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2018 (3) TMI 1778 - Tri - Insolvency and BankruptcyAdmissibility of petition - Initiation of Corporate Insolvency Resolution Process - corporate debtor - default in repayment of huge outstanding amount - main contention of the respondent is that the Applicant is guilty of suppression of material facts documents and information and that there is no amount due and payable by responded company to applicant bank because a serious fraud has been committed by the applicant bank - HELD THAT - Section 7 application filed under the Code is an independent proceeding, which has nothing to do with the pendency of criminal or civil proceedings. Misappropriation of funds by CFO of the respondent company and by employees of bank, if any, has to be dealt with separately. Pendency of investigation and civil suit, in the absence of specific stay order, cannot be construed as a valid defense against triggering of Corporate Insolvency Resolution Process under the provisions of the Code. Insolvency and Bankruptcy Code, 2016 is a special law having an overriding effect on any other law as mandated under Section 238 of the Code. The statutory rights of the applicant bank satisfying the requirements of Section 7 of the Code to trigger Corporate Insolvency Resolution Process cannot be defeated on the ground of pendency of adjudication pertaining to misappropriation of funds. Once there is a debt and default, the Adjudicating Authority has no option but to admit the application filed under Section 7 of the Code, when it is complete. It is also settled law that facts which are not required to be disclosed as per the prescribed format, cannot be treated as suppression of facts. Application is admitted - moratorium in terms of Section 14 of the Code declared.
Issues Involved:
1. Authority of the Applicant's Representative 2. Allegations of Fraud and Pending Proceedings 3. Existence of Financial Debt and Default 4. Admissibility of the Application under Section 7 of the Insolvency and Bankruptcy Code Issue-wise Detailed Analysis: 1. Authority of the Applicant's Representative: The respondent challenged the authority of Mr. Gaurav Sarkar, the Vice President of the applicant bank, to file the application, arguing that no board resolution or sufficient power of attorney was provided. The applicant bank countered this by presenting a power of attorney dated 21.06.2018, authorizing Mr. Sarkar to act on behalf of the bank. The Tribunal referenced the NCLAT decision in Palogix Infrastructure (P.) Ltd. v. ICICI Bank Ltd., affirming that a senior officer authorized to grant loans also has the authority to initiate insolvency proceedings. Therefore, the Tribunal concluded that Mr. Sarkar was duly authorized and competent to file the application. 2. Allegations of Fraud and Pending Proceedings: The respondent alleged suppression of material facts and claimed that no amount was due because of fraud by the applicant bank. They cited an FIR and a pending civil suit. The applicant bank argued that these allegations were irrelevant to the insolvency proceedings, which are independent and unaffected by other pending criminal or civil cases. The Tribunal supported this view, citing the overriding effect of the Insolvency and Bankruptcy Code (IBC) under Section 238, and decisions from the NCLAT and Supreme Court, emphasizing that the pendency of other proceedings cannot bar the initiation of Corporate Insolvency Resolution Process (CIRP). 3. Existence of Financial Debt and Default: The applicant bank provided extensive documentation, including facility letters, agreements, deeds of hypothecation, promissory notes, and statements of account, to prove the existence of financial debt and default. The respondent admitted to availing the loan but contested the default due to alleged fraudulent transactions. The Tribunal noted that the applicant had provided overwhelming evidence of the financial debt and default, including a CRILIC report and certificates of charge registration. The Tribunal emphasized that its role was to ascertain the existence of a default, not to determine the exact amount due. 4. Admissibility of the Application under Section 7 of the Insolvency and Bankruptcy Code: The Tribunal examined whether the application met the criteria under Section 7 of the IBC: existence of default, completeness of the application, and no pending disciplinary proceedings against the proposed Interim Resolution Professional (IRP). The Tribunal found that the applicant met all these conditions. The applicant bank was deemed a financial creditor, the debt was established as a financial debt, and the default was proven. The application was complete, and there were no disciplinary proceedings against the proposed IRP, Mr. Ashok Kumar Dewan. Conclusion: The Tribunal admitted the application under Section 7 of the IBC, appointing Mr. Ashok Kumar Dewan as the IRP. A moratorium was declared under Section 14 of the IBC, prohibiting suits, asset transfers, and recovery actions against the corporate debtor. The IRP was directed to make a public announcement and manage the corporate debtor's affairs in accordance with the IBC provisions. The Registrar of Companies was instructed to update the status of the corporate debtor on its website.
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