Section 7 insolvency filing survives defective authorisation where notice, participation, and proof of debt and default are established.
A defective power of attorney and minor lapses in authorisation, service, and nomination of the interim resolution professional did not defeat the section 7 insolvency petition, because valid board resolutions authorised filing, the corporate debtor had received notice and participated, and the proposed professional was qualified. The Tribunal treated the designation issue as an irregularity rather than a fatal defect. On the merits, the loan record, settlement terms, repayment arrangement, correspondence, and financial statements established a financial debt and default, and prior sick-industry proceedings did not bar admission after statutory abatement. The application was admitted, moratorium followed, and CIRP was directed to commence.
Issues: (i) Whether defects in the power of attorney, authorisation, service of the application, and nomination of the interim resolution professional warranted rejection of the section 7 application; (ii) Whether the financial creditor had established a financial debt and default so as to justify admission of the insolvency application.
Issue (i): Whether defects in the power of attorney, authorisation, service of the application, and nomination of the interim resolution professional warranted rejection of the section 7 application?
Analysis: The power of attorney relied upon by the financial creditor was found to be seriously defective and incapable of conferring valid authority by itself. However, the record also contained board resolutions authorising officers of the bank to initiate proceedings under the Insolvency and Bankruptcy Code by designation, and the officer who filed the application fell within the authorised category. The defect in the chosen officer's designation was treated as an irregularity, not a fatal vice, because the bank had authorised higher-level officers and there was no legal bar to such filing. As regards service, the Tribunal held that the purpose of Rule 4(3) was substantially met because the corporate debtor received the papers, entered appearance, and contested the case. On the interim resolution professional, the Tribunal held that the creditor's role is only to name a qualified person and that the candidate proposed possessed the required qualifications; any lapse in the manner of naming him did not justify rejection.
Conclusion: The objections to maintainability failed and did not justify dismissal of the application.
Issue (ii): Whether the financial creditor had established a financial debt and default so as to justify admission of the insolvency application?
Analysis: The materials on record, including the loan history, the one-time settlement, the debenture-based repayment arrangement, the correspondence denying liability, and the financial statements, showed that a substantial amount remained unpaid. The Tribunal concluded that the corporate debtor had defaulted in repayment and that the claim satisfied the threshold for initiation of corporate insolvency resolution process under section 7. The existence of prior sick-industry proceedings did not bar the application after the statutory abatement and the opportunity to approach the adjudicating authority had not been availed within time.
Conclusion: Financial debt and default were established, and the application was admissible.
Final Conclusion: The insolvency application was admitted, moratorium followed, and corporate insolvency resolution process was directed to commence.
Ratio Decidendi: A defective power of attorney or minor procedural lapse will not defeat a section 7 insolvency application where valid board authorisation exists, the corporate debtor has received notice and participated, and financial debt and default are otherwise established.
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