2019 (7) TMI 776 - AT - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Section 10 of the I B Code - cost of payment of fees in relation to the Authorised Representatives appointed as well as to defray the costs of Resolution Professional - who is liable to pay - HELD THAT - There have been default against the purchasers of the Plans who otherwise do not come within the meaning of Financial Creditors or Operational Creditors . However the Adjudicating Authority having seen some discrepancies raised doubt about the genuineness of the Corporate Debtor and the application as has been filed. The Resolution Professional also claims that financial irregularities have also been committed by the Corporate Debtor . The order regarding expenses of Resolution Professional was not required to be determined at this stage we are also of the view that considering the record the Adjudicating Authority should also seen whether the application under Section 10 of the I B Code was filed with fraudulently or with malicious intention for any purpose other than for the resolution of the insolvency or liquidation as defined under Section 65 of the I B Code and if so necessary it may request the Central Government for reference to the SFIO under Sections 212 and 213 of the Companies Act 2013 and other provisions of the Insolvency Bankruptcy Code including Part II Chapter VII wherein Offences and Penalties has been prescribed. Appeal disposed off.

Summary

Issues:
1. Clarification on the liability of expenses for the insolvency resolution process.
2. Validity of the application filed by the Corporate Debtor under Section 10 of the Insolvency & Bankruptcy Code.
3. Examination of financial irregularities and discrepancies raised about the Corporate Debtor.
4. Consideration of potential fraudulent or malicious intentions behind the application under Section 10 of the Insolvency & Bankruptcy Code.

Analysis:
1. The appeal was filed by the Promoters of the Corporate Debtor against orders passed by the Adjudicating Authority regarding the liability of expenses for the insolvency resolution process. The Adjudicating Authority had ruled that in the absence of a Financial Creditor, the costs would be borne by the Corporate Debtor. The subsequent order clarified the need to lift the corporate veil to identify the legal persons behind the Corporate Debtor. The Appellant argued that this observation would impact the Promoters, as the Corporate Debtor initiated the process under Section 10 of the Insolvency & Bankruptcy Code. The Tribunal opined that the expenses determination was premature and suggested further examination by the Adjudicating Authority.

2. The Interim Resolution Professional informed that no claims were filed by creditors except for a water supplier, and individuals who purchased air tickets plans had submitted applications. The Tribunal directed the submission of the air ticket plans for review. It was noted that there was no evidence of an Annual General Meeting decision to file the application under Section 10 of the Insolvency & Bankruptcy Code. The Adjudicating Authority raised doubts about the genuineness of the Corporate Debtor and financial irregularities were alleged by the Resolution Professional.

3. The Adjudicating Authority was advised to investigate whether the application under Section 10 was filed fraudulently or with malicious intent. If necessary, a request to the Central Government for SFIO reference under relevant provisions of the Companies Act, 2013, and the Insolvency & Bankruptcy Code was suggested. Despite raised doubts, the Tribunal chose not to interfere with the impugned orders, allowing the Adjudicating Authority to proceed according to the law. The appeal was disposed of with these observations.