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CS Professional · Insolvency and Bankruptcy - Law and Practice · Insolvency Resolution of Individuals and Partnership Firms

M/s Kapoor Traders, a partnership firm, is a defendant in a suit filed by a supplier, and its insolvency proceedings are pending before the Debt Recovery Tribunal. A dispute arises on whether another creditor's claim has priority over the supplier's claim. Which statement is correct about the Tribunal's jurisdiction?

The Debt Recovery Tribunal has jurisdiction notwithstanding any other law to decide any question of priorities or any other question of law or fact arising out of or in relation to the insolvency and bankruptcy of the debtor or firm, so the dispute goes to the DRT, not a civil court.

  1. AThe Tribunal can decide only the insolvency application, and priority questions must go to the civil court
  2. BThe Tribunal has jurisdiction, despite any other law, over any question of priorities or other question of law or fact arising out of or in relation to the insolvencyCorrect
  3. CThe Tribunal can decide priorities only if the Debt Recovery Appellate Tribunal refers the matter
  4. DThe Tribunal can decide priorities only for individuals, not for firms

Explanation

Section 179(2) gives the DRT jurisdiction, notwithstanding any other law, over suits or proceedings by or against the individual debtor, claims by or against him, and any question of priorities or other question of law or fact arising out of or in relation to insolvency and bankruptcy of the individual debtor or firm. Hence the civil court route is wrong.

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