2021 (1) TMI 901 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The Adjudicating Authority who was required to pass the order of admission or rejection of the application being satisfied about the completion of the application and proof of debt and default as mandated under Section 9(5) has failed to provide opportunity of rectifying the defect as noticed and allowing the applicant to bring it in conformity with the requirements of law. Dismissal of application as being non-maintainable for such technical defect is not warranted. The impugned order is set aside and matter remanded back to the Adjudicating Authority to allow the Appellant/Applicant opportunity of rectifying the defect, if any, in the application and thereafter pass order of admission or rejection in regard to initiation of Corporate Insolvency Resolution Process on merit. Appeal disposed off.

Summary

Issues:
Application for initiation of Corporate Insolvency Resolution Process dismissed on grounds of non-maintainability due to technical defects.

Analysis:
The Appellant, an Operational Creditor, filed an application seeking initiation of Corporate Insolvency Resolution Process against the Respondent, a Corporate Debtor. The Adjudicating Authority dismissed the application on the basis of non-maintainability, citing technical defects in the application. The Appellant challenged this decision, arguing that the Authority did not provide an opportunity to rectify the defects before dismissing the application.

Upon review, the Appellate Tribunal found that the main reason for dismissal was the absence of signatures on the application in the prescribed format and notarization. The Tribunal noted that the Board Resolution authorized the filing of the application and that two Advocates had signed the petition, albeit without a recorded date. The Tribunal emphasized that incompleteness is different from non-maintainability, with the latter having broader implications.

The Tribunal referred to Section 9(5) of the Insolvency and Bankruptcy Code, which mandates that the Adjudicating Authority must admit or reject an application within fourteen days of receipt. If the application is incomplete, the Authority should provide notice to rectify the defect. In this case, the Authority failed to give the Appellant an opportunity to correct the technical defect before dismissing the application.

Consequently, the Tribunal set aside the impugned order and remitted the matter back to the Adjudicating Authority. The Authority was instructed to allow the Appellant to rectify any defects in the application and then make a decision on the admission or rejection of the Corporate Insolvency Resolution Process. The Tribunal clarified that its decision did not express any opinion on the merits of the case.

The Tribunal directed the parties to appear before the Adjudicating Authority on a specific date for further proceedings. Overall, the Tribunal emphasized the importance of providing the Appellant with an opportunity to rectify technical defects before dismissing an application for non-maintainability.