2021 (5) TMI 308 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - In the instant case, though there is an authority letter issued by other partners of the firm (page 40), it does not bear any date in order to make out as to whether the said authorisation is given prior to the issuance of demand notice. In absence of such vital information i.e. the 'date' on which such authority letter is/was executed, it is difficult to come to the conclusion that the demand notice is/was issued on the basis of the authority letter. In the result, the application so filed gets vitiated. The petition is not maintainable and deserves to be dismissed - Petition dismissed.

Summary

Issues:
- Validity of authority letter for initiating CIRP
- Requirement of specific authorization for issuing demand notice and application under the Code
- Importance of date in authorization documents
- Maintaining sanctity of authorization documents

Validity of authority letter for initiating CIRP:
The judgment addressed the issue of the validity of the authority letter for initiating Corporate Insolvency Resolution Process (CIRP). It was noted that the authority letter authorizing the initiation of CIRP against the respondent company did not bear a date of issuance. The absence of a date on such a crucial document rendered it invalid in the eyes of the law. The demand notice issued by the applicant, a prerequisite for commencing CIRP, was deemed invalid due to the lack of a date on the authority letter.

Requirement of specific authorization for issuing demand notice and application under the Code:
Referring to the Palogix Infrastructure case, the judgment emphasized the necessity of specific authorization for the power of attorney holder to initiate CIRP under the Insolvency and Bankruptcy Code. It was clarified that only an authorized person can issue a demand notice and file an application under the Code. The judgment highlighted that the Code mandates that particular acts must be performed by individuals as prescribed therein.

Importance of date in authorization documents:
The judgment underscored the significance of including the date in authorization documents. It was emphasized that a letter of authorization, serving as proof of empowerment to act on behalf of another, must include essential details such as the date of issuance, the identity of the authorized person, the validity period of the document, and the specific actions authorized. The absence of such critical information was deemed to compromise the validity and sanctity of the authorization document.

Maintaining sanctity of authorization documents:
In analyzing the facts and circumstances of the case, the judgment concluded that the petition was not maintainable due to the deficiencies in the authorization documents. The lack of a date on the authority letter and the absence of crucial details rendered the application vitiated and led to its dismissal. However, the judgment clarified that the dismissal was based on maintainability grounds and did not prevent the petitioner from seeking recourse through the appropriate forum to enforce its claim against the respondent.

This comprehensive analysis of the judgment highlights the critical issues surrounding the validity of authorization documents, the necessity of specific authorization for actions under the Code, and the importance of maintaining the integrity of such documents to ensure compliance with legal requirements.