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2017 (10) TMI 913 - AT - Insolvency and BankruptcyCorporate Insolvency Resolution Process - whether the Power of Attorney Holder given power of attorney prior to enactment of I&B Code , is entitled to file an application under Section 7 or 9 or 10 of the I&B Code ? - The Financial Creditor -Bank has pleaded that by Board s Resolutions dated 30th May, 2002 and 30th October, 2009, the Bank authorised its officers to do needful in the legal proceedings by and against the Bank? - Held that - If general authorisation is made by any Financial Creditor or Operational Creditor or Corporate Applicant in favour of its officers to do needful in legal proceedings by and against the Financial Creditor / Operational Creditor Corporate Applicant , mere use of word Power of. Attorney while delegating such power will not take away the authority of such officer and for all purposes it is to be treated as an authorization by the Financial Creditor Operational Creditor Corporate Applicant in favour of its officer, which can be delegated even by designation. In such case, officer delegated with power can claim to be the Authorized Representative for the purpose of filing any application under section 7 or Section 9 or Section 10 of I&B Code . As per Entry 5 & 6 (Part I) of Form No. 1, Authorised Representative is required to write his name and address and position in relation to the Financial Creditor /Bank. If there is any defect, in such case, an application under section 7 cannot be rejected and the applicant is to be granted seven days time to produce the Board Resolution and remove the defect. This apart, if an officer, such as senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a proceeding for Corporate Insolvency Resolution Process against the person who have taken loan, in such case the Corporate Debtor cannot plead that the officer has power to sanction loan, but such officer has no power to recover the loan amount or to initiate Corporate Insolvency Resolution Process , in spite of default of debt. If a plea is taken by the authorised officer that he was authorised to sanction loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the Financial Creditor in favour of such officer designate. In view of reasons as recorded above, while we hold that a Power of Attorney Holder is not empowered to file application under section 7 of the I&B Code , we further hold that an authorised person has power to do so.
Issues Involved:
1. Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) filed through a Power of Attorney Holder. 2. Specific authorization requirement for initiating Corporate Insolvency Resolution Process (CIRP). 3. Validity of the removal of defects within the prescribed period. Issue-wise Analysis: 1. Maintainability of the application under Section 7 of the I&B Code filed through a Power of Attorney Holder: The core issue was whether a Power of Attorney Holder, authorized before the enactment of the I&B Code, could file an application under Section 7. The Adjudicating Authority had a divided opinion, leading to a larger Bench's decision. The majority judgment held that specific authorization for initiating CIRP is necessary. The Tribunal emphasized that the I&B Code and Adjudicating Authority Rules recognize that a Financial Creditor, being a juristic person, can only act through an "Authorized Representative." The Tribunal concluded that a Power of Attorney Holder is not competent to file such an application, as the Code mandates specific authorization. 2. Specific authorization requirement for initiating CIRP: The Tribunal explored the necessity of specific authorization for initiating CIRP. It referred to various rules and provisions, including Section 7 of the I&B Code, Adjudicating Authority Rules, and NCLT Rules, 2016. The Tribunal noted that the I&B Code is a complete code in itself, and the provisions of the Power of Attorney Act, 1882, cannot override the specific requirements of the I&B Code. The Tribunal held that only an "authorized person," distinct from a "Power of Attorney Holder," could make an application under Section 7, and such authorization must be explicitly stated by the Board of Directors. 3. Validity of the removal of defects within the prescribed period: The Tribunal addressed the objection regarding the removal of defects within the seven-day period. The Corporate Debtor argued that the defects were not removed within the stipulated time. However, the Tribunal clarified that the seven days should be counted from the date of receipt of the notice from the Adjudicating Authority, excluding holidays. The Tribunal found no specific pleadings from the Corporate Debtor regarding the date of receipt of the notice and accepted the Financial Creditor's stand that the defects were removed within the permissible period, considering the holidays. Conclusion: The Tribunal dismissed all appeals and affirmed the order of admission of the application under Section 7. It held that while a Power of Attorney Holder is not empowered to file an application under the I&B Code, an authorized person with specific authorization from the Board of Directors can do so. The Tribunal emphasized the importance of adhering to the specific provisions of the I&B Code and the necessity of proper authorization for initiating CIRP.
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