Tribunal sets aside illegal order, allows appellant company to operate independently under I&B Code

The tribunal set aside the impugned order passed by the Adjudicating Authority, declaring all orders illegal and dismissing the application under Section 9 of the I&B Code. The appellant company was permitted to operate independently through its Board of Directors, with the Interim Resolution Professional's fee to be determined and paid by the company. The appeal was allowed with no order as to cost.

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Issues Involved:
1. Validity of demand notice issued by a law firm under Section 8 of the Insolvency and Bankruptcy Code (I&B Code).
2. Authority of Power of Attorney holders to file applications under Section 9 of the I&B Code.
3. Requirement of a certificate from financial institutions confirming unpaid operational debt under Section 9(3)(c) of the I&B Code.

Issue-wise Detailed Analysis:

1. Validity of Demand Notice Issued by a Law Firm:
The appellants contended that the demand notice under Section 8(1) of the I&B Code was invalid as it was issued by an Advocate/Lawyers’ Firm, which is not permissible. The tribunal referenced the case "Uttam Galva Steels Limited Vs. DF Deutsche Forfait AG & Anr." where it was held that an Operational Creditor must issue the demand notice in Form-3 or Form-4, and only a person authorized by the Operational Creditor, holding a position within or in relation to the Operational Creditor, can issue such notice. In the present case, the notice dated 5th May 2017 was issued by 'Advani & Co. – Barristers-At-Law,' and there was no evidence that the law firm was authorized by the Operational Creditor. Therefore, the tribunal concluded that the application under Section 9 was not maintainable as the notice was not issued by an authorized person.

2. Authority of Power of Attorney Holders to File Applications:
The appellants argued that the application under Section 9 was signed by Power of Attorney holders, not by the Operational Creditor. The tribunal referred to the case "Palogix Infrastructure Limited Vs. ICICI Bank Limited," where it was held that a Power of Attorney holder is not competent to file an application on behalf of a Financial Creditor, Operational Creditor, or Corporate Applicant. In the current case, the application was signed by four advocates as Power of Attorney holders, which rendered the application under Section 9 invalid.

3. Requirement of Certificate from Financial Institutions:
The appellants also argued that the respondent, a foreign company, did not submit a certificate from any financial institution confirming the unpaid operational debt, as mandated by Section 9(3)(c) of the I&B Code. The tribunal referenced the case "Smart Timing Steel Ltd. Vs. National Steel and Agro Industries Ltd.," which held that the certificate from a financial institution is mandatory. The respondent submitted a chart from 'CaixaBank,' which is not recognized as a financial institution under the I&B Code. Therefore, the application was further deemed not maintainable due to the lack of the required certificate.

Conclusion:
The tribunal set aside the impugned order dated 10th August 2017 passed by the Adjudicating Authority (NCLT, Chennai) in CP/537/(IB)/CB/2017. All orders passed by the Adjudicating Authority, including the appointment of an Interim Resolution Professional and the declaration of moratorium, were declared illegal and set aside. The application under Section 9 of the I&B Code was dismissed, and the appellant company was allowed to function independently through its Board of Directors. The tribunal directed the Adjudicating Authority to fix the fee of the Interim Resolution Professional, which the appellant company was instructed to pay. The appeal was allowed without any order as to cost.

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