Tribunal upholds Financial Creditor's right under Insolvency & Bankruptcy Code

The Tribunal held that the application under Section 7 of the Insolvency and Bankruptcy Code was maintainable, emphasizing the special remedy provided to Financial Creditors upon default. It ruled that the I&B Code prevails over any other law or instrument, allowing the Financial Creditor to seek remedies under Section 7 regardless of secured assets. The Tribunal also clarified that the doctrine of stare decisis was considered but deemed the conflicting judgment not binding due to ignorance of Section 238 of the I&B Code, ultimately upholding the maintainability of the Section 7 application.

---

---

Issues Involved:
1. Maintainability of the Application under Section 7 of the Insolvency and Bankruptcy Code (I&B Code), 2016.
2. The effect of secured assets on the rights of the Financial Creditor.
3. Applicability of the doctrine of stare decisis in the context of co-ordinate Bench judgments.

Issue-wise Detailed Analysis:

1. Maintainability of the Application under Section 7 of the Insolvency and Bankruptcy Code (I&B Code), 2016:

The Corporate Debtor obtained two loans from the Financial Creditor, secured by mortgage deeds. The Financial Creditor filed an application under Section 7 of the I&B Code due to default. The Corporate Debtor argued that the Financial Creditor should have realized the amount from the secured assets rather than filing under Section 7. The Financial Creditor maintained that the application was within jurisdiction and fully maintainable, as the Mortgage Deed did not restrict the right to seek remedy under Section 7.

The Tribunal held that Section 7 of the I&B Code provides a special remedy to Financial Creditors when a default occurs. The I&B Code has an overriding effect under Section 238, which states that the provisions of the Code shall prevail over any other law or instrument. Thus, the Tribunal concluded that the application under Section 7 was maintainable, irrespective of the secured assets.

2. The effect of secured assets on the rights of the Financial Creditor:

The Corporate Debtor argued that the Financial Creditor should have realized the dues from the secured assets as per the Mortgage Deed. The Financial Creditor countered that the Mortgage Deed allowed for other remedies and did not restrict the right to file under Section 7.

The Tribunal examined clauses 11.3 and 19.4 of the Mortgage Deed, which did not impose any embargo on the Financial Creditor from seeking remedies under the law. Clause 11.3 allowed the Mortgagee to deal with the mortgaged properties without prejudice to other rights and remedies. Clause 19.4 preserved the Mortgagee's right to other remedies available under the law. The Tribunal concluded that the Financial Creditor had the choice to recover dues from secured assets or take other legal recourse, including filing under Section 7.

3. Applicability of the doctrine of stare decisis in the context of co-ordinate Bench judgments:

The Corporate Debtor cited a co-ordinate Bench judgment in "Beacon Trusteeship Limited vs. Neptune Ventures and Developers Private Limited," where a similar application under Section 7 was rejected. The Tribunal noted that the same Judicial Member had taken a contrary view in another case, "IDBI Trusteeship Services Ltd. V. Ornate Spaces Pvt. Ltd.," and thus did not follow the "Beacon Trusteeship Limited" judgment.

The Tribunal emphasized the principle of stare decisis, which requires consistency in judicial decisions. However, it clarified that judgments from other jurisdictions have persuasive value, not binding precedent. The Tribunal further noted that the "Beacon Trusteeship Limited" judgment did not consider Section 238 of the I&B Code, which gives the Code an overriding effect. As the judgment was rendered in ignorance of a binding statute, it was deemed per incuriam and not a binding precedent.

The Tribunal referred to the Supreme Court's judgment in "Gujarat Urja Vikas Nigam Limited vs. Amit Gupta and Others," which held that Section 238 of the I&B Code overrides any inconsistent provisions in other agreements or instruments. Consequently, the Tribunal concluded that the judgment in "Beacon Trusteeship Limited" was not binding and upheld the maintainability of the Section 7 application.

Conclusion:

The Tribunal dismissed the appeal, affirming that the application under Section 7 was maintainable and that the Financial Creditor had the right to seek remedies under the I&B Code, irrespective of the secured assets. The doctrine of stare decisis was acknowledged, but the Tribunal clarified that the "Beacon Trusteeship Limited" judgment was not binding due to its failure to consider Section 238 of the I&B Code.

---