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2019 (11) TMI 1410 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - application rejected on the ground that the Appellant has failed to show the default of any financial debt and that the Adjudicating Authority cannot go into the aspect of fraud which is within the purview of the Criminal Courts - HELD THAT - The Adjudicating Authority came to the conclusion that the default as alleged cannot be determined in absence of any requisite document. The Adjudicating Authority also held that the fraud is the question which cannot be decided by the Adjudicating Authority and can be decided only by the Court of Criminal jurisdiction. Taking into consideration the imposition of the cost, the impugned order dated 20th September, 2019 is set aside so far it relates to the imposition of the cost of Rupees One Lakh - appeal disposed off.
Issues:
- Delay in preferring the appeal and its condonation - Rejection of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Failure to show default of financial debt - Adjudicating Authority's inability to decide fraud issues - Disputed claims and counter-claims between the parties - Existence of loan agreement and memorandum of understanding - Allegations of antedated, false, and fabricated documents - Request for arbitration and objections raised - Determination of default in absence of requisite documents - Jurisdiction of Adjudicating Authority versus Criminal Court - Imposition of costs in the impugned order Delay in Preferring the Appeal and its Condonation: The Appellant received the certified copy of the impugned order on 3rd October, 2019, and preferred the appeal on 16th November, 2019, resulting in a delay of 13 days. The delay was condoned after hearing the counsels for both parties and being satisfied with the grounds presented. Rejection of Application under Section 7 of the Insolvency and Bankruptcy Code: The Appellant filed an application under Section 7 of the Insolvency and Bankruptcy Code against the Corporate Debtor, which was rejected by the Adjudicating Authority on the grounds of failure to demonstrate default of any financial debt. The Authority also noted its inability to address fraud issues, stating that such matters fall under the jurisdiction of Criminal Courts. Disputed Claims and Counter-Claims: The Appellant asserted the existence of a balance amount and interest owed by the Corporate Debtor, supported by evidence including an Audit Report. However, the Corporate Debtor contested this, claiming the Appellant failed to fulfill obligations regarding equity investment as per a memorandum of understanding. Allegations of Antedated, False, and Fabricated Documents: The Appellant denied the existence of certain loan agreements and memorandum of understanding, alleging these documents were antedated, false, and fabricated in collusion with a director of the Corporate Debtor. The Adjudicating Authority observed these discrepancies but could not determine default due to lack of necessary documentation. Jurisdiction of Adjudicating Authority vs. Criminal Court: The Adjudicating Authority emphasized its limited jurisdiction in deciding fraud issues, highlighting that such matters are within the purview of the Criminal Courts. The Authority could not make determinations related to fraud allegations and emphasized the need for legal proceedings in the appropriate forum. Imposition of Costs in the Impugned Order: While finding no grounds to interfere with the impugned order, the Tribunal set aside the imposition of a cost of Rupees One Lakh, considering the circumstances. The appeal was disposed of with these observations, addressing the various legal and factual complexities presented during the proceedings.
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