2021 (2) TMI 1367 - AT - Insolvency and Bankruptcy

Tribunal Confirms Only Financial Creditor & Corporate Debtor Needed Pre-Admission in Insolvency Applications.

The Tribunal dismissed the appeal for impleadment, affirming the Adjudicating Authority's decision to reject the application. It held that at the ... Seeking impleadment as a necessary party - pre-admission stage under Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The ground projected by the Appellant in his capacity as Resolution Professional of NDL for seeking impleadment in pending consideration before the Adjudicating Authority does not warrant impleadment of Appellant as party Respondent. In an application under Section 7, the Financial Creditor and the Corporate Debtor alone are the necessary party and the Adjudicating Authority is, at the pre-admission stage, only required to satisfy itself that there is a financial debt in respect whereof the Corporate Debtor has committed a default warranting triggering of CIRP. The Adjudicating Authority is required to satisfy itself in regard to there being a financial debt and default thereof on the part of the Corporate Debtor besides the application being complete as mandated under Section 7(5) of the ‘I&B Code’ and then pass an order of admission or rejection on merit as mandated under sub-section (4) of Section 7 within 14 days. No third party intervention is contemplated at that stage. No lengthy hearing is warranted at the pre-admission stage nor can the dispute in regard to shareholding or inter se directorial issue be entertained. There are no legal infirmity in the impugned order passed by the Adjudicating Authority. The course open to Appellant would be to apprise the IRP of the admission of the claim in CIRP of NDL if the application under Section 7 pending before the Adjudicating Authority is admitted and IRP is appointed. Such situation may not arise if the Adjudicating Authority is not satisfied about debt and default. Appeal dismissed. Issues:1. Impleadment sought by the Appellant in a pending case under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Rejection of the impleadment application by the Adjudicating Authority.3. Appellant's argument based on being the Resolution Professional of two companies.4. Legal validity of the impugned order and the necessity of the Appellant's impleadment.Analysis:1. The Appellant, seeking impleadment in a case pending under Section 7 of the Insolvency and Bankruptcy Code, was aggrieved by the rejection of the application by the Adjudicating Authority. The Appellant, as the Resolution Professional of two companies undergoing Corporate Insolvency Resolution Process (CIRP), argued that his impleadment was crucial due to the interests involved.2. The Appellant contended that the main Company Petition sought to trigger CIRP against one of the companies he represented, potentially impacting its equity shares and the interests of homebuyers. Reference was made to a previous judgment by the Appellate Tribunal to support the argument against the maintainability of the application under Section 7.3. However, after considering the submissions and reviewing the record, the Tribunal held that in an application under Section 7, only the Financial Creditor and the Corporate Debtor are necessary parties at the pre-admission stage. The Adjudicating Authority's role is to determine the existence of a financial debt and default by the Corporate Debtor, without entertaining third-party interventions or disputes related to shareholding or directorial issues.4. The Tribunal emphasized that no extensive hearing is required at the pre-admission stage, and the focus should remain on the financial aspects relevant to triggering CIRP. Consequently, the impugned order rejecting the Appellant's impleadment was deemed legally sound, with the Appellant advised to inform the Interim Resolution Professional (IRP) if the application under Section 7 is admitted.5. In conclusion, the appeal for impleadment was dismissed, with no costs imposed. The judgment underscored the limited scope of involvement at the pre-admission stage of insolvency proceedings, emphasizing the specific roles of the Financial Creditor, Corporate Debtor, and the Adjudicating Authority in determining the admission or rejection of applications under the Insolvency and Bankruptcy Code.