2023 (10) TMI 239 - AT - Insolvency and Bankruptcy

Correctness of admitting section 7 application - allegation is that Section 7 application has been filed with the help of fabricated and manufactured documents as well as by suppression of material facts - HELD THAT - It is trite law that under the IBC once a debt becomes due or payable, in law and in fact, and there is incidence of non-payment of the said debt in full or part thereof, CIRP may be triggered by the Financial Creditor as long as the amount in default is above the threshold limit. It is also well accepted that debt means the liability in respect of a claim and claim means a right to payment even if it is disputed. When financial debt is undisputedly established and default in payment is also crystal clear, it is opined that the Adjudicating Authority did not commit any error in admitting the Section 7 application. There are substance in the contention of Respondent No.1 that the IA was not only heard by the Adjudicating Authority but was heard before pronouncing the order in the main company petition. It is also borne out from the orders that both parties were present and had placed their respective contentions / arguments before the Adjudicating Authority in the matter of the IA. It is an undisputed fact that there was disbursal of funds by the Financial Creditor to the Corporate Debtor. Receipt of this amount by the Corporate Debtor has not been controverted by the Appellant. Neither has any claim been made that this entire sum was repaid by the Corporate Debtor. That being the case there arises no doubt in our mind that there was a debt on the part of the Corporate Debtor qua the Financial Creditor which remained unpaid. There is no infirmity in the findings of the Adjudicating Authority that the Financial Creditor having successfully proved the financial debt and default on the part of the Corporate Debtor, Section 7 application has been admitted. There are no error in the order impugned passed by the Adjudicating Authority admitting the Section 7 application - there is no merit in the Appeal - appeal dismissed.

Summary

Issues Involved:
1. Alleged collusion and fraudulent intent in filing the Section 7 application.
2. Non-adjudication of IA No. 2002/2023 by the Adjudicating Authority.
3. Financial debt and default by the Corporate Debtor.

Summary:

1. Alleged Collusion and Fraudulent Intent:
The Appellant contended that the Section 7 application was filed in collusion between the Financial Creditor and Respondents No.2 to 4 with fraudulent and malicious intent. The Appellant argued that the Adjudicating Authority ignored the fraudulent nature of the insolvency petition. The Appellant emphasized that the IA No.2002/MB/2023, which highlighted the collusion, was not properly adjudicated. However, the Respondent argued that the Corporate Debtor had admitted the financial debt and default, and the Adjudicating Authority committed no error in admitting the Section 7 application.

2. Non-Adjudication of IA No. 2002/2023:
The Appellant claimed that the Adjudicating Authority passed the impugned order without adjudicating the IA No. 2002/2023, which alleged fraud and collusion among the Respondents. The Appellant cited previous judgments emphasizing the role of the Adjudicating Authority in preventing malicious insolvency petitions. However, the Respondent countered that the IA was considered and dismissed by the Adjudicating Authority on 17.05.2023 before passing the impugned order on 19.05.2023. The Adjudicating Authority found the IA to be frivolous and without merit, as it lacked authorization from the Board of Directors of the Corporate Debtor.

3. Financial Debt and Default:
The Adjudicating Authority found that the Corporate Debtor had admitted the financial debt and default in repayment of Rs.65,08,05,433/-. The Corporate Debtor attributed the default to economic downturns and the Covid pandemic but did not dispute the debt or the default. The Adjudicating Authority noted that the Corporate Debtor was attempting to settle the debt by seeking investors, indicating financial incapacity to repay the debt. The Tribunal upheld the Adjudicating Authority's findings, emphasizing that the financial debt and default were undisputed, and the Section 7 application was rightly admitted.

Conclusion:
The Tribunal dismissed the appeal, finding no error in the Adjudicating Authority's order admitting the Section 7 application. The Tribunal held that the financial debt and default were undisputed, and the IA No. 2002/2023 was rightly dismissed as frivolous. The appeal was dismissed with no costs.