2017 (12) TMI 101 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - notice under sub-Section (1) of Section 8 was not given by the respondent Operational Creditor but through Advocate/Lawyers Firm - Held that - There is nothing on record to suggest that the person/Law Firm was authorised by the Operational Creditor or the Law firm is holding any position within the office of the Operational Creditor . Thus we hold that the application under Section 9 preferred by the respondent- Operational Creditor was not maintainable. The I&B Code is a complete Code by itself. The provision of the Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a particular act should be done by a person in the manner as prescribed thereunder. Therefore, we hold that a Power of Attorney Holder is not competent to file an application on behalf of a Financial Creditor or Operational Creditor or Corporate Applicant . . See Palogix Infrastructure Limited Vs. ICICI Bank Limited 2017 (10) TMI 913 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI - Application dismissed.

Summary

Issues Involved:
1. Validity of demand notice issued by a law firm under Section 8 of the Insolvency and Bankruptcy Code (I&B Code).
2. Authority of Power of Attorney holders to file applications under Section 9 of the I&B Code.
3. Requirement of a certificate from financial institutions confirming unpaid operational debt under Section 9(3)(c) of the I&B Code.

Issue-wise Detailed Analysis:

1. Validity of Demand Notice Issued by a Law Firm:
The appellants contended that the demand notice under Section 8(1) of the I&B Code was invalid as it was issued by an Advocate/Lawyers’ Firm, which is not permissible. The tribunal referenced the case "Uttam Galva Steels Limited Vs. DF Deutsche Forfait AG & Anr." where it was held that an Operational Creditor must issue the demand notice in Form-3 or Form-4, and only a person authorized by the Operational Creditor, holding a position within or in relation to the Operational Creditor, can issue such notice. In the present case, the notice dated 5th May 2017 was issued by 'Advani & Co. – Barristers-At-Law,' and there was no evidence that the law firm was authorized by the Operational Creditor. Therefore, the tribunal concluded that the application under Section 9 was not maintainable as the notice was not issued by an authorized person.

2. Authority of Power of Attorney Holders to File Applications:
The appellants argued that the application under Section 9 was signed by Power of Attorney holders, not by the Operational Creditor. The tribunal referred to the case "Palogix Infrastructure Limited Vs. ICICI Bank Limited," where it was held that a Power of Attorney holder is not competent to file an application on behalf of a Financial Creditor, Operational Creditor, or Corporate Applicant. In the current case, the application was signed by four advocates as Power of Attorney holders, which rendered the application under Section 9 invalid.

3. Requirement of Certificate from Financial Institutions:
The appellants also argued that the respondent, a foreign company, did not submit a certificate from any financial institution confirming the unpaid operational debt, as mandated by Section 9(3)(c) of the I&B Code. The tribunal referenced the case "Smart Timing Steel Ltd. Vs. National Steel and Agro Industries Ltd.," which held that the certificate from a financial institution is mandatory. The respondent submitted a chart from 'CaixaBank,' which is not recognized as a financial institution under the I&B Code. Therefore, the application was further deemed not maintainable due to the lack of the required certificate.

Conclusion:
The tribunal set aside the impugned order dated 10th August 2017 passed by the Adjudicating Authority (NCLT, Chennai) in CP/537/(IB)/CB/2017. All orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional and the declaration of moratorium, were declared illegal and set aside. The application under Section 9 of the I&B Code was dismissed, and the appellant company was allowed to function independently through its Board of Directors. The tribunal directed the Adjudicating Authority to fix the fee of the Interim Resolution Professional, which the appellant company was instructed to pay. The appeal was allowed without any order as to cost.