'Dakshinarayan' was a Surat restaurant with rented premises. It was well-known, with award-winning chefs and attractively decorated premises. Executive lunches and dinners accounted for a large portion of the company's r

Part III of the Insolvency and Bankruptcy Code, 2016 deals with Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms whereby section 78 of the IBC stipulates Application of the Part as follows: This Part shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership firms where the amount of the default is not less than one thousand rupees: Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees. Dakshinarayan is run by Kakubhai as proprietorship. So, this Part applies to him. Therefore, for applicability of this part, default of prescribed limit by the debtor is necessary. Default is defined in PART I of the Code which applies to whole of the Code. As defined in section 3(12) of the Code, "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be; Now, if go by facts of the case to check whether there has been made any default by the proprietor: Suppliers of food, beverage and utilities were owed ₹67,50,000 in outstanding supplies from the previous 45-60 days but it is not stated that the same has become due and payable and is defaulted by Kakubhai, running Dakshinarayan as proprietorship. No default has been made w.r.t. rent as landlord has three month's rent in advance and only one month rent is due. No default has been made w.r.t. Saran Bank, secured creditor. Ten person's team (employees') incomes have been cut but not defaulted. Going by the above facts, no insolvency resolution process can be initiated against Kakubhai, running Dakshinarayan as proprietorship as no default has been made yet. It may be noted that section 6 of the Insolvency and Bankruptcy Code, 2016 provides that where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner provided under Chapter II of Part II of the Code.