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2020 (6) TMI 688 - AT - Insolvency and BankruptcyAdmissibility of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Existence of debt and dispute or not - HELD THAT - The pendency of actions under the SARFAESI Act or actions under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 does not create obstruction for filling an Application under section 7 of Insolvency and Bankruptcy Code 2016, specially in view of Section 238 of IBC. The Application is more to bring about a Resolution of Corporate Debtor than any penal action or any recovery proceedings. Appeal dismissed.
Issues:
Admission of Application under section 7 of Insolvency and Bankruptcy Code 2016 without proper service to Corporate Debtor; Bank's resort to SARFAESI Act and recovery proceedings affecting the validity of the Application; Violation of principles of natural justice due to incomplete service; Applicability of judgments in similar cases; Value of securities held by the Bank compared to the outstanding claim; Defense against the Section 7 application based on actions under SARFAESI Act and DRT proceedings; Interpretation of Section 238 of IBC regarding overriding effect on other laws. Analysis: 1. The Appeal was filed against the admission of an Application under section 7 of the Insolvency and Bankruptcy Code 2016 by the Financial Creditor, Punjab National Bank, against the Corporate Debtor. The Appellant argued that the Corporate Debtor was not duly served with the notice of the Application, and the Bank had already initiated proceedings under the SARFAESI Act and recovery of debts due to Banks and Financial Institutions Act, which should have barred the Application under IBC. 2. The Appellant relied on the judgment in "Pegasus Assets Reconstruction Pvt. Ltd. vs. Haryana Concast Ltd.," emphasizing that SARFAESI proceedings do not preclude the filing of an Application under IBC. The Counsel highlighted the intention of Parliament expressed in Section 13 of the SARFAESI Act, allowing secured creditors to enforce their security interest without court intervention until the sale of secured assets. 3. The Appellant argued that the value of securities held by the Bank exceeded the outstanding claim, which should have prevented the admission of the Application under section 7. The Counsel also pointed out the alleged lack of proper service to the Corporate Debtor, citing an order from the Adjudicating Authority. 4. In response, the Bank's Counsel demonstrated various efforts made to serve the Corporate Debtor, including involvement of Postal Department authorities and proof of delivery to the registered office. The Bank also cited a judgment in "Aditya Kumar Jajodia Vs. Srei Infrastructure Finance Ltd.," stating that actions under SARFAESI or DRT proceedings do not bar an Application under section 7 of IBC. 5. The Adjudicating Authority confirmed the service of notice to the Corporate Debtor, and the Appellant's argument regarding incomplete service was dismissed. The judgment in "Pegasus Assets" was contextualized in relation to SARFAESI Act and earlier Companies Act, emphasizing the overriding effect of IBC provisions on other laws under Section 238. 6. The defense raised by the Appellant based on actions under SARFAESI Act and DRT proceedings was refuted, citing the judgment in "M/s. Unigreen Global Private Limited v. Punjab National Bank & Anr.," which clarified that such actions do not prevent the filing of an Application under section 7 of IBC. Section 238 of IBC was highlighted to emphasize the Code's overriding effect on other laws, including SARFAESI Act and DRT Act. 7. The Tribunal concluded that the pendency of actions under SARFAESI Act or recovery proceedings does not obstruct the filing of an Application under section 7 of IBC, as the primary aim is corporate resolution. The Appeal was dismissed, emphasizing the applicability of IBC provisions over conflicting laws and rejecting the Appellant's arguments.
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