2018 (2) TMI 116 - AT - Insolvency and Bankruptcy

Corporate insolvency process - no enclousres of certificate from financial institution - Held that - Respondent, Macquarie Bank Ltd., has not enclosed any certificate from financial institution as defined under sub-section (14) of Section 3 of the I&B Code and Lawyer s notice as given has been deprecated by the adjudicating authority . In effect, order (s), if any, passed by Ld. Adjudicating Authority appointing any Interim Resolution Professional or declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional , including the advertisement, if any, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside.

Summary

Issues:
Appeals against orders admitting applications under Section 9 of the Insolvency & Bankruptcy Code, 2016 without proper certification and notice by a financial institution.

Analysis:
The Appellate Tribunal considered two appeals challenging orders passed in insolvency proceedings initiated under Section 9 of the Insolvency & Bankruptcy Code, 2016. The Respondent, Macquarie Bank Ltd., had filed the applications, but the Appellant contested the validity of the proceedings. The Tribunal referred to a previous judgment involving the same parties, where it was held that Macquarie Bank Ltd. did not qualify as a financial institution under the Code. As a result, any certificate from the bank could not establish a debt default. Moreover, the notice issued by a lawyer on behalf of the Appellant was deemed inadequate under Section 8 of the Code, rendering the petition under Section 9 non-maintainable.

In the present appeals, the Tribunal noted that Macquarie Bank Ltd. failed to provide a certificate from a financial institution as defined in the Code. Additionally, the notice issued by the lawyer representing the Respondent was criticized by the adjudicating authority. Consequently, 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 Appellant company was released from the legal constraints and allowed to resume independent operations under its Board of Directors immediately.

Furthermore, the Adjudicating Authority was directed to determine the fees of the Interim Resolution Professional, if one was appointed, and the Appellant was instructed to pay the fees for the IRP's period of service. The Tribunal, based on the aforementioned reasons, allowed both appeals, setting aside the orders related to Macquarie Bank Ltd.'s case. It was clarified that the Tribunal did not address other issues raised in the appeals, focusing solely on the procedural irregularities regarding certification and notice in the insolvency proceedings.