2018 (9) TMI 1529 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - applicant as to come under the purview of person as defined under Section 3(23) of the Code - default in payment of the financial debt - whether applicant, not being a person , cannot be a financial creditor and hence cannot file the present application under Section 7 of the Code? - Held that - In the present case the respondent corporate debtor has availed the credit facility on the strength of the Corporate Card Account Agreement duly executed between the parties. Respondent company had accepted the terms and conditions of Corporate Card Account Agreement. Applicant has placed on record copy of the agreement duly executed and signed by the director of the respondent company with company seal. Applicant has also placed on record the Board resolution of the respondent company dated 18.09.2015 wherein it was resolved to authorise Gaurav Vasudeva, Director to sign and avail banking facilities in the name of and on behalf of the company from American Express Banking Corp. He was further authorised to operate the banking facilities on behalf of the company. There is no dispute that the respondent company has availed the card facilities. However except part payment of ₹ 1 lac, no other repayment was made by the respondent. Consequently, respondent company was liable to pay interest and other card charges as per binding card agreement. The amount was disbursed against time value of money and for commercial purpose. The debt claimed in the application includes outstanding principal, interest and other card charges as per mutual agreement and therefore comes within the purview of financial debt . The applicant accordingly comes within the definition of financial creditor in respect of financial debt in question and has a clear right to file application under Section 7 of the Code. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the loan amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from, the corporate debtor and that there has been a default in payment of the financial debt. Thus in terms of Section 7(5)(a) of the Code, the present application is admitted.

Issues Involved:
1. Territorial Jurisdiction
2. Status of Applicant as Financial Creditor
3. Validity of Debt and Default
4. Authorization of the Applicant’s Representative
5. Non-joinder of Necessary Party
6. Compliance with Procedural Requirements

Detailed Analysis:

1. Territorial Jurisdiction:
The Tribunal established its jurisdiction over the matter as the registered office of the respondent corporate debtor, M/s Jambu Knits Private Limited, is located in New Delhi, falling under the Tribunal's territorial jurisdiction as per Section 60(1) of the Insolvency and Bankruptcy Code, 2016.

2. Status of Applicant as Financial Creditor:
The applicant, M/s American Express Banking Corp., claimed to be a financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The respondent contested this status, arguing that the applicant did not qualify as a "person" under Section 3(23) of the Code. The Tribunal referred to the definition of "person" and the registration of the applicant with the Registrar of Companies, concluding that the applicant qualifies as a "company" and thus a "person" under the Code. The Tribunal also noted the Reserve Bank of India’s license granted to the applicant to carry on banking business in India, further establishing the applicant's status as a financial creditor.

3. Validity of Debt and Default:
The respondent argued that the debt did not qualify as a "financial debt" and that the applicant was not a "financial creditor." The Tribunal examined the definitions under Sections 5(7) and 5(8) of the Code, determining that the debt, which included outstanding principal, interest, and other charges, was disbursed against the time value of money and thus qualified as a financial debt. The Tribunal noted the respondent's default in repayment, with only a part payment of ?1 lakh made, and affirmed that the applicant was a financial creditor entitled to file the application under Section 7 of the Code.

4. Authorization of the Applicant’s Representative:
The respondent challenged the validity of the power of attorney authorizing Mr. Dipender Singh to file the application, arguing it was defective. The Tribunal found that Mr. Dipender Singh, Portfolio Manager (Legal), was duly authorized by the General Power of Attorney from the CEO of the applicant bank to sign and file the application. Citing the NCLAT ruling in Palogix Infrastructure (P.) Ltd. v. ICICI Bank Ltd., the Tribunal dismissed the technical objection, emphasizing that such an authorization was sufficient for initiating the proceedings.

5. Non-joinder of Necessary Party:
The respondent argued that the application was not maintainable due to the non-joinder of the director, who was jointly and severally liable. The Tribunal held that the financial creditor could proceed against the respondent company alone, as per the terms of the agreement, and that the application under Section 7 of the Code was maintainable against the corporate debtor without the necessity of joining the director.

6. Compliance with Procedural Requirements:
The Tribunal sought clarifications from the applicant regarding the date of incorporation, details of disbursements, and the status of the respondent. The applicant provided the required documents and clarifications, including the Reserve Bank of India approval, certificate of establishment, and detailed account statements. The Tribunal verified that the application was complete, the proposed Interim Resolution Professional (IRP) had no disciplinary proceedings pending, and the debt was due and in default.

Conclusion:
The Tribunal admitted the application under Section 7(5)(a) of the Code, appointing Ms. Rita Gupta as the Interim Resolution Professional. A moratorium was declared as per Section 14 of the Code, and the IRP was directed to make a public announcement and perform her duties in accordance with the Code, Rules, and Regulations. The Tribunal emphasized the legal obligation of the corporate debtor's personnel to cooperate with the IRP and directed the office to communicate the order to all parties involved.

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