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2024 (4) TMI 869 - AT - Insolvency and BankruptcyRejection of application filed by the Appellant (Suspended Director) before the Adjudicating Authority - Challenging the authority of another director's actions and Approval of Resolution Plan CIRP - The appellant contends that the reply filed by another director on behalf of the Corporate Debtor was unauthorized and vexatious, intended to obscure alleged collusions and mismanagement. - HELD THAT - The Adjudicating Authority in the impugned order has although noted certain submission of the Appellant made in the application but held that there being no authorization of the Board of Directors to file the application, application appears to be frivolous and seem to have been filed with the view to delay the proceeding. Appellant in the application has not claimed the application is being filed by any authorization of the Board. In the reply which was filed by Respondent No.2, which is also on the record, does not indicate that Respondent No.2 claimed any board resolution for filing reply on behalf of the Corporate Debtor. When reply filed by Respondent No.2 dated 09.05.2023 did not claim any board resolution for filing reply, we fail to see that how the application filed by the Appellant can be rejected on the ground that there is no board resolution supporting filing of the application. Appellant has filed the application as Director of the Corporate Debtor to bring various facts which according to the Appellant indicate that there is collusion between Respondent No.2, 3 and the Financial Creditor and several relevant facts have not been brought before the Adjudicating Authority by Respondent No.2 in his reply. The facts and material brought on the record does indicate that there has been serious dispute between the Directors inter se and a Memorandum of Understanding was also executed on 2901.2022, in which Memorandum of Understanding both the Appellant as well as Respondent No.2 and 3 with other persons were parties. The observations of the Adjudicating Authority that application has been filed to delay the proceeding also does not commend us. 11.05.2023 was the first date of hearing on which order was reserved. The application was filed within three days i.e. on 14.5.2023, hence, conclusion drawn by the Adjudicating Authority that application has been filed to delay the proceeding is without any basis. The impugned order set aside - appeal allowed.
Issues Involved:
1. Authorization of the Applicant. 2. Allegations of Collusion and Malafide Acts. 3. Timeliness of the Application. 4. Admissibility of the Section 7 Application. 5. Judicial Observations and Precedents. Summary: 1. Authorization of the Applicant: The appeal was filed by a Suspended Director of the Corporate Debtor challenging the order dated 17.05.2023 by the National Company Law Tribunal (NCLT), Mumbai Bench, which dismissed the application IA/2002/2023. The Adjudicating Authority observed that the Applicant was not authorized by the Corporate Debtor and deemed the application vexatious. The Appellant contended that the application was filed in his capacity as a Director and not based on any board resolution. 2. Allegations of Collusion and Malafide Acts: The Appellant alleged that the Section 7 application filed by Respondent No.1 was in collusion with Respondent Nos. 2 and 3, who were acting without proper authorization. The Appellant argued that various illegalities in loan documents and mortgage deeds were not disclosed to the Tribunal. The Appellant also highlighted a Memorandum of Understanding (MoU) dated 29.01.2022, which was allegedly not complied with by Respondent Nos. 2 and 3, who continued to act as Directors despite agreeing to retire. 3. Timeliness of the Application: The Appellant filed the application on 14.05.2023, three days after the hearing on 11.05.2023 when the order was reserved. The Tribunal found that the application was not belatedly filed, as it was submitted within a reasonable time after the Appellant became aware of the proceedings. 4. Admissibility of the Section 7 Application: The Adjudicating Authority admitted the Section 7 application filed by the Financial Creditor, which claimed a default of Rs.34,41,00,000/- and an additional amount of Rs.65,08,05,433/-. The Appellant argued that the reply filed by Respondent No.2 on behalf of the Corporate Debtor was unauthorized and concealed important facts. The Tribunal noted that the Adjudicating Authority should have considered the allegations of collusion and malafide acts instead of dismissing the application on procedural grounds. 5. Judicial Observations and Precedents: The Tribunal referred to various judgments, including "CFM Asset Reconstruction Pvt. Ltd. vs. Swatantra Kumar & Anr." and "Beacon Trusteeship Limited vs. Earthcon Infracon Private Limited," emphasizing the need to examine allegations of collusion and fraudulent initiation of proceedings. The Tribunal also noted the doctrine of indoor management, which allows creditors to presume the validity of internal corporate actions unless there are suspicious circumstances. Conclusion: The Tribunal set aside the order dated 17.05.2023, allowing the Appellant to file appropriate applications before the Adjudicating Authority. The Tribunal clarified that its observations were not an expression of opinion on the merits of the allegations. The appeal was allowed, and the Appellant was granted the opportunity to present relevant materials and arguments before the Adjudicating Authority.
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