2017 (9) TMI 927 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Initiation of corporate insolvency resolution process by financial creditor - completion of application - Held that - A defective application can be corrected by removing the defect. Similarly, if an application is incomplete, it can be completed, but if any misleading statement is made in an application no time can be granted to recall the misleading statement and such application is fit to be rejected. In the present case, it is not the case of the Appellants that there is a mismatch between the amount shown in the notice under Rule 4(3) and the amount of default shown by the Financial Creditor in its original application under Section 7. On the other hand, the Corporate Debtor has explained that the amount of interest as was calculated upto 31 t March, 2012, if further calculated for the period from 1St April, 2012 to 14th May, 2017, then the total debt comes to ₹ 1,09,32,72,312.86p. The default amount as on 31st March, 2012 remains constant. Thus we find that neither any misleading statement was made by the Financial Creditor nor any misleading statement of default was made. The case of the Respondent- Financial Creditor , being different from the case of ICICI Bank Limited (the Financial Creditor of M/s. Starlog Enterprises Limited), the plea taken by the Appellants cannot be accepted. Another ground taken by the Appellants is that the person, who filed the application under Section 7 was not authorised by the Board of Directors of the Bank of India ( Financial Creditor ). The Respondent has brought to our notice that the person who has filed the petition under Section 7, is an officer of Bank of India (Financial Creditor) and was authorised by the Board of Directors to do so. Therefore, the impugned judgement cannot be interfered with on such ground. In view of the discussions as made above and in absence of merit, we are not inclined to interfere with the impugned judgment and, accordingly, dismiss the appeal.

Summary

Issues:
1. Mismatch in the amount of debt in the original application and after rectification of defect.
2. Admittance of incorrect claim by the Financial Creditor.
3. Timeliness of correction of defect in the application.
4. Authorization of the person filing the application under Section 7.

Analysis:
1. The appeal was filed against the judgment admitting the application by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellants argued a discrepancy in the debt amount before and after rectification of defect, citing a previous judgment where a mismatch led to the rejection of the application. The Adjudicating Authority had initiated the Corporate Insolvency Resolution Process and imposed a Moratorium.

2. The Appellants contended that the Financial Creditor's application contained an incorrect claim, emphasizing the importance of accurate claims to avoid adverse consequences on the company's welfare. The Appellate Tribunal highlighted the need for caution in admitting insolvency applications and adherence to natural justice principles, citing a case where an incorrect claim led to the rejection of the application.

3. The Appellants raised concerns about the delay in correcting the defect in the application beyond the stipulated seven days. The Financial Creditor argued that the supplementary statement filed did not constitute defect removal and maintained the right to claim the total amount with interest before the Interim Resolution Professional.

4. An additional argument centered on the authorization of the person filing the Section 7 application. The Respondent clarified that the individual was an authorized officer of the Financial Creditor, duly authorized by the Board of Directors. The Tribunal found no merit in the appeal and upheld the judgment, dismissing the appeal while directing each party to bear their respective costs.

In conclusion, the judgment addressed multiple issues including debt amount discrepancies, the correctness of claims, timeliness of defect correction, and the authorization of the applicant. The Tribunal's decision emphasized the importance of accurate claims, adherence to procedural timelines, and proper authorization in insolvency proceedings.