Admission of Creditor's Application Upheld Despite Lack of Opportunity for Corporate Debtor

The Adjudicating Authority admitted the Financial Creditor's Application under section 7 of the Insolvency and Bankruptcy Code, 2016 without allowing the Corporate Debtor to present arguments. The Appeal, raised by a Shareholder/Director of the Corporate Debtor, contested this lack of opportunity. Despite disputes over the authorized representative's power, non-compliance with bankruptcy rules, and alleged payment issues, the court found the default amount substantial and upheld the admission order. The Appeal was dismissed, with costs not awarded.

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Issues:
1. Admission of Application under section 7 of Insolvency and Bankruptcy Code, 2016 without hearing the Corporate Debtor.
2. Lack of opportunity given to the Corporate Debtor to address arguments before the order of admission.
3. Dispute regarding the authorized representative of the Petitioner.
4. Failure to comply with the format prescribed under Rule 4 of the Bankruptcy rules.
5. Alleged payment made without supporting documents.
6. Existence of a pre-existing dispute between the parties.
7. Calculation discrepancies and intention to create fictitious entries without consent.

Analysis:

1. The Financial Creditor filed an Application under section 7 of the Insolvency and Bankruptcy Code, 2016 for the initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. The Adjudicating Authority admitted the Application without giving the Corporate Debtor an opportunity to address arguments, which was the main plea raised by the Appellant, who is a Shareholder/Director of the Corporate Debtor.

2. Both parties, through their learned counsel, raised the issue that no opportunity was provided to the Corporate Debtor to present arguments before the admission order was passed. The Adjudicating Authority acknowledged the arguments presented by the Corporate Debtor's counsel, highlighting various grounds of opposition to the admission of the petition.

3. One of the disputes raised was regarding the authorized representative of the Petitioner lacking the requisite power to initiate the resolution process under section 7 of the Code. The Petitioner was also alleged to have failed to comply with the format prescribed under Rule 4 of the Bankruptcy rules, and to have made payments without proper supporting documentation.

4. Additionally, it was contended that there was a pre-existing dispute between the parties, with pending proceedings before various courts and forums. The calculation discrepancies and the alleged creation of fictitious entries without consent were also brought to light during the proceedings.

5. The judgment noted that there was no evidence to suggest the absence of the Appellant on the date of the hearing, despite claims made by a Shareholder/Director of the Corporate Debtor. The total default amount sanctioned and disbursed by the Financial Creditor was confirmed to exceed rupees thirty-nine crores, ninety-seven lakhs, ninety-eight thousand, ninety-two and twenty-seven paisa.

6. It was ultimately concluded that the default amount exceeded one lakh rupees, and no sufficient grounds were found to interfere with the impugned order of admission dated 08-11-2019. Consequently, the Appeal was dismissed, and no costs were awarded.

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