2017 (7) TMI 505 - Tri - Insolvency and Bankruptcy

Petition rejected for non-compliance with mandatory requirements under Insolvency and Bankruptcy Code

Macquarie Bank Limited Versus Uttam Galva Metallics Limited

Macquarie Bank Limited Versus Uttam Galva Metallics Limited - Tmi Issues Involved:1. Validity of the Power of Attorney.2. Entitlement of the petitioner as an assignee of the original supplier.3. Compliance with clause (c) of Section 9(3) of the Code.4. Notice of the existence of the dispute.5. Locus-standi of the petitioner after being reimbursed by the insurer.Issue-wise Analysis:Issue No.1: Validity of the Power of AttorneyThe tribunal examined whether the petition was filed based on a valid power of attorney. The power of attorney dated 14.12.2016 authorized Mr. Pankaj Sachdeva to demand outstanding amounts, file suits, engage advocates, and undertake legal proceedings. The tribunal noted that the power of attorney was executed after the Insolvency and Bankruptcy Code (IBC) came into force, thus covering the authority to file insolvency resolution processes. The tribunal held that the power of attorney was valid and the issue was decided in favor of the petitioner.Issue No.2: Entitlement of the Petitioner as an AssigneeThe petitioner relied on a non-recourse receivables purchase agreement dated 27.07.2015, which allowed the original supplier to transfer receivables to a financial institution. The tribunal found that the petitioner, being a financial institution, was entitled to file the petition as an assignee. The tribunal dismissed the respondent's contention that the assignment was invalid due to a lack of prior written consent, as the sales contract allowed the transfer of receivables to a financial institution. The issue was decided in favor of the petitioner.Issue No.3: Compliance with Clause (c) of Section 9(3) of the CodeThe tribunal examined whether the petitioner complied with the requirement to furnish a certificate from a financial institution confirming non-payment of the operational debt. The petitioner filed the certificate late, and the tribunal noted that the petitioner, being a foreign bank, did not fall within the definition of a 'financial institution' under the Code. The tribunal referred to the National Company Law Appellate Tribunal (NCLAT) decision in 'Smart Timing Steel Ltd. v. National Steel and Agro Industries Ltd.,' which held that compliance with Section 9(3)(c) is mandatory. The tribunal concluded that the petitioner did not comply with this mandatory requirement, and the issue was decided against the petitioner.Issue No.4: Notice of the Existence of the DisputeThe tribunal considered whether the petitioner had notice of a dispute regarding the debt. The respondent had raised quality issues in a letter dated 11.04.2016 and reiterated these concerns in subsequent communications, including a reply to a statutory notice under Sections 433 and 434 of the Companies Act, 1956. The tribunal found that the dispute was raised before the IBC came into force and was sufficient to attract the provisions of Section 9(5)(ii)(d) of the Code. The tribunal referred to the NCLAT decision in 'MCL Global Steel (P.) Ltd. v. Essar Projects India Ltd.,' which supported the existence of a dispute. The issue was decided against the petitioner.Issue No.5: Locus-standi of the Petitioner after Reimbursement by the InsurerThe respondent contended that the petitioner had been reimbursed by the insurer and thus lacked locus-standi. The tribunal held that the corporate debtor could not escape liability under the contract even if the petitioner had been reimbursed. The issue was decided in favor of the petitioner.Conclusion:The petition was rejected based on the tribunal's findings on Issues No.3 and 4, which involved non-compliance with the mandatory requirement of Section 9(3)(c) of the Code and the existence of a dispute. The tribunal ordered that a copy of the decision be supplied to both parties.