9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 1925 - HC - Insolvency and BankruptcyInitiation of CIRP - whether petitioner is defaulter or not - section 7 of IBC - HELD THAT - The Adjudicating Authority/NCLT is obliged to determine the factum of occurrence of the 'default' on part of the alleged corporate debtor before admitting a petition under Section 7 of the IBC - In other words, determination of commission of 'default' by the corporate debtor by the Adjudicating Authority/NCLT is a per-condition for admitting the petition under Section 7 of the IBC - The said stage in the matter has not yet arrived. It is therefore, open for the petitioner to establish no default on its part before the Adjudicating Authority/NCLT. The issue of default, if any, is an issue of fact depending upon the evidence and this Court finds itself unequipped for deciding such factual issue more particularly when they can be dealt with and decided by the other statutory authority before whom the proceedings are pending. Section (7) of the IBC permits a financial creditor to file application for initiating Corporate Insolvency Resolution Process against the corporate debtor when a 'default' has occurred. Therefore, the filing of application for initiating Corporate Insolvency Resolution Process by the petitioner who is a financial creditor is not prohibited under law even if there is no direction to the said effect by the RBI - Therefore, the direction of the RBI dated 14.8.2018 has no material bearing upon the proceedings initiated by ICICI Bank under Section 7 of the IBC. The writ petition is dismissed with liberty to the petitioner to participate in the proceedings under the IBC before the NCLT and may raise all possible objections as are permissible in law.
Issues Involved:
1. Quashing of RBI's direction to ICICI Bank to initiate insolvency proceedings. 2. Quashing of the NCLT order initiating insolvency proceedings. 3. Direction to NCLT to sanction the Scheme of Arrangement filed by the petitioner. Issue-Wise Detailed Analysis: 1. Quashing of RBI's direction to ICICI Bank to initiate insolvency proceedings: The petitioner challenged the RBI's direction dated 14.8.2018 to ICICI Bank to initiate insolvency proceedings, arguing it was illegal as insolvency can only be initiated against a 'defaulter'. The petitioner contended that they were not a 'defaulter' as per Section 35 AA of the Banking Regulation Act, 1949 and the definition of 'default' in Section 3(12) of the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner also argued that the Supreme Court's decision in Chitra Sharma did not specifically direct RBI to issue such instructions. The court found that the RBI's direction was based on the Supreme Court's decision, which allowed RBI to initiate insolvency proceedings against the petitioner to protect the interests of home buyers. The court noted that the Supreme Court had recognized the financial distress of the petitioner and allowed RBI to direct banks to initiate the Corporate Insolvency Resolution Process (CIRP). Therefore, the RBI's direction was neither without jurisdiction nor illegal. 2. Quashing of the NCLT order initiating insolvency proceedings: The petitioner sought to quash the NCLT order dated 10.9.2018, which initiated insolvency proceedings based on ICICI Bank's application. The court highlighted that under Section 7 of the IBC, the NCLT is required to ascertain the existence of 'default' before admitting an insolvency petition. The court emphasized that the determination of 'default' is a factual issue that the NCLT is equipped to handle, and the petitioner could present their case before the NCLT. The court also noted that even without RBI's direction, ICICI Bank, as a financial creditor, was entitled to initiate insolvency proceedings under Section 7 of the IBC. Therefore, the RBI's direction did not materially affect the proceedings initiated by ICICI Bank. 3. Direction to NCLT to sanction the Scheme of Arrangement filed by the petitioner: The petitioner requested the court to direct the NCLT to sanction their Scheme of Arrangement. The court observed that the NCLT is the appropriate forum to consider and decide on such schemes. The court emphasized minimal judicial interference in financial matters, which should be left to expert forums like the NCLT. Conclusion: The court dismissed the writ petition, allowing the petitioner to participate in the NCLT proceedings and raise all permissible objections. The court declined the petitioner's request to keep the NCLT proceedings in abeyance, suggesting that the petitioner could make such a request directly to the NCLT. The judgment underscores the importance of allowing specialized statutory bodies to handle financial disputes and insolvency matters.
|
