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2022 (9) TMI 909 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - initiation of proceedings under Sections 13 and 14 of the SARFAESI Act under which possession of property was handed over - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Appellant in application has given the details of events from 19.06.2015 to March, 2020 and has given details of the Deed of Mortgage entered by Corporate Debtor to secure the loan granted to the sister concern. Details of SARFAESI proceedings initiated against borrower as well as complaint filed under Maharashtra RERA Act was referred to. Details of the order passed by MRERA dated 04.05.2018 and other details were given. The application filed by the Appellant was an application under Section 60(5) of the Code r/w Rule 11 of NCLT Rules, 2016 and under Section 65 of the Code seeking appropriate directions. The Appellant/ Applicant has come up in the application as an assignee of the Financial Creditor to whom the subject property is mortgaged and possession has already been taken under Section 13(4) of SARFAESI Act much before the filing of Section 7 application. Application also notice in detail the proceedings initiated against the Corporate Debtor prior to the application under Section 7 and allegations have been made in the application that the application has been filed fraudulently and maliciously to save the Corporate Debtor. Allegations made in the application are the allegations which are made in reference to Section 65 of the Code. The application by the Appellant was competent application filed under Section 60(5) of the Code r/w Rule 11 of NCLT Rules, 2016 and under Section 65 of the Code and the Adjudicating Authority was obliged to look into the allegations to find out if there is any ground to grant any of the prayers made in the application. The finding of the Adjudicating Authority that the Appellant has no locus cannot be sustained. When the Appellant claims to be the Financial Creditor who is assignee of the Financial Creditor and the application records sequence of events and various proceedings prior to the application under Section 7, the allegations ought to have been looked into and could not have been brushed aside by observing that the applicant has no locus. Appeal allowed.
Issues Involved:
1. Validity of the rejection of I.A. No. 572 of 2021 by the Adjudicating Authority. 2. Validity of the admission of Section 7 application by the Adjudicating Authority. Issue-wise Detailed Analysis: 1. Validity of the Rejection of I.A. No. 572 of 2021: The appellant, claiming to be a Financial Creditor, filed I.A. No. 572 of 2021 seeking intervention and dismissal of the Company Petition filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) by the Respondent. The appellant argued that the Section 7 application was fraudulently filed to save the Corporate Debtor from liabilities. The Adjudicating Authority dismissed the application on the grounds of lack of locus standi. The Tribunal noted that the appellant, as an assignee of the Financial Creditor, had a legitimate interest in the proceedings. The application contained detailed allegations that the Section 7 petition was filed maliciously and fraudulently to evade other legal proceedings and liabilities. The Tribunal emphasized that the Adjudicating Authority should have examined these allegations under Section 65 of the IBC, which deals with fraudulent or malicious initiation of proceedings. The Tribunal criticized the Adjudicating Authority's order as laconic and lacking substantive reasoning. It highlighted that the Adjudicating Authority failed to consider the detailed allegations and evidence presented by the appellant. The Tribunal referred to the Supreme Court's judgment in "Beacon Trusteeship Limited vs. Earthcon Infracon Pvt. Ltd. & Anr." which mandates that allegations of collusion and fraud in insolvency proceedings must be thoroughly examined. The Tribunal concluded that the Adjudicating Authority erred in dismissing the application without proper consideration of the appellant's claims. Therefore, the order dated 08.06.2021 was set aside, and the appellant was allowed to intervene in the proceedings. 2. Validity of the Admission of Section 7 Application: The Section 7 application was filed by the Respondent, claiming to be a Financial Creditor, against the Corporate Debtor. The Adjudicating Authority admitted the application, noting that the Corporate Debtor had acknowledged the loan and its liability to pay the Financial Creditor. However, the Tribunal found that the Adjudicating Authority's decision was made without contest and failed to consider the appellant's allegations of fraud and collusion. The Tribunal reiterated that the Adjudicating Authority should have examined the appellant's claims before admitting the Section 7 application. The Tribunal emphasized that the appellant had presented significant materials and evidence suggesting that the Section 7 application was filed fraudulently. By dismissing the appellant's intervention application, the Adjudicating Authority deprived itself of crucial information that could impact the decision to admit the Section 7 application. Consequently, the Tribunal set aside the order dated 01.11.2021, admitting the Section 7 application. It directed that both I.A. No. 572 of 2021 and the Company Petition be revived and reconsidered afresh by the Adjudicating Authority, taking into account the appellant's allegations and evidence. Conclusion: The Tribunal allowed both appeals, set aside the orders dated 08.06.2021 and 01.11.2021, and directed the Adjudicating Authority to reconsider the matters afresh, ensuring that the appellant's allegations of fraud and collusion are thoroughly examined.
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