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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2021 (2) TMI AT This

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2021 (2) TMI 451 - AT - Insolvency and Bankruptcy


Issues:
1. Rejection of application under Section 10 of the Insolvency & Bankruptcy Code, 2016 by the Adjudicating Authority.
2. Interpretation of Rule 7 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules 2016.
3. Examination of financial statements by the Adjudicating Authority.
4. Allegation of ulterior motive in filing the application under Section 10.

Analysis:

Issue 1: Rejection of application under Section 10:
The appeal was filed against the rejection of the application under Section 10 of the Insolvency & Bankruptcy Code, 2016 by the Adjudicating Authority. The Corporate Applicant had filed the application to initiate the corporate insolvency resolution process due to default by the borrower. The Adjudicating Authority rejected the application citing discrepancies in audited balance sheets and lack of information in the application.

Issue 2: Interpretation of Rule 7:
The Appellate Tribunal analyzed Rule 7 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules 2016. It was clarified that Rule 7 pertains to the procedure for filing the application under Section 10 and does not empower the Adjudicating Authority to examine the financial statements annexed with the application. The Tribunal emphasized that the Adjudicating Authority exceeded its jurisdiction in analyzing the financial statements of the Corporate Applicant.

Issue 3: Examination of financial statements:
The Tribunal highlighted that the Adjudicating Authority's scrutiny of the financial statements and subsequent rejection of the application based on discrepancies in the statements was beyond its purview. The Tribunal held that as long as the application contains the necessary information as required under Section 10 and Form 6 of the Adjudicating Authority Rules, it should be admitted unless incomplete.

Issue 4: Allegation of ulterior motive:
The Respondent alleged that the application was filed with an ulterior motive to defeat the SARFAESI measures initiated by the financial creditor. However, the Tribunal disagreed with this finding, stating that such a fact is unrelated to the requirements under the Insolvency & Bankruptcy Code or the prescribed forms. The Tribunal concluded that the rejection of the application on extraneous grounds was unwarranted.

In conclusion, the Appellate Tribunal set aside the impugned order and remitted the case back to the Adjudicating Authority to admit the application under Section 10 after ensuring there are no defects. The Tribunal emphasized that the Adjudicating Authority should not reject applications based on extraneous grounds and must adhere to the requirements specified under the law.

 

 

 

 

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