2018 (5) TMI 644 - AT - Insolvency and Bankruptcy

Court validates application under Insolvency and Bankruptcy Code due to payment default. CEO's Form 1 signature upheld.

The court upheld the admission of the application under section 7 of the Insolvency and Bankruptcy Code, 2016, due to the default in payment by the ... Corporate insolvency process - ‘Financial Creditor’ has already filed application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Authorised Representative of the ‘Financial Creditor’ has not signed Form 1 of the Insolvency and Bankruptcy Application - Held that:- In this case, as default is apparent and the Adjudicating Authority is satisfied that a default has occurred, the application being complete, the Adjudicating Authority rightly admitted the application. In the present case, as the Chief Executive Officer of the Bank has signed Form 1, the application under Section 7 of the ‘I&B Code’ cannot be rejected. We find no merit in this appeal. It is accordingly dismissed. Issues:1. Admission of application under section 7 of the Insolvency and Bankruptcy Code, 2016.2. Default in payment by the Corporate Debtor to the Financial Creditor.3. Signing of Form 1 under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.Issue 1: Admission of application under section 7 of the Insolvency and Bankruptcy Code, 2016:The appeal was filed against the order admitting the application under section 7 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Appellant argued that the Financial Creditor had already filed an application under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, which was pending. Despite the Corporate Debtor's efforts to present a Corrective Action Plan due to the challenging steel industry scenario, the Financial Creditor proceeded with the application under section 7. The Appellant contended that there was no default as per the restructuring plan decided by the Joint Lenders Forum. However, the Adjudicating Authority found that a default had occurred, leading to the admission of the application.Issue 2: Default in payment by the Corporate Debtor to the Financial Creditor:The Adjudicating Authority determined that a default had taken place as the Corporate Debtor failed to pay the debt to the Financial Creditor within the stipulated time. The Hon'ble Supreme Court's decision highlighted the broad definition of default under the Insolvency and Bankruptcy Code, encompassing non-payment of a debt once it becomes due and payable. The Corporate Debtor's argument regarding the decision of the Joint Lenders Forum not to be considered for rejecting the application under section 7 was dismissed. The Court emphasized that once a default is established, the application must be admitted unless incomplete.Issue 3: Signing of Form 1 under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016:The Appellant raised concerns about the Authorised Representative of the Financial Creditor not signing Form 1 as per the Rules. However, it was clarified that the Chief Executive Officer of the Bank had signed the form, which was deemed acceptable. Citing a previous judgment, it was established that if an officer authorized by the Financial Creditor initiates the Corporate Insolvency Resolution Process, the absence of a separate specific authorization letter does not invalidate the application under section 7. Therefore, the appeal was dismissed based on the valid signing of Form 1 by the Chief Executive Officer.In conclusion, the judgment upheld the admission of the application under section 7 of the Insolvency and Bankruptcy Code, 2016, based on the default in payment by the Corporate Debtor to the Financial Creditor. The signing of Form 1 by the Chief Executive Officer of the Bank was deemed appropriate, dismissing the appeal.