2019 (10) TMI 593 - AT - Insolvency and Bankruptcy

Tribunal Upholds Insolvency Process Initiation; Lack of Objections on Agreement Genuineness

The Tribunal dismissed the appeal challenging the initiation of Corporate Insolvency Resolution Process due to lack of objections raised by the Corporate ... Permission for withdrawal of application - Maintainability of application - initiation of CIRP - Corporate Debtor - main plea taken by the appellant is that the Assignment Agreement dated 17th April, 2015 is not genuine - HELD THAT:- There are no ground to allege malicious intent on the part of the ‘Financial Creditor’ for the purpose of Section 65 of the I&B Code. The validity of the Assignment Agreement cannot be decided by the Adjudicating Authority and, therefore, the same issue could not been reiterated. The appeal stands disposed of as withdrawn. Issues:1. Challenge to initiation of Corporate Insolvency Resolution Process based on the genuineness of Assignment Agreement dated 17th April, 2015.2. Allegation of fraudulent or malicious intent in the insolvency resolution process under Section 65 of the Insolvency and Bankruptcy Code.Analysis:1. The Appellant, a Shareholder/Director of 'M/s. White Metals Limited,' challenged the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Appellant contended that the Assignment Agreement dated 17th April, 2015, relied upon by the Financial Creditor, was not genuine. The Tribunal noted the existence of two Assignment Agreements and observed that the Corporate Debtor did not dispute the debt due or default in payment. The Tribunal held that the genuineness of the Assignment Agreement could not be examined unless the Corporate Debtor raised objections under Section 65 of the Code alleging fraud by the Financial Creditor. As no such plea was raised, the Tribunal dismissed the appeal, emphasizing that the NPA provisions were not applicable under the Code.2. Subsequently, the Appellant filed an application under Section 65 of the Code, alleging fraudulent or malicious intent in the insolvency resolution process. The Adjudicating Authority rejected this allegation, stating that the validity of the Assignment Agreement could not be determined by them. The Appellant's reliance on the Assignment Agreement being registered in NOIDA and related to asset sale was deemed insufficient to prove malicious intent. The Tribunal reiterated that the validity of the Assignment Agreement could not be re-examined. Following a request to withdraw the appeal, permission was granted with the condition that the matter would not be raised in the future, leading to the disposal of the appeal.This judgment highlights the significance of raising specific objections under the relevant provisions of the Insolvency and Bankruptcy Code, emphasizing the need for parties to follow procedural requirements to challenge the validity of agreements and allegations of fraud in insolvency proceedings.