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2019 (10) TMI 332 - AT - IBCMaintainability of application - initiation of CIRP - Corporate Guarantee has been given by Corporate Debtor or not? - pre-existing dispute or not - Section 7 of the I B Code - HELD THAT - In the case of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. 2017 (9) TMI 58 - SUPREME COURT it was held that Once the Adjudicating Authority is satisfied on the basis of records that the debt is payable and there is default, the Adjudicating Authority is required to admit the application. The Respondent M/s Pashupati Jewellers having enclosed the copy of the Corporate Guarantee and Undertaking Agreement dated 7th April, 2017 instituted on e-Stamp, issued by Government of National Capital Territory of Delhi, it was not open to the Adjudicating Authority to deliberate on the issue whether e-Stamp is a forged document or not - Merely because a suit has been filed by the Appellant and pending, cannot be a ground to reject the application under Section 7 of the I B Code. Pre-existing dispute cannot be a subject matter of Section 7, though it may be relevant under Section 9 of the I B Code. Appeal dismissed.
Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on a 'Corporate Guarantee and Undertaking' Agreement dated 7th April, 2017; Allegation of fraud in obtaining the agreement; Validity of the agreement as per the Companies Act, 2013; Interpretation of the Supreme Court's observations in "Innoventive Industries Ltd. Vs. ICICI Bank and Anr. - (2018) 1 SCC 407" regarding default and debt under the Insolvency and Bankruptcy Code. Analysis: 1. The appeal was filed against the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, by the Adjudicating Authority. The appellant argued that the 'Corporate Guarantee and Undertaking' Agreement dated 7th April, 2017, was obtained fraudulently and was not reflected in the records of the Corporate Debtor available with the Registrar of Companies, making the application not maintainable under the law. 2. The Tribunal noted that the agreement in question was executed on e-Stamp, issued by the Government of National Capital Territory of Delhi, clearly showing the involvement of the Corporate Debtor. The fact that the agreement was not reflected in the Registrar of Companies' records did not invalidate its existence. The Tribunal emphasized that the Corporate Guarantee was entered into by the Management of the Corporate Debtor, and any failure to register it with the Registrar of Companies did not negate its validity. 3. Referring to the Supreme Court's observations in "Innoventive Industries Ltd. Vs. ICICI Bank and Anr. - (2018) 1 SCC 407," the Tribunal highlighted the broad definition of default and debt under the Insolvency and Bankruptcy Code. The Court's ruling emphasized that once the Adjudicating Authority is satisfied that a debt is payable and there is a default, the application must be admitted. The Tribunal concluded that the existence of the 'Corporate Guarantee and Undertaking' Agreement, supported by the e-Stamp, was sufficient for the Adjudicating Authority to admit the application under Section 7. 4. The Tribunal dismissed the appeal, stating that there was no merit in the arguments presented. However, it cautioned that the observations made in the appeal could not be used to decide the pending suit, if any. The Tribunal clarified that pre-existing disputes should be addressed under Section 9 of the Insolvency and Bankruptcy Code, not Section 7, emphasizing the importance of adhering to the statutory provisions and established legal principles in insolvency proceedings.
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