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TMI Blog2024 (7) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Proceedings ('CIRP' in short) against itself. Aggrieved by the impugned order, the present appeal has been preferred. 2. Making submissions, the Learned Counsel for the Appellant submitted that Agroha Paper Industries Pvt. Ltd.- Corporate Debtor had filed an application under Section 10 of IBC for initiation of CIRP against itself. The reason given by the Corporate Debtor for filing the Section 10 application was fiscal distress and suffering of business losses triggered by the Covid pandemic. The net worth having suffered an erosion, it was not in a position to repay the loan which it had availed from the Respondent-Bank of Maharashtra which led to the Respondent Bank declaring the account of the Corporate Applicant as NPA on 28.10.2018. It is further submitted that thereafter the Respondent Bank issued a Demand Notice on 11.01.2019 under Section 13(2) of the SARFAESI Act, 2002. In their reply to the demand notice, the Corporate Debtor had sought additional loan facility from the Respondent Bank which proposal was not accepted by the Respondent Bank. Though having defaulted in making repayment of outstanding loan to the Respondent Bank but being of the view that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considering admission of Section 10 application as per the statutory scheme of IBC. 5. Refuting the contentions of the Appellant, the Learned Counsel for the Respondent submitted that that the Appellant had defaulted in repaying the loan facility which had been secured by them from the Respondent Bank. Repeated notices were issued to the Corporate Debtor prior to their declaration as a wilful defaulter but they intentionally failed to appear before the Bank authorities for hearing. The Respondent Bank therefore invoked Sections 13(2) and (4) of the SARFAESI Act and after issue of notice took possession of the properties of the Appellant mortgaged to the Bank and placed notice of sale/public auction. The sale bid had also been confirmed to the successful bidder before the filing of Section 10 application. In the interregnum, the Corporate Debtor realising that their attempts to obtain a One Time Settlement ('OTS' in short) with the bank was turning futile and recovery of the outstanding debt by the Respondent Bank loomed imminent, they chose to file the Section 10 application with a view to take undue advantage of the moratorium provisions of IBC to stall further recovery proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt and default stood clearly established. In such circumstances, it is canvassed that the impugned order was not in conformity with the requirements and mandate of Section 10 of IBC. 8. Repelling the contentions of the Corporate Debtor, the Respondent Bank has contended that the Appellant had failed to repay the loan as per the terms and conditions of the Bank and neglected all notices of default issued by the Respondent Bank. It is also their contention that when they initiated recovery proceedings before the appropriate forum in accordance with law, the Appellant tried to create a logjam by filing a securitisation application before the Debts Recovery Tribunal, Lucknow ('DRT' in short) and subsequently a writ petition before the Hon'ble Allahabad High Court. Having not succeeded in their objective to scuttle recovery proceedings, the Appellant then filed an application under Section 10 IBC purely to wriggle out of their liability to pay. Thus, according to the Respondent Bank, the Section 10 application was filed for reasons other than for insolvency resolution and thus fell foul of the objectives of the IBC. 9. The short question that arises before us is whether the Adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out by the Respondent Bank has also been taken cognisance of by the Adjudicating Authority in concluding that the Appellant has come before it with unclean hands. 12. Learned Counsel for the Appellant has relied upon the judgment of this Tribunal in Unigreen and Leo Duct supra to canvass that it is incumbent upon the Adjudicating Authority to admit Section 10 application once the application is complete and cannot reject the application on any other ground. The facts of those cases are clearly distinct from the facts of this case. In Unigreen and Leo Duct supra, the issue which arose for consideration was whether nondisclosure of facts relating to third party civil suits by the Adjudicating Authority amounted to over-reaching the statutory requirements under Section 10 of IBC read with relevant regulations. In the present case, the Adjudicating Authority has not sought any third-party information but only endeavoured to find out whether the Appellant has come up with unclean hands by filing the Section 10 application for purpose other than insolvency resolution. Hence, the above judgments do not come to the aid of the Appellant. 13. We would like to next dwell upon the SARF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er filed by the Corporate Applicant to the objections raised by the Financial Creditor, do not further advance the case in its favour only by stating that the auction of assets are at undervalued prices, and would defeat the very purpose of the application filed U/s 10 of the Code. The contention raised on behalf of the Corporate Applicant that the DRT, Lucknow has granted status quo in respect of the several properties vide its order dated 22.11.2022, however it is noted that the auction already took place on 16.07.2022 as per the sale auction notice issued by the Financial Creditor/ Bank by following due procedure. 29. We have also noted that the Bank in its para no. 14 of the reply/ objection has also stated that it has handed over the enquiry to the detective agency for enquiring the net worth and asset details of the applicants and the Bank have sufficient cause to believe that the applicant having sufficient means is still not ready to repay the loan. In view of this, the intentions of the Corporate Applicant to preempt any such similar proceedings for recovery by the Bank deserves to be deprecated. 30. The application filed U/s 10 thus lacks bonafide from all perspecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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