2019 (1) TMI 1718 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - existence of debt and dispute or not - HELD THAT - It has come to our notice that the corporate debtor is from the state of Odisha and the matter may be transferred to National Company Law Tribunal , Cuttack Bench which is likely to be opened on 22nd January, 2019. Therefore, the order under Section 7 required to be passed before the case is transferred and thereby prolongs. It is needless to say that if there is a debt and default and the record is otherwise complete, the application is to be admitted. On the other hand, if there is no debt payable in law or in fact then it is to be rejected. In that view of the matter we are not passing any specific directions, as the matter will be taken up on 16th January, 2019 we expect that the Adjudicating Authority (National Company Law Tribunal), Kolkata will pass appropriate order either admitting or rejecting the application under Section 7 of the I B Code taking into the consideration. Except the applicant (financial creditor) and the corporate debtor , there is no requirement of hearing a third party including Intervenor at the stage of admission - Appeal disposed off.

Summary

Issues:
1. Delay in passing orders by the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code.
2. Transfer of the case to National Company Law Tribunal, Cuttack Bench.
3. Criteria for admitting or rejecting an application under Section 7 of the I&B Code.
4. Procedural requirements for filing an application under Section 7 by a financial creditor.
5. Contrasting procedures for financial creditors under Section 7 and operational creditors under Section 8.
6. No requirement of hearing third parties at the admission stage.

Analysis:

1. The judgment addresses the issue of delay in passing orders by the Adjudicating Authority under Section 7 of the Insolvency and Bankruptcy Code. The Appellate Tribunal notes that the appellant, a financial creditor, filed an application which was adjourned multiple times without a final order being passed, leading to an appeal against the adjournment order. The Tribunal emphasizes the need for timely disposal of such applications to prevent unnecessary prolongation.

2. Another issue discussed is the potential transfer of the case to the National Company Law Tribunal, Cuttack Bench. The Tribunal acknowledges the impending opening of the Cuttack Bench and highlights the importance of passing the order under Section 7 before the transfer to avoid further delays.

3. The judgment delves into the criteria for admitting or rejecting an application under Section 7 of the I&B Code. It emphasizes that if there is a debt and default, and the record is complete, the application should be admitted. Conversely, if there is no debt payable in law or fact, the application should be rejected, as per the decision of the Hon'ble Supreme Court in a specific case.

4. The procedural requirements for filing an application under Section 7 by a financial creditor are detailed in the judgment. It explains the necessary forms, documents, and timelines involved in the application process, highlighting the importance of dispatching a copy of the application to the corporate debtor's registered office and the adjudicating authority's role in verifying the default.

5. The judgment contrasts the procedures for financial creditors under Section 7 with those for operational creditors under Section 8. It explains the different requirements and processes involved in triggering the insolvency resolution process for financial debts compared to operational debts, emphasizing the distinct treatment under the Code.

6. Lastly, the judgment clarifies that there is no requirement to hear third parties, including intervenors, at the admission stage of an application under Section 7. It aligns with the decision of the Hon'ble Supreme Court and concludes the appeal with specific observations and directions, highlighting the need for adherence to the established legal principles in such matters.