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2023 (2) TMI 1046 - AT - Insolvency and BankruptcySeeking intervention of petition - Adjudicating Authority by way of the impugned order, without even issuing notice or considering the issue of fraud, erroneously dismissed the application for intervention filed by the Appellants - HELD THAT - The application under Section 7 by a Financial Creditor against the Corporate Debtor was pending for consideration and for admission and in the meanwhile, the Appellants are seeking intervention, not on the ground that the Corporate Debtor defaulted in payment of amounts to them, but, on the ground that the Company Petition filed by the Central Bank of India, the Respondent No. 2 herein was not for legitimate reasons but it is a malicious prosecution that falls under Section 65 of the IBC. The Appellants have been ostensibly setup by the Respondent No. 1 Company for the purpose of derailing the lawful action of the Respondent Bank under Section 7 of the IBC - there are no merit in the Appeal to interfere with the order impugned passed by the Adjudicating Authority - appeal dismissed.
Issues Involved
1. Whether the Appellants could intervene in the insolvency proceedings initiated by the Respondent Bank under Section 7 of the Insolvency and Bankruptcy Code (IBC). 2. Whether the insolvency proceedings initiated by the Respondent Bank were fraudulent or malicious under Section 65 of the IBC. 3. The impact of the Appellants' claims as Financial Creditors on the insolvency proceedings. Detailed Analysis Issue 1: Intervention by Appellants in Insolvency Proceedings The Appellants sought to intervene in the insolvency proceedings initiated by the Respondent Bank against the Corporate Debtor. The Adjudicating Authority dismissed the intervention application, stating that a third party does not find place in an application under Section 7 and Section 9 of the IBC. The Appellants argued that under Section 65 of the IBC, any party may intervene to demonstrate that the petition has been filed fraudulently or with malicious intent. They relied on judgments such as *SREI Infrastructure Finance Ltd. v. Right Tower Pvt. Ltd* and *Beacon Trusteeship Ltd v. Earthcon Infracon (P) Ltd*, which supported the view that any person can bring to the notice of the Adjudicating Authority that the insolvency resolution process has been initiated fraudulently. Issue 2: Fraudulent or Malicious Proceedings under Section 65 of IBC The Appellants contended that the insolvency proceedings initiated by the Respondent Bank were based on false claims and collusion with the Corporate Debtor, aimed at defeating the claims of the Appellants. They argued that the land in question was agricultural land, contrary to the Bank's claim that it was for industrial activity. The Appellants cited several judgments to support their claim that the Adjudicating Authority must investigate allegations of fraud. However, the Adjudicating Authority did not find any merit in these allegations and dismissed the application without issuing notice or considering the issue of fraud. Issue 3: Appellants' Claims as Financial Creditors The Appellants claimed to be Financial Creditors of the Corporate Debtor, having lent sums of Rs. 21,00,000/- and Rs. 3,00,000/- respectively. They argued that the insolvency proceedings would affect their claims and that they should be allowed to intervene. However, the Adjudicating Authority found that the claims of the Appellants did not warrant intervention in the insolvency proceedings initiated by the Respondent Bank. The Tribunal observed that the Appellants were likely set up by the Corporate Debtor to derail the lawful action of the Respondent Bank. Conclusion The Tribunal upheld the Adjudicating Authority's decision to dismiss the intervention application filed by the Appellants. It found no merit in the allegations of fraud and collusion made by the Appellants against the Respondent Bank. The Tribunal affirmed the impugned order dated 19.02.2021 and dismissed the appeal, concluding that the intervention was not justified and that the insolvency proceedings initiated by the Respondent Bank should proceed without interference. The Tribunal also noted that the Appellants could raise their claims during the Corporate Insolvency Resolution Process.
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