2019 (9) TMI 415 - AT - Insolvency and Bankruptcy

Application u/s 7 of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor failed to pay the debt and default occurred - HELD THAT - Adjudicating Authority found that there is a debt and default and the application filed by the Financial Creditor was complete, we find no infirmity in the impugned order of admission. We observe that if the Financial Creditor satisfies all the requirements, the Adjudicating Authority has no discretion to reject the application or defer it unless the Corporate Debtor submits that they intend to settle the claim. Only if such request is made to settle the claim, the Adjudicating Authority may give one opportunity to the Corporate Debtor to do so instead of admitting the application.

Summary

Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
The appeal before the National Company Law Appellate Tribunal pertained to an application filed by 'ICICI Bank Limited' under Section 7 of the Insolvency and Bankruptcy Code, 2016 against 'Gwalior Bypass Project Limited' (the Corporate Debtor). The Adjudicating Authority had admitted the application, leading to the present appeal by the Promoter/Shareholder.

The Appellant contended that the impugned order disregarded the provisions of Section 7(5)(a) of the I&B Code, which grants the Adjudicating Authority discretion to admit or reject an application even in cases of default. However, the Tribunal noted that the Corporate Debtor had indeed failed to pay the debt, and a default had occurred, as per the Supreme Court's observations in the case of "Innoventive Industries Limited v. ICICI Bank and Anr."

Referring to the Supreme Court's decision, the Tribunal highlighted that the I&B Code triggers the insolvency resolution process upon a default of rupees one lakh or more. It explained the distinction between financial creditors and operational creditors, emphasizing the requirements and process under Section 7 for a financial creditor to trigger the insolvency resolution process.

In light of the Supreme Court's ruling and the Adjudicating Authority's findings of debt and default, the Tribunal found no flaw in the order of admission. It emphasized that if a Financial Creditor meets all requirements, the Adjudicating Authority is bound to admit the application without discretion, except if the Corporate Debtor expresses intent to settle the claim, in which case the Authority may provide an opportunity for settlement before admission.

Ultimately, the Tribunal dismissed the appeal, affirming the admission order and providing specific observations on the Adjudicating Authority's limited discretion in such matters. No costs were awarded in the case.