2020 (12) TMI 953 - AT - Insolvency and Bankruptcy

Tribunal Upholds Rejection of Insolvency Application: Emphasizes Genuine Intent and Statutory Compliance

The Tribunal upheld the rejection of the application under Section 10 of the Insolvency and Bankruptcy Code due to non-compliance with legal requirements, ... Maintainability of application - initiation of CIRP - filing of application by the Promotor / Director of company - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Applicant has not approached the Adjudicating Authority with a bonafide intention and we affirm that the Adjudicating Authority rightly rejected the Application of the Appellant. In the present case, the Adjudicating Authority dealt with all aspects including the Special Power of Attorney given by one of the Promotors Ms. Neelu Gupta, and did not confine to only non-disclosure of facts beyond the statutory requirements. Therefore, the learned Counsel for the Appellant cannot rely upon the Judgment of this Tribunal passed in M/S. UNIGREEN GLOBAL PRIVATE LIMITED VERSUS PUNJAB NATIONAL BANK, CORPORATION BANK, VIJAYA BANK AND ORIENTAL BANK OF COMMERCE [2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI]. Further, this Tribunal in the matter of GAJA TRUSTEE COMPANY PRIVATE LIMITED AND ORS. VERSUS HALDIA COKE AND CHEMICALS PRIVATE LIMITED [2018 (8) TMI 1270 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] held that the Application under Section 10 of IBC cannot be filed by the Board of Directors of a Company without prior approval of the shareholders in its Extraordinary General Meeting or Annual General Meeting. Further, it is on record that the SIDBI and IOB, the Financial Creditors have strenuously opposed the admission of Section 10 Application by filing their Counter Affidavits. We add and express that the intention of Promotors is only to get admission and followed by imposition of Moratorium to stall all further proceedings. The IBC being a special legislation cannot be used as a tool to one’s advantage and other’s disadvantage. The Adjudicating Authority rightly rejected the Application - Appeal dismissed. Issues:- Rejection of Application under Section 10 of Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority.- Lack of Special Resolution passed by shareholders of the Corporate Debtor.- Disqualification of Directors under Section 164 of the Companies Act, 2013.- Non-disclosure of facts and fabricated documents in the application.- Opposition by Financial Creditors SIDBI and IOB.Analysis:The appeal was filed against the rejection of an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Appellant, a registered company, sought initiation of Corporate Insolvency Resolution Process due to financial constraints. The application was filed by the Promotors as the Directors were disqualified under Section 164 of the Companies Act, 2013. However, the Adjudicating Authority dismissed the application citing various reasons, including the lack of a Special Resolution by shareholders and fabricated documents in the application.The Adjudicating Authority highlighted discrepancies in the application, such as the absence of a Special Resolution as required by law. It was noted that the Appellant Company had not fulfilled the conditions under Section 10 of the IBC. Additionally, Financial Creditors SIDBI and IOB had initiated proceedings against the company under other Acts, indicating a lack of genuine intent in filing for insolvency. The Authority concluded that the application was an attempt to avoid repayment obligations rather than a genuine effort to resolve financial distress.The Tribunal affirmed the decision of the Adjudicating Authority, emphasizing that the application lacked a bona fide intention. The Tribunal differentiated this case from previous judgments, highlighting the specific circumstances and non-compliance with legal requirements. It was noted that the IBC should not be misused to stall proceedings or benefit one party at the expense of others. The appeal was dismissed, and no costs were awarded.In conclusion, the rejection of the application under Section 10 of the IBC was upheld by the Tribunal based on the lack of compliance with legal requirements, fabricated documents, and the absence of a genuine intent to resolve financial issues. The Tribunal stressed the importance of adhering to statutory provisions and using insolvency proceedings for legitimate purposes, rather than as a means to avoid liabilities.