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TMI Blog2023 (2) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority - appeal dismissed. - Company Appeal ( AT ) Insolvency No. 228 of 2021 - - - Dated:- 23-2-2023 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Mr. Shreesha Merla ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha, Mr. Saikat Sarkar, Mr. Udit Gupta, Mr. Vyom Chaturvedi, Advocates For the Respondent : Respondent No. -1 appeared but not marked appearance Mr. O.P. Gaggar, Mr. Sachindra Karn, Advocates for R-2. JUDGMENT Justice Anant Bijay Singh; The instant Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) preferred by the Appellants being aggrieved and dissatisfied by the order dated 19.02.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench, Chandigarh) in IA No. 1/2021 in CP (IB) No. 351/Chd/Pb/2018 whereby IA No. 1/2021 filed by the Appellants herein claiming to be the Financial Creditors of the Corporate Debtor seeking to intervene in the CP (IB) No. 351/Chd/Pb/2018 filed by the Central Bank of India (Respondent No. 2 herein). By which the Adjudicating Authority passed the following orders: .. 8. In the circumstances and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been impleaded 4. It is further submitted that the third party under Section 65 can intervene at the stage of Section 7 of the Code. The findings rendered in paragraph 6 of the impugned order are incorrect in law. It is rather well settled that any party may intervene in a petition filed under the Insolvency and Bankruptcy Code to demonstrate that the petition has been filed for a purpose other than for resolution of insolvency, or liquidation . In this regard, Section 65 of Code is relied upon, which reads as under: 65. Fraudulent or malicious initiation of proceedings. (1) if, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees. (2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees but may ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the Adjudicating Authority in case such an allegation is raised to go into the same. In case, such an objection is raised or application is filed before the Adjudicating Authority, obviously, it has to be dealt with in accordance with law. The plea of collusion could not have been raised for the first time in the appeal before the NCLAT or before this Court in this appeal. Thus, we relegate the appellant to the remedy before the Adjudicating Authority. 8. In case, a proper application is filed, aspect whether the proceedings have been initiated in collusive manner will be looked into, in accordance with law and the appropriate orders have to be passed, considering the facts and circumstances of the case. We have made it clear that we have not commented on the merit of the case. We set aside the impugned order passed by the NCLAT and dispose of the appeal in accordance with the aforesaid direction. Embassy Property Developments Private Limited v. State of Karnataka, 2019 SCC Online SC 1542 (Hon ble Supreme Court). 52. Even fraudulent tradings carried on by the Corporate Debtor during the insolvency resolution, can be inquired into by the Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 65 of the Code, a 'prima facie' opinion is required to be arrived at that a person has filed the petition for initiation of proceedings fraudulently or with malicious intent. No penalty can be saddled either under Section 65(1) or (2) of the Code without recording an opinion that a prima facie case is established to suggest that a person fraudulently‟ or with malicious intent for the purpose other than the resolution of Insolvency or Liquidation or with an intent to defraud any person has filed the Application. 8. Further, non- consideration of fraud under Section 65 of the Code 12. The Adjudicating Authority in paragraph 3 of impugned order recorded the submission by the counsel for the Appellant that the Respondent-Bank committed an illegal action by granting loan for industrial activity on agricultural land. However, at paragraph 7, the Adjudicating Authority does not refer to this allegation at all. Therefore, there is a prima facie case of fraud, the Appellants ought to have been impleaded by the Adjudicating Authority. Further, the impugned order does not consider that no prejudice caused to any party if the Appellants herein are permitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7 of the Code, it is incumbent upon a financial creditor to disclose, in part V of Form 1, any particulars of security held by it and its estimated valuation. Such details furnished by the financial creditor ought to be true and correct. However, if the nature/status of such security is incorrect the application under Section 7 of the Code remains defective. Mention of such an entry in Form 1 shows that legislative intent under the code is that while deciding an application under Section 7 of the Code, the Adjudicating Authority is able to decide the status of such petitioning creditor. In the present case, the Adjudicating Authority, instead of adjudicating on the status of the Petitioning Creditor, dismissed the application on an erroneous consideration that the Petitioning Creditor before it is a nationalized Bank. Such a reasoning is irrelevant for the purpose of an application under Section 65 of the Code. Additionally, the Impugned Order ignores the fact that the Bank had conveniently suppressed the status of the security as disclosed in its application filed under Section 7 of the Code. Further, the burden of disclosing the correct status of such security was on the Bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the bank when the section 7 petition was Rs. 47.36 crores. which presently shall be more than Rs. 72 crores. The said petition has been pending admission before the Chandigarh Bench of the NCLT since then which is more than 3 years and 4 months. The Respondent No. 1 has been able to drag the matter on one or other pretext by raising frivolous and unconcerned claims and has been able to delay simple admission of the section 7 petition. It is a fact that the amount due to the Respondent bank is duly recorded as default and there is no legal defence to the section 7 petition which, as stated by the Hon ble Supreme Court and Hon ble Tribunal in a number of judgments, is not an adversarial litigation but is meant for resolution of corporate insolvency and is in the large interest of both the parties. 14. It is further submitted that as per the scheme of law, upheld by the Hon ble Supreme Court, the legislature has prescribed a definite time frame for the adjudication of section 7 petition. The petition, if found in order, the adjudicating authority has to ascertain default within 14 days of filing the petition (in this case the same was not required because the bank itself has file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. xx xx 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise. The issues canvassed by the Appellants in the appeal are not of concern to these proceedings. The appellant shall be able to raise his claim in the corporate insolvency resolution process. 15. After hearing the parties and going through the pleadings made on behalf of the parties, we observe that the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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