2018 (10) TMI 1665 - AT - Insolvency and Bankruptcy

Maintainability of the application - Initiation of Corporate Insolvency Resolution Process - Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that - The question whether the Assignment Agreement dated 17th April, 2015 is genuine or not cannot be looked into by the Adjudicating Authority while deciding the application under Section 7 or by this Appellate Tribunal, till the Corporate Debtor alleges the same and raise the objection under Section 65 of the Code. No such plea has been taken by the Corporate Debtor before the Adjudicating Authority alleging fraud on the part of the Financial Creditor for initiation of proceedings under Section 65 of the Code. Therefore, this Appellate Tribunal cannot look into such question of fraud. Further, the provision of NPA relates to SARFAESI Act, 2002 and has nothing to do with Code. Appeal dismissed.

Summary

Issues:
1. Challenge to the admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Validity of Assignment Agreements made in favor of the Respondent.
3. Dispute regarding the Corporate Debtor's account status as a Non-Performing Asset (NPA).

Analysis:
1. The Appellant contested the admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The challenge was based on the argument that two Assignment Agreements made in favor of the Respondent, an Asset Reconstruction Company, were not in accordance with the law. The Appellant claimed that discrepancies in the dates of the Assignment Agreements raised doubts about the validity of the assignments.

2. The Appellant's counsel highlighted that the Corporate Debtor's account had not become a Non-Performing Asset (NPA), questioning the maintainability of the application under Section 7 of the Code. However, the Respondent relied on the Assignment Agreement dated 17th April, 2015 for initiating the Corporate Insolvency Resolution Process, which the Corporate Debtor did not dispute. The Corporate Debtor acknowledged the debt and default in payment, indicating the existence of a valid debt.

3. The Tribunal noted the presence of two Assignment Agreements, one dated 21st July, 2014, and the other dated 17th April, 2015, executed in favor of the Respondent. It emphasized that the authenticity of the Assignment Agreement dated 17th April, 2015 could not be questioned unless the Corporate Debtor raised specific objections under Section 65 of the Code regarding fraud. Since the Corporate Debtor did not raise such objections, the Tribunal deemed it inappropriate to delve into the validity of the Assignment Agreement at that stage.

4. Regarding the argument related to the Non-Performing Asset (NPA) status, the Tribunal clarified that the provisions of the SARFAESI Act, 2002, concerning NPAs were not applicable to the Insolvency and Bankruptcy Code. Consequently, the Tribunal found no merit in the appeal and dismissed it without costs, upholding the decision to admit the application under Section 7 of the Code for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor.