2018 (12) TMI 1438 - AT - Insolvency and Bankruptcy

Corporate insolvency process - default in payment of dues - Held that - The Adjudicating Authority noticed that there is a debt payable in the law and in the fact to the Financial Creditor and being satisfied that the default has occurred, admitted the application being complete. Thus it is found that there is a debt due to the Financial Creditor and the Corporate Debtor has defaulted in paying the dues. This is also evident from the satisfaction recorded by the Adjudicating Authority while discussing the case of the Appellant

Summary

Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016; Allegation of fraud by the Respondents in filing the application; Malafide intention of the Bank in classifying the account as NPA; Adjustment of loan amounts and interest by the Bank; Grounds for interference with the impugned order.

Admission of Application under Section 7 of the I&B Code:
The appeal was filed by a Shareholder against an order admitting an application by a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority found a debt payable to the Financial Creditor and admitted the application after determining that a default had occurred. The Authority considered the Supreme Court's decision in "Innoventive Industries Ltd. v. ICICI Bank and Anr." which outlines the process for a financial creditor to trigger insolvency proceedings under Section 7.

Allegation of Fraud:
The Appellant alleged fraud by the Respondents in filing the application, claiming malafide intentions by the Bank in not classifying the account as NPA earlier to charge interest. However, the Adjudicating Authority rejected these allegations, emphasizing the existence of a debt due to the Financial Creditor and the default by the Corporate Debtor in payment. The Authority's satisfaction with the case was evident in the order.

Malafide Intention of the Bank:
The Appellant argued that the Bank had malafide intentions in delaying the classification of the account as NPA to accrue interest and profit. The Appellant mentioned specific loan adjustments made by the Bank, but the Tribunal held that such submissions cannot prevent the admission of an application under Section 7 once a debt is due to the Financial Creditor and default by the Corporate Debtor is established.

Grounds for Interference:
After hearing arguments from both sides, the Tribunal found no legal grounds to interfere with the impugned order. The appeal was dismissed, and the Interlocutory Application was disposed of. The Tribunal concluded that there was no merit in the appeal, indicating the absence of any illegality in the Adjudicating Authority's decision to admit the application under Section 7 of the I&B Code.

This detailed analysis of the judgment highlights the key issues involved, including the admission of the application under Section 7, the allegation of fraud, the malafide intentions of the Bank, loan adjustments, and the grounds for interference with the impugned order. The Tribunal's decision was based on a thorough examination of the facts and legal provisions, ultimately leading to the dismissal of the appeal.