2022 (11) TMI 568 - AT - Insolvency and Bankruptcy

Rejection of Application under Section 65 and 76 of I B Code - rejection on the ground that Special Court established under IBC is alone competent to entertain Criminal Proceedings in respect of offence punishable under the provisions of the Code and the Adjudicating Authority has no role in implementing the penal provisions under the Code - HELD THAT - Law is well settled, that the Adjudicating Authority with regard to allegation of offence in appropriate case, can always refer the recommendation to the Insolvency and Bankruptcy Board of India or to the Central Government to consider as to whether the case is made out for filing a complaint before the Special Court. The observations of the Adjudicating Authority is not approved to the extent that the Adjudicating Authority has no role in implementing the penal provisions in the Code. Limited role which can be performed by the Adjudicating Authority is to make a reference if there are allegations which need consideration by IBBI or Central Government for purpose of filing a complaint. In the facts of the present case where the Adjudicating Authority has found that there was pre-existing dispute between the parties and Application under Section 9 was not liable to be admitted - there are no reason to issue any direction to the Adjudicating Authority at this stage to consider making a reference to the Board or Central Government for prosecution under Section 76 Application disposed off.

Issues involved:
1. Appeal against the Order passed by the Adjudicating Authority under Sections 65 and 76 of the Insolvency and Bankruptcy Code, 2016.
2. Challenge to the rejection of Section 9 Application by the Operational Creditor.
3. Role of Adjudicating Authority in implementing penal provisions under the Code.

Analysis:
1. The Appeal by the Corporate Debtor challenges the Order passed by the Adjudicating Authority under Sections 65 and 76 of the Insolvency and Bankruptcy Code, 2016. The Appellant argues that the Adjudicating Authority erred in rejecting the Application, contending that only the Special Court established under the IBC can entertain criminal proceedings for offenses under the Code. The Appellant also asserts that the proceeding initiated by the Operational Creditor under Section 9 was dismissed for further investigation and was not fraudulent or malicious. Citing a previous Tribunal judgment, the Appellant argues for the rejection of the Adjudicating Authority's decision.

2. The Adjudicating Authority's rejection of the Section 9 Application filed by the Operational Creditor is also under scrutiny. The Operational Creditor challenged this rejection through an Appeal, which was dismissed. The Adjudicating Authority found that there was a pre-existing dispute between the parties, leading to the non-admission of the Section 9 Application. The Operational Creditor's petition under Section 65 was rejected based on the lack of fraudulent or malicious nature in the transaction. The Tribunal upheld the Adjudicating Authority's decision in this regard.

3. The Tribunal clarified the role of the Adjudicating Authority in implementing penal provisions under the Code. Referring to a previous judgment, it established that the Adjudicating Authority can refer matters to the Insolvency and Bankruptcy Board of India or the Central Government for consideration of filing a complaint before the Special Court in case of offenses under the Code. The Tribunal disagreed with the Adjudicating Authority's view that it has no role in implementing penal provisions, emphasizing its authority to make references for further action. The Tribunal concluded the Appeal with observations and clarification, indicating no need for further direction to the Adjudicating Authority regarding prosecution under Section 76, as the matter was settled based on previous decisions.

In conclusion, the Judgment by the National Company Law Appellate Tribunal addressed the issues raised in the Appeal against the Adjudicating Authority's Order under Sections 65 and 76 of the Code, the rejection of the Section 9 Application by the Operational Creditor, and the Adjudicating Authority's role in implementing penal provisions. The Tribunal provided a detailed analysis, citing relevant legal principles and previous judgments to support its decision, ultimately disposing of the Appeal with necessary observations and clarifications.

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