2018 (6) TMI 843 - Tri - Insolvency and Bankruptcy

Insolvency Resolution Process - discrepancies in the xerox copy of the account furnished - whether the handwritten additions and omissions are against the specific provisions of The Bankers Books Evidence Act, 1891 and therefore, such an account is liable to be rejected? - Held that - A certified copy of entry in a banker s books is to be regarded as prima facie evidence in all legal proceedings with regard to the existence of such entry. As evidence of the matters, transactions and accounts therein recorded in every case. It has come on record that a certificate of entries in a banker s books in accordance with the Banker s Books Evidence Act, 1891 has been placed before us as Annexure A-VIII. There is a record of default available with the Central Repository of Information on Large Credits (CRILC) as per its asset classification report of the Corporate Debtor dated 16-06-2017.N o serious dispute with regard to the amount payable has been raised before us. Therefore, we find no substance in the aforesaid argument and reject the same. Mr. Naveen Jain is not authorized to sign the pleadings and file the application before us has also lost its sheen because with the rejoinder a copy of the certificate dated 26-03-2018 issued by the Financial Creditor under Bankers Books Evidence Act, 1891 and a copy of the Board Resolution of the Financial Creditor dated 06-12-2008 along with special power of attorney dated 11-08-2017 in favour of Mr. Naveen Jain have been placed on record. The filing of the aforesaid documents completely answer the objections raised by the Corporate Debtor. It is evident that by virtue of special power of attorney dated 11-08-2017 Mr. Naveen Jain has been authorized to file such like application before any Court/Tribunal. Accordingly, we find that the aforesaid objection is frivolous and is devoid of merit. Accordingly, the same is rejected. Corporate Debtor has various claims and litigations pending against the public sector undertakings like National Highways Authority of India, Railway and many others. It has filed arbitration proceedings and those proceedings are likely to result in payment of huge amounts. We are afraid that we cannot accept the pending claim petition as a basis for rejecting the prayer for triggering the Corporate Insolvency Resolution Process in respect of the Corporate Debtor. There is no provision in the Code to create such a bar. Accordingly, we reject the aforesaid objection.

Summary

Issues Involved:
1. Validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Authority of Mr. Naveen Jain to file the application.
3. Admissibility of evidence under the Bankers’ Books Evidence Act, 1891.
4. Impact of ongoing arbitration and other claims on the initiation of the Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Validity of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Financial Creditor, Union Bank of India, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate the Insolvency Resolution Process against the Corporate Debtor. The application was filed in the prescribed form and manner under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The tribunal found that a default had occurred, the application was complete, and there were no disciplinary proceedings pending against the proposed Interim Resolution Professional. Consequently, the application warranted admission.

2. Authority of Mr. Naveen Jain to file the application:
The Corporate Debtor challenged the authority of Mr. Naveen Jain to file the application, arguing that the Power of Attorney was executed before the Code came into force and was not on a stamp paper. The tribunal rejected this objection, noting that a certificate dated 26-03-2018 and a Board Resolution dated 06-12-2008, along with a special power of attorney dated 11-08-2017 in favor of Mr. Naveen Jain, were placed on record. These documents demonstrated that Mr. Naveen Jain was authorized to file the application, rendering the objection frivolous and devoid of merit.

3. Admissibility of evidence under the Bankers’ Books Evidence Act, 1891:
The Corporate Debtor argued that the statement of account was not filed in accordance with the Bankers’ Books Evidence Act, 1891, and contained handwritten entries. The tribunal cited Section 4 of the Bankers’ Books Evidence Act, 1891, which states that a certified copy of any entry in a banker’s books is prima facie evidence of the existence of such entry. The tribunal found that a certificate of entries in a banker’s books was placed on record, and there was a record of default available with the Central Repository of Information on Large Credits (CRILC). Therefore, the tribunal rejected the objection.

4. Impact of ongoing arbitration and other claims on the initiation of the CIRP:
The Corporate Debtor contended that the initiation of the CIRP would jeopardize ongoing infrastructure projects and that it had substantial claims in arbitration proceedings. The tribunal held that pending claim petitions could not be a basis for rejecting the initiation of the CIRP, as there was no provision in the Code to create such a bar. The tribunal emphasized that the object of the Code is to maximize the value of the assets of an entity, and the initiation of the CIRP would serve this purpose.

Conclusion:
The tribunal admitted the petition, appointed Mr. Rajiv Chakraborty as the Interim Resolution Professional, and declared a moratorium in terms of Section 14 of the Code. The tribunal directed the Interim Resolution Professional to make a public announcement of the admission and perform his functions in accordance with the Code. The personnel connected with the Corporate Debtor were legally obligated to extend cooperation to the Interim Resolution Professional. The tribunal rejected all objections raised by the Corporate Debtor, emphasizing the need to follow best practices and principles of fairness during the CIRP.