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2020 (6) TMI 661 - AT - Insolvency and BankruptcyCIRP process - Proposal for One Time Settlement rejected - Financial Creditor was not agreed with the proposal and on the ground that the settlement is going on some hearing dates have been adjourned - initiation of parallel proceedings under SARFAESI Act, 2002 as well as under I B Code - whether filing of parallel proceedings attracts proceedings under section 65 of I B code? HELD THAT - The Financial Creditor can proceed simultaneously under SARFAESI Act, 2002 as well as under I B Code. Section 238 of I B Code provides that the provisions of this code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by the virtue of any such law. Thus, the non-obstante clause of the I B Code will prevail over any other law for the time being in force - Ld. Adjudicating has incorrectly held that after initiating proceedings under SARFAESI Act the Appellant i.e. Financial Creditor should be precluded from filing application under section 7 of I B Code. From the reading of impugned order it seems that as the Financial Creditor has initiated parallel proceedings. Hence, Adjudicating Authority has drawn the conclusion that the Financial Creditor fraudulently/maliciously initiated proceedings under I B Code against the Corporate Debtor - In the application under section 7 of I B Code Financial Creditor has mentioned that the Corporate Debtor has sent the notice under section 13 (2) of SARFAESI Act, 2002, thus, the Financial Creditor has not suppressed any material fact. The Financial Creditor has initiated parallel proceedings against the Corporate Debtor in SARFAESI Act as well as I B Code, only on this ground it cannot be inferred that proceedings against the Corporate Debtor are fraudulent or malicious. The Adjudicating Authority shall decide the application expeditiously as per law.
Issues involved:
1. Whether a Financial Creditor can initiate parallel proceedings under the SARFAESI Act, 2002 and the Insolvency & Bankruptcy Code, 2016. 2. Whether the filing of parallel proceedings attracts penalties under section 65 of the Insolvency & Bankruptcy Code. Analysis: Issue 1: The Appellant, Punjab National Bank, filed an appeal against an order passed by the Adjudicating Authority under the Insolvency & Bankruptcy Code, 2016 (I&B Code). The case involved the Financial Creditor (Appellant) filing an application against the Corporate Debtor (Respondent) under section 7 of the I&B Code. The Adjudicating Authority found that the Financial Creditor had initiated parallel proceedings under the SARFAESI Act, 2002, while also proceeding under the I&B Code, leading to allegations of forum shopping. The question arose whether a Financial Creditor can simultaneously pursue actions under both legislations. The Tribunal cited relevant judgments, including one by the Hon'ble Madras High Court, emphasizing the independence of proceedings under the I&B Code and the permissibility of filing applications under section 7 despite other ongoing proceedings. The Tribunal held that the Financial Creditor can proceed under both the SARFAESI Act, 2002, and the I&B Code concurrently, as the I&B Code's provisions prevail over inconsistent laws. Issue 2: The Adjudicating Authority's order raised the issue of whether the Financial Creditor's actions amounted to fraudulent or malicious initiation of proceedings under the I&B Code. The Tribunal observed that the Financial Creditor had disclosed the notice served under the SARFAESI Act, 2002, in the application under section 7 of the I&B Code, indicating no suppression of material facts. The Tribunal emphasized that the mere initiation of parallel proceedings does not automatically imply fraudulent intent. The Tribunal set aside the Adjudicating Authority's order, highlighting the need for an expeditious decision on the pending application under section 7 of the I&B Code. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order without imposing any costs, based on the findings that the Financial Creditor can pursue parallel proceedings under the SARFAESI Act, 2002, and the I&B Code, and that the mere initiation of such parallel actions does not necessarily indicate fraudulent or malicious intent. This detailed analysis of the judgment by the National Company Law Appellate Tribunal, New Delhi, provides a comprehensive understanding of the issues involved and the Tribunal's reasoning behind the decision.
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