2018 (8) TMI 1959 - AT - Insolvency and Bankruptcy

Tribunal Upholds Decision on Financial Creditor Application under I&B Code

V.R. Hemantraj Versus Stanbic Bank Ghana Ltd, Deepa V Ramani

The Tribunal upheld the Adjudicating Authority's decision to admit the application under Section 7 of the I&B Code, determining that the 1st ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - financial creditor or not - presence of debt and default or not - HELD THAT:- Application under Section 7 is filed in Form I which is in 5 Parts. It is not a recovery proceeding or a proceeding for determination of claim on merit, which can be decided only by a court of competent jurisdiction. Application under Section 7 or 9 or 10 of I&B Code being not money claim or suit and not being an adversarial litigation, the Adjudicating Authority is not required to write a detailed decision as to which are the evidence relied upon for its satisfaction. The Adjudicating Authority is only required to be satisfied that there is a ‘debt’ and default has occurred - In the present case the Adjudicating Authority has held that “a prima facie case has been made out” by the 1st Respondent/applicant. Such observations having made, the Adjudicating Authority expressed its final satisfaction both about existence of debt and default. The ‘corporate debtor’ has taken a plea that there is no debt or that default has not occurred. As the appellant is silent on such issue, in absence of any objection, we accept that the Corporate Debtor has not disputed the question of debt and default. Appeal dismissed. Issues:1. Whether the 1st respondent qualifies as a financial creditor under the I&B Code.2. Whether the application by the 1st respondent was maintainable in the absence of a document of debt or default.Analysis:1. The 1st respondent, a bank, was held to be a financial creditor as per the I&B Code based on providing a loan to the subsidiary of the corporate debtor, with the corporate debtor acting as a guarantor. This arrangement fell within the definition of a financial creditor under the Code.2. The appellant argued that the Adjudicating Authority did not fulfill the requirements under Section 7(5) of the I&B Code, citing a Supreme Court case. However, the Tribunal rejected this argument, stating that a record of decree serves as proof of debt, and the default record is necessary to show non-payment according to the decree.3. The Tribunal referenced the Innoventive Industries case to emphasize the importance of the Adjudicating Authority being satisfied about the debt and default before admitting an application under Section 7. The Authority's satisfaction is crucial, and the application must be admitted if a default is confirmed.4. The Tribunal clarified that the Adjudicating Authority's role is not to determine claims on merit but to ascertain the existence of debt and default. In this case, the Authority had expressed satisfaction regarding both aspects, leading to the admission of the application.5. The appellant's argument regarding the ex parte nature of the decree was dismissed, with the Tribunal stating that such issues fall under the jurisdiction of a competent court for challenge. The decree was considered valid evidence supporting the existence of debt, leading to the application's admission.6. It was noted that the corporate debtor did not dispute the debt or default, strengthening the case for admission of the application. The Tribunal found no merit in the appeal and dismissed it without costs.In conclusion, the judgment upheld the Adjudicating Authority's decision to admit the application under Section 7 of the I&B Code, emphasizing the importance of establishing debt and default satisfaction before proceeding with the Corporate Insolvency Resolution Process.