2020 (3) TMI 1056 - Tri - Insolvency and Bankruptcy

Tribunal rules in favor of financial creditor, accepts application by power of attorney holder

The tribunal found in favor of the financial creditor, ruling that the power of attorney holder had the competence to file the application. The ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt or not - pre-existing dispute or not - HELD THAT:- The applicant granted several facilities including cash credit facility to the corporate debtor and the corporate debtor fully availed those facilities. Those facilities carry interest applicable from time to time as per the terms and conditions mentioned in the sanction letters. Therefore, the amount due to the financial creditor from the corporate debtor is a financial debt. In the instant application, from the material placed on record by the applicant, this Authority is satisfied that the corporate debtor committed default in paying the financial debt to the applicant. As can be seen from the written communication of the proposed insolvency resolution process, no disciplinary proceedings are pending against him - In the instant case, the documents produced by the financial creditor clearly establish the 'debt'. Section 13(2) notice issued by the financial creditor clearly indicates that entire debt was recalled. There is a default on the part of the corporate debtor in payment of the 'financial debt'. Thus, there is existence of default and that the application under section 7(2) of the Code is also complete in all respect - the petitioner/financial creditor having fulfilled all the requirements of section 7 of the Code, the instant petition deserves to be admitted - petition admitted - moratorium declared. Issues Involved:1. Competence of the power of attorney holder to file the application.2. Establishment of default by the respondent.3. Viability of the respondent-company as a going concern.4. Offer for one-time settlement by the corporate debtor.Issue-wise Detailed Analysis:1. Competence of the Power of Attorney Holder to File the Application:The respondent challenged the competence of the power of attorney holder to file the application on behalf of the financial creditor. The tribunal referenced the decision of the National Company Law Appellate Tribunal in *Palogix Infrastructure P. Ltd. v. ICICI Bank Ltd.*, which states that a general authorization by a financial creditor in favor of its officers to act in legal proceedings is sufficient. The term 'power of attorney' does not diminish the authority of such officers, and they can be treated as authorized representatives for filing applications under sections 7, 9, or 10 of the Insolvency and Bankruptcy Code (IBC). The tribunal found that the authorization letter dated February 22, 2019, issued by the general manager of the applicant-bank, authorized Mr. Dinesh Kumar V. Chavda to file the application, thereby dismissing the respondent's objection.2. Establishment of Default by the Respondent:The respondent contended that the petitioner failed to establish default. However, the tribunal noted that the corporate debtor had availed various financial facilities from the petitioner-bank and acknowledged the debt. The tribunal emphasized that the initiation of debt recovery proceedings by the financial creditor substantiates the occurrence of default. The tribunal referred to the Supreme Court judgment in *Innoventive Industries Ltd. v. ICICI Bank*, which clarified that the adjudicating authority needs to verify the occurrence of default based on the records or evidence provided by the financial creditor. The tribunal concluded that the corporate debtor committed default in payment of the financial debt to the applicant.3. Viability of the Respondent-Company as a Going Concern:The respondent argued that the company is a viable, going concern. However, the tribunal did not find this argument sufficient to dismiss the application. The tribunal noted that the financial debt was established, and the corporate debtor did not present any bona fide defense based on substantial grounds. The tribunal focused on the existence of default and the completeness of the application under section 7 of the IBC, rather than the operational viability of the respondent-company.4. Offer for One-Time Settlement by the Corporate Debtor:The respondent mentioned an offer for a one-time settlement. The tribunal did not consider this offer as a valid defense against the proceedings under section 7 of the IBC. The tribunal's primary concern was the establishment of default and the satisfaction of the requirements under section 7 of the Code.Conclusion:The tribunal found that the financial creditor fulfilled all the requirements under section 7 of the IBC. The application was complete, and there was sufficient evidence of default by the corporate debtor. The tribunal admitted the petition and declared a moratorium prohibiting the institution or continuation of suits or proceedings against the corporate debtor, transferring or disposing of assets, and actions to enforce security interests. The tribunal appointed Ms. Vineeta Maheshwari as the interim resolution professional and directed the continuation of essential services to the corporate debtor during the moratorium period. The petition was disposed of with no order as to costs, and a copy of the order was to be communicated to the applicant, respondent, and the interim resolution professional.