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2019 (8) TMI 1036 - AT - Insolvency and BankruptcyApplication u/s 7 of the I B Code - Appellant submitted that the recovery proceeding is already pending before the Debt Recovery Tribunal ( DRT ) which is the subject matter of the application u/s 7 of the I B Code. - Appellant submits that the amount of debt is also in dispute and it cannot be held that there is a default as the matter is pending for consideration in the Revision Application, which is pending before the DRT - HELD THAT - Even if a claim is disputed and if the amount payable is more than ₹ 1 lakh, the application u/s 7 of the I B Code is maintainable. Mere pendency of the case before the DRT for adjudicating of such disputed amount cannot be a ground to reject the application u/s 7 of the I B Code, if the Adjudicating Authority is satisfied that there is a debt and default and the application is complete. On the other hand, in view of Section 14 all such proceedings in respect of any debt will remain stayed and cannot proceed during the period of moratorium. For the reasons aforesaid, we are not inclined to interfere with the impugned order in appeal.
Issues:
- Appeal against order dated 29th March, 2019 passed by the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code, 2016. - Dispute regarding recovery proceeding pending before the Debt Recovery Tribunal (DRT) and violation of Memorandum of Understanding (MOU). - Challenge regarding the Recovery Certificate issued by DRT and pending Revision Application. - Disputed amount of debt and the issue of default. - Interpretation of Section 7 of the Insolvency and Bankruptcy Code, 2016. Issue 1: Appeal against Adjudicating Authority's order under Section 7 of the Insolvency and Bankruptcy Code, 2016 The appeal was filed by the Director of a Corporate Debtor against the order passed by the Adjudicating Authority admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by a Financial Creditor. The Appellant argued that a recovery proceeding was already pending before the Debt Recovery Tribunal (DRT) and challenged the violation of a Memorandum of Understanding (MOU) in the application under Section 7. Issue 2: Challenge regarding Recovery Certificate and pending Revision Application The Appellant raised concerns about the Recovery Certificate issued by the DRT, which formed the basis of the Section 7 application, not attaining finality as it was pending consideration in a Revision Case filed by the Appellant. The Revision Application sought cancellation of the order due to alleged fraud committed by a consortium, adding complexity to the debt recovery process. Issue 3: Disputed amount of debt and default The Appellant contended that the debt amount was in dispute, challenging the existence of default as the matter was under consideration in the Revision Application pending before the DRT. This raised questions about the determination of default and the implications on the insolvency resolution process under the Code. Issue 4: Interpretation of Section 7 of the Insolvency and Bankruptcy Code, 2016 The Tribunal referred to the Supreme Court's interpretation of Section 7 in the case of "Innoventive Industries Ltd. v. ICICI Bank," emphasizing that a claim, even if disputed, exceeding the specified amount triggers the insolvency resolution process. The Tribunal clarified that the pendency of a case before the DRT does not automatically invalidate a Section 7 application if the Adjudicating Authority is satisfied with the existence of debt and default. The Tribunal highlighted the importance of the moratorium period under Section 14, staying proceedings related to debts during insolvency resolution. In conclusion, the Tribunal dismissed the appeal, stating that the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable despite the dispute over the debt amount, emphasizing the threshold for triggering the insolvency resolution process and the significance of the Adjudicating Authority's determination of debt and default.
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