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2024 (11) TMI 554 - AT - IBCDisqualification of Director of the Financial Creditor to sign the Section 7 Application - Rejection of Application under Section 7 signed by Vinod Sachdeva, Director of the Airwill Infracon and also Director in the Airwill JKM Infrastructure Pvt. Ltd. (the Financial Creditor herein) - Appellant submits that Infracon Company has been struck off on account of non-filing its Financial Statement for last 3 years, which attracts the disqualification of the Directors under Section 164 - HELD THAT - The basis of the submission of the Appellant that Airwill Infracon has not filed Financial Statement for continuous last 3 years hence the Directors have become disqualified does not commend us. Further for applicability of Section 164(2), essential condition is that the Company has not filed Financial Statement or Annual Return for any continuous period of 3 Financial Years. The Company Airwill Infracon has been incorporated on 26.02.2014 and last date of filing of Balance Sheet was mentioned as 31.03.2015. In the Reply which has been filed by Financial Creditor to the I.A.5670/2023, the Financial Creditor has clearly pleaded that said condition as contemplated under Section 164(2)(a) cannot also be attracted since there can be no default for filing of Financial Statement of 3 continuous Year. Company having been struck off on 08.08.2018. The submission of the Counsel for the Appellant is that in event, disqualification under sub-Section (2) of Section 164, the Office of Director becomes vacant in all the Companies other than the Company which is in default under the sub-Section (2). The Counsel for the Appellant contended that in view of the default committed by Airwill Infracon not filing the Financial Statement under sub-Section (2) of Section 164, the Office of the Director of all the Companies including Financial Creditor, where Vinod Sachdeva is the Director shall be vacated. It is relevant to notice that proviso has been inserted by Act of 01/2018 with effect from 07.05.2018. There are two reasons for which the said submission advanced by the Appellant cannot be accepted. The default under Section 164(2) has neither been proved nor is the basis of striking off the Airwill Infracon as was contended by the Counsel for the Appellant. There is no Applicability of Section 167(1) proviso to hold the Vinod Sachdeva as disqualified in the Airwill JKM Infrastructure Pvt. Ltd., the Financial Creditor. On the date of filing the Section 7 Application, Airwill Infracon had already been struck off, and the Vinod Sachdeva could not continue as Director of the Company Airwill Infracon having been dissolved, but that shall have no effect on continuance of Vinod Sachdeva as Director in Airwill JKM Infrastructure Pvt. Ltd. Vinod Sachdeva was fully competent to file Section 7 Application and swear Affidavit in support of Section 7 Application. There are no error in the Order of the Adjudicating Authority in rejecting the application filed by the Corporate Debtor. There are no merit in any of the Appeals - Appeals dismissed.
Issues Involved:
1. Authority of Vinod Sachdeva to file Section 7 Application. 2. Disqualification of Vinod Sachdeva under Section 164(2) of the Companies Act, 2013. 3. Applicability of Section 167(1) proviso regarding vacation of office by disqualified directors. 4. Grounds for striking off Airwill JKM Infracon Pvt. Ltd. Issue-wise Detailed Analysis: 1. Authority of Vinod Sachdeva to file Section 7 Application: The core issue was whether Vinod Sachdeva had the authority to file Section 7 Applications on behalf of the Financial Creditor. The Corporate Debtor argued that Vinod Sachdeva, being disqualified as a director of a sister company, Airwill JKM Infracon Pvt. Ltd., lacked the authority to file the application. However, the Financial Creditor contended that the striking off of Airwill Infracon was due to its failure to commence business operations, not due to non-filing of financial statements, which would invoke disqualification under Section 164(2). The tribunal concluded that Vinod Sachdeva was authorized by a board resolution dated 23.02.2022 to sign and verify the Section 7 Application, thus affirming his authority. 2. Disqualification of Vinod Sachdeva under Section 164(2): The Appellant argued that Vinod Sachdeva was disqualified under Section 164(2)(a) because Airwill Infracon did not file financial statements for three consecutive years. However, the tribunal found that Airwill Infracon was struck off not for non-filing of financial statements but for not carrying on business for two years, as per Section 248(1)(c). Therefore, the disqualification under Section 164(2) was not applicable, as the conditions for such disqualification were not met. 3. Applicability of Section 167(1) proviso regarding vacation of office by disqualified directors: The Appellant contended that under the proviso to Section 167(1)(a), Vinod Sachdeva should vacate his office in all companies due to the disqualification incurred under Section 164(2). However, the tribunal found that since there was no disqualification under Section 164(2), the proviso to Section 167(1) was not applicable. Moreover, the tribunal noted that the proviso was inserted on 07.05.2018, and there was no evidence of disqualification occurring after this date. 4. Grounds for striking off Airwill JKM Infracon Pvt. Ltd.: The tribunal examined the grounds for striking off Airwill Infracon and found that it was not due to non-compliance with Section 164(2) but rather due to the company not carrying on any business for two years, as per Section 248(1)(c). The tribunal referred to public notices issued by the Registrar of Companies, confirming that the company was struck off for not carrying on business, not for failing to file financial statements. This distinction was crucial in determining the applicability of disqualification provisions. Conclusion: The tribunal dismissed the appeals, affirming that Vinod Sachdeva was not disqualified under Section 164(2) and was competent to file the Section 7 Applications. The tribunal upheld the Adjudicating Authority's decision to reject the applications for dismissal filed by the Corporate Debtor. The tribunal requested the Adjudicating Authority to expeditiously consider the Section 7 Applications filed by the Financial Creditors. Both parties were directed to bear their own costs.
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