2022 (10) TMI 587 - AT - Insolvency and Bankruptcy

Tribunal validates Financial Creditor's Section 7 Application, dismisses appeal. Power of Attorney authorized filing.

Sameer Bansal Director (Suspended) of NSP Associates (India) Pvt. Ltd. Versus Canara Bank & Anr.

The tribunal upheld the validity of the Section 7 Application filed by the Financial Creditor, dismissing the appeal of the Suspended Director of the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- In the present case, on looking into the Power of Attorney which has been brought on record and in paragraph 20 of the Power of Attorney, there is a clear mention that Power of Attorney was executed by Director of Bank on the basis of Resolution dated 24.01.2005 passed by the Board of Directors in the meeting held at Bangalore. The statement in Column 5 of Part-I of Section 7 Application was clearly with regard to person authorised to file Section 7 Application. In reply filed to Section 7 Application, none of the contents of Part-I was denied. It was stated by the Corporate Debtor that it does not require any reply. Submission of the Learned Counsel for the Appellant that Bank may be directed to produce the Resolution cannot be entertained at this stage especially when in the reply it was not even contended that no Resolution has been passed as mentioned in the Power of Attorney. The admission of Section 7 Application and rejection of this Appeal may not come in the way of the Appellant and the Bank in considering the One Time Settlement. The route under Section 12A of the IBC is always open in event the Bank- Financial Creditor accept the OTS. Appeal dismissed. Issues Involved:1. Validity of the Section 7 Application filed by an authorized person.2. Interpretation of Power of Attorney and Board Resolution requirements.3. Consideration of previous judgments and notifications regarding authorization.4. Impact of a pending One Time Settlement (OTS) on the Section 7 Application.Issue-wise Detailed Analysis:1. Validity of the Section 7 Application filed by an authorized person:The appeal was filed by the Suspended Director of the Corporate Debtor against the order admitting the Section 7 Application filed by the Financial Creditor (Canara Bank). The primary contention was that the Section 7 Application was not filed by an authorized person. The appellant argued that the application was supported by a Power of Attorney dated 24.01.2005 without a corresponding Board Resolution authorizing the person to file the application, making it invalid.2. Interpretation of Power of Attorney and Board Resolution requirements:The appellant's counsel argued that the authorization must be by the Board of Directors and not merely through a Power of Attorney. The Financial Creditor's counsel countered that the Chief Manager of Canara Bank, who filed the application, was duly authorized, and the Power of Attorney referenced a Board Resolution. The tribunal examined Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which allows a financial creditor to initiate the corporate insolvency resolution process in Form 1, including the particulars of the authorized person.3. Consideration of previous judgments and notifications regarding authorization:The tribunal referred to several judgments, including 'Palogix Infrastructure Pvt. Ltd. vs. ICICI Bank Ltd.' and 'Ramesh Chander Gupta vs. Punjab National Bank', which discussed the validity of applications filed by authorized officers. The tribunal noted that a general authorization by the Board of Directors, even if termed as a Power of Attorney, is sufficient for filing a Section 7 Application. The Supreme Court's judgment in 'Rajendra Narottamdas Sheth & Anr. vs. Chandra Prakash Jain and Anr.' was also considered, which upheld that an application filed under a Power of Attorney referable to a Board Resolution is valid.4. Impact of a pending One Time Settlement (OTS) on the Section 7 Application:The appellant mentioned a One Time Settlement (OTS) proposal submitted to the bank. The tribunal clarified that the admission of the Section 7 Application and the dismissal of the appeal would not preclude the consideration of the OTS. The tribunal indicated that the route under Section 12A of the Insolvency and Bankruptcy Code (IBC) remains open if the Financial Creditor accepts the OTS.Conclusion:The tribunal found no merit in the appellant's submissions, affirming that the Section 7 Application was validly filed by an authorized person. The tribunal dismissed the appeal, stating that the Power of Attorney, supported by a Board Resolution, was sufficient authorization. The tribunal also noted that the OTS could still be considered under Section 12A of the IBC if accepted by the Financial Creditor.