leading to an operational debt. The total debt due was Rs. 24,34,054/-, including principal and interest at 18% per annum. Instyle Exports issued four cheques totaling Rs. 24,34,054/- which were returned unpaid. Mandhana Industries is itself undergoing CIRP, initiated on 29.09.2017. Mandhana Industries, through its Resolution Professional, filed an application under Section 9 of the IBC to initiate CIRP against Instyle Exports. Instyle Exports claimed the goods supplied were defective and the debt was

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## Issues and analysis

### Issue 1: Whether the application under Section 9 of the IBC, 2016 is maintainable when filed by a corporate …

**Ratio:** Section 11 of the IBC, 2016, read with its explanation, creates a bar on a corporate

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**Reasoning:** The court reasoned that the legislative intent behind Section 11 is to prevent corporate

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**Interpretation:** Section 11 of the IBC is interpreted literally to mean that a corporate debtor

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**Application:** In this case, Mandhana Industries, being under CIRP, is considered a corporate

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## Parties

- **Judges:** DEEPTI M…
- **Appellants:** M/S MANDHANA…
- **Respondents:** M/S INSTYLE…

## Timeline

- **2015-12-05 — First Defau…**: The default in payment of operational debt first became due and payable from the date of…
- **2016-01-19 — Default Per…**: The period of default was…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 11 — Persons not entitled to make application](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-11)

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