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2017 (12) TMI 1544 - Tri - Insolvency and BankruptcyRelevancy of Initiation of proceedings under the SARFAESI Act to reject an application under Section 10 of the Insolvency and Bankruptcy Code - Held that - In the present case, it has not been pleaded that the appellant-Corporate Debtor is ineligible in terms of Section 11 of the I & B Code. The Adjudicating Authority has noticed unrelated facts which are not required to be disclosed in terms of Section 10 or Form 6 and as the case also relates to third party suit or proceeding, and not the Corporate Debtor. In the circumstances, the Adjudicating Authority was not correct in rejecting the application on the ground of suppression of relevant facts. The Adjudicating Authority, having held that otherwise the application under Section 10 is complete and in absence of any ineligibility of appellant, it was incumbent on the part of the Adjudicating Authority to admit the appeal, having no jurisdiction to notice unrelated facts beyond the requirement under the I & B Code and the Forms prescribed under the Adjudicating Authority Rules. Case is remitted back to the Adjudicating Authority, Mumbai Bench to admit the application under Section 10 after notice to the parties if there is no defect.
Issues:
- Rejection of application under Section 10 of the Insolvency and Bankruptcy Code - Impact of SARFAESI Act proceedings on the admission of the application - Plea regarding initiation of proceedings under the SARFAESI Act - Applicability of the decision in "M/s. Unigreen Global Private Limited vs. Punjab National Bank and others" - Relevance of disclosing unrelated facts in the application under Section 10 - Jurisdiction of the Adjudicating Authority in admitting the application Rejection of Application under Section 10: The appellant, a Corporate Applicant, filed an application under Section 10 of the Insolvency and Bankruptcy Code. The Adjudicating Authority dismissed the application, citing potential serious impact on financial creditors who had initiated proceedings under the SARFAESI Act. The Authority expressed concerns that admitting the petition would hinder the rights of financial creditors and guarantors, leading to an abuse of the legal process. Impact of SARFAESI Act on Application Admission: The main contention by the Corporate Applicant was that SARFAESI Act proceedings should not be a ground for rejecting an application under Section 10 if it complies with the I & B Code and relevant rules. The respondents, including financial creditors, supported the Authority's decision based on similar grounds as mentioned by the Adjudicating Authority. Applicability of Precedent Decision: Referring to a previous case, the Appellate Tribunal emphasized that if an application under Section 10 meets the necessary requirements and the Corporate Applicant is not ineligible under Section 11, the Adjudicating Authority must admit the application. The Tribunal clarified that the Authority cannot reject the application on grounds unrelated to the I & B Code or prescribed forms. Disclosure of Unrelated Facts: The Adjudicating Authority's rejection of the application based on unrelated facts not required to be disclosed under Section 10 or Form 6 was deemed incorrect. It was highlighted that the case involved third-party suits or proceedings, not directly related to the Corporate Debtor, and should not have led to the rejection of the application. Jurisdiction of the Adjudicating Authority: Given that the application was complete and there was no ineligibility on the part of the Corporate Debtor, the Adjudicating Authority was obligated to admit the application. The Tribunal set aside the Authority's order and remitted the case back for proper consideration and potential admission under Section 10. In conclusion, the judgment highlighted the importance of adhering to the statutory requirements and not rejecting applications based on unrelated grounds. It underscored the need for the Adjudicating Authority to focus on the merits of each case within the scope of the I & B Code and relevant rules, ensuring fair treatment of Corporate Applicants seeking insolvency resolution.
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