Appellate Tribunal rejects Foreign Company's insolvency application against Corporate Debtor

The Appellate Tribunal found the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by a Foreign Company against the Corporate Debtor, to be not maintainable due to the absence of a 'record of default' and lack of proper authorization. The Tribunal declared the orders of the Adjudicating Authority, including the appointment of an Interim Resolution Professional and declaration of moratorium, as unsustainable. Consequently, all actions and orders were set aside, allowing the Corporate Debtor to resume independent operations. The appeal was allowed, and the proceedings were directed to be closed, with the Appellant bearing the fees of the Interim Resolution Professional, if appointed.

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Issues:
- Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
- Compliance with the requirements of sub-section (3)(a) of Section 7.
- Authorization of the person filing the application.
- Validity of the orders passed by the Adjudicating Authority.

Analysis:

1. Maintainability of the Application:
The Respondent, a Foreign Company, initiated the Corporate Insolvency Resolution Process against the Appellant-Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellant contended that the application was not maintainable due to the absence of a 'record of default' or a certificate from a financial institution. The Respondent argued that the Adjudicating Authority correctly admitted the application as the existence of default was established to the satisfaction of the Authority.

2. Compliance with Section 7 Requirements:
Sub-section (3)(a) of Section 7 mandates the 'Financial Creditor' to provide a 'record of default' as specified by the Insolvency and Bankruptcy Board of India. The application filed by the Respondent lacked the necessary record of default, rendering it incomplete. The Adjudicating Authority should not have entertained the application without this essential requirement, as per the provisions of the Code and the Adjudicating Authority Rules.

3. Authorization of the Applicant:
The application under Section 7 was filed by an Advocate on behalf of the Respondent, who was neither an Authorized Representative nor held any position with the Financial Creditor. This lack of authorization from the Financial Creditor, as required by the Adjudicating Authority Rules, further supported the finding that the application was not maintainable.

4. Validity of Orders by the Adjudicating Authority:
The Appellate Tribunal, after careful consideration, found that the impugned orders of the Adjudicating Authority, including the appointment of an Interim Resolution Professional and the declaration of moratorium, were unsustainable due to the defects in the application. Consequently, all related actions and orders were declared illegal and set aside, allowing the Appellant to resume independent operations through its Board of Directors.

In conclusion, the appeal was allowed, the impugned orders were set aside, and the proceedings were directed to be closed. The Appellant was released from the legal constraints, and the fees of the Interim Resolution Professional, if appointed, were to be determined and paid by the Appellant.

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