2021 (2) TMI 14 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - outstanding dues - suppression of facts - applicant turned into non-performing asset (NPA) as on 9-12-2013 and on account of default, legal action was initiated under DRT Act and SARFAESI Act, 2002 - HELD THAT - On perusal of the record it is found that no Board Resolution is ever passed by the company authorising Mr. Sanjay Gupta to file the instant application. Further, on perusal of the record it appears that the applicant company has held one Extraordinary General Meeting (EGM) flouting all the norms of the Companies Act, 2013, thereby the very power given in favour of Mr. Sanjay Gupta is bad in the eye of law and as such the application is not maintainable for want of proper authorisation. Admittedly, as also matter of record that, the applicant is not a corporate applicant as per Form 6, clause 3. The applicant is not a director and is disqualified under section 168 of the Companies Act, 2013 wherein the name and address of the Director is shown as All directors on the Board has already resigned and vacated office pursuant to resignation u/s 168 of the Companies Act, 2013 and a situation of deadlock has emerged. However, clause 3 of Form 6 further discloses that the list of promoters along with their address attached - As per the list of promoters/shareholding pattern as on 30-6-2018 (page 11), Mr. Sanjay Gupta holds 23,15,714 shares of the company. Further, the applicant has not filed/disclosed the details of the unsecured financial creditors. However, there are as many as 427 operational debtors as per the list annexed to the application at page Nos. 24-32. However, while going through the records it is found that there is no whisper about the outstanding amount. It is also pertinent to note that if the company is really insolvent, applicant could have opted for winding up/dissolution application. Further, affairs of the company is managed by the Directors and not by the promoters. Since the Directors are already disqualified, the applicant has no authority to file the instant application. It is also a matter of record that objector(s)/banks have already initiated proceedings under RDDB Act, 1993 and SARFAESI Act, 2002 and to install the said proceedings, the applicant has filed the instant application, so as to initiate moratorium and to get stayed the proceedings initiated by the banks - Company Petition stand dismissed as not maintainable.

Summary

Issues Involved:
1. Maintainability of the application under Section 10 of the Insolvency and Bankruptcy Code, 2016.
2. Allegations of suppression of facts and incomplete application.
3. Authorization to file the application.
4. Malicious intent to avoid liabilities and responsibilities.
5. Existing recovery proceedings under RDDB Act, 1993 and SARFAESI Act, 2002.
6. Objections from financial creditors and other stakeholders.

Issue-wise Detailed Analysis:

1. Maintainability of the Application:
- The Tribunal examined whether the application filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 (the Code) was maintainable. It was found that no Board Resolution was passed authorizing Mr. Sanjay Gupta to file the application. The application was filed based on a Special Power of Attorney signed in an Extraordinary General Meeting (EGM), which flouted the norms of the Companies Act, 2013. Therefore, the application was deemed not maintainable for want of proper authorization.

2. Allegations of Suppression of Facts and Incomplete Application:
- The financial creditors, including SIDBI and Central Bank of India, submitted that the application was incomplete and filed with malicious intention. They pointed out that the applicant had not enclosed necessary documents such as mortgage documents, hypothecation documents, and details of properties mortgaged or charges created. The Tribunal found that the applicant had suppressed information regarding various transactions and properties mortgaged.

3. Authorization to File the Application:
- The Tribunal noted that the applicant, Mr. Sanjay Gupta, was not a corporate applicant as defined under Section 5(5) of the Code. The applicant was not a director and was disqualified under Section 168 of the Companies Act, 2013. The Tribunal emphasized that the affairs of the company are managed by directors and not by promoters. Since the directors were disqualified, the applicant had no authority to file the application.

4. Malicious Intent to Avoid Liabilities and Responsibilities:
- The financial creditors argued that the application was filed with the intention to avoid responsibilities and liabilities under the Companies Act, 2013. The Tribunal observed that the applicant had not provided substantial information regarding the properties mortgaged, securities charged, and collateral given for borrowings. The application was found to be filed with malicious intent to stall recovery proceedings pending before the Debts Recovery Tribunal (DRT).

5. Existing Recovery Proceedings:
- The Tribunal noted that the objectors, including SIDBI and Central Bank of India, had already initiated recovery proceedings under the RDDB Act, 1993, and SARFAESI Act, 2002. The Tribunal found that the instant application was filed to initiate a moratorium and stay the proceedings initiated by the banks. Therefore, the application lacked merit and was dismissed.

6. Objections from Financial Creditors and Other Stakeholders:
- The objections raised by SIDBI, Central Bank of India, and ICICI Bank Ltd. were considered by the Tribunal. The creditors argued that the application was incomplete, filed with malicious intent, and aimed at stalling legal proceedings. The Tribunal found merit in these objections and concluded that the application deserved to be dismissed.

Conclusion:
- The Tribunal dismissed the Company Petition CP (IB) No. 423 of 2018 as not maintainable due to lack of proper authorization and malicious intent. The Interlocutory Application No. 76 of 2020 was allowed. No order as to cost was made.