My creditor has initiated IBC insolvency proceedings against my company in Bikaner; what defences can I raise and what is the corporate debtor's position?

Detailed Legal Analysis

If your creditor has initiated insolvency proceedings against your company under the Insolvency and Bankruptcy Code, 2016 (IBC), there are several defenses you may raise to contest the proceedings.

As a corporate debtor, your position allows you to challenge the application on various grounds outlined in the IBC and other applicable laws. Here are some defenses you might consider:

• Existence of Dispute: Under Section 8 of the IBC, you can contend that there is an existing dispute regarding the unpaid debt. If you have raised any operational or legal disputes before the demand notice was issued, this can be a strong defense.
• Time-barred Debt: If the debt is time-barred under the Limitation Act, 1963, you can argue that the creditor cannot initiate insolvency proceedings as the claim is not legally enforceable.
• Not an Operational Debt: If the claim is not categorized as operational debt, you can argue against the jurisdiction of the Adjudicating Authority (NCLT). Operational debts are defined under Section 5(21) of the IBC.
• Non-compliance with Section 9(3): You can challenge the application on the grounds that the creditor did not comply with the procedural requirements under Section 9(3), which includes the need for the creditor to submit proof of the default and, if applicable, a copy of the operational debt.
• Lack of Financial Creditor Status: If the creditor is not classified as a financial creditor, their application for insolvency can be contested. Financial creditors are defined in Section 5(7) of the IBC.
• Set-Off Claims: If your company has any counterclaims against the creditor, you can argue that these should be set off against the claimed debt, potentially nullifying the claim.

It is crucial to respond to the insolvency application within the stipulated time frame set by the NCLT, typically within 14 days of receiving the notice. If you successfully establish a defense, the NCLT may dismiss the application. However, if the NCLT admits the application, the insolvency proceedings will commence, and a resolution professional will be appointed to manage the corporate debtor's affairs.

In conclusion, understanding your rights and potential defenses under the IBC is essential. Engaging legal counsel experienced in corporate insolvency can significantly enhance your defense strategy.