TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether workers and other stakeholders of the corporate debtor had locus to seek intervention and raise an objection under Section 65 of the Insolvency and Bankruptcy Code, 2016 in pending Section 7 proceedings; (ii) Whether the Adjudicating Authority was required to examine the allegations of fraudulent and malicious initiation of insolvency proceedings on merits and not reject the application merely on the ground of locus standi.
Issue (i): Whether workers and other stakeholders of the corporate debtor had locus to seek intervention and raise an objection under Section 65 of the Insolvency and Bankruptcy Code, 2016 in pending Section 7 proceedings.
Analysis: The intervention application was not a bare attempt by a stranger to oppose admission. It was filed by workers who claimed to be directly affected stakeholders and who asserted that the proposed insolvency process was collusive and fraudulent. The pleadings disclosed a specific grievance that the proceedings were being used to legitimise sham transactions and would affect livelihood and employment. In that backdrop, the application could not be rejected by treating the applicants as devoid of any standing without first considering the substance of the allegations raised under Section 65.
Conclusion: The stakeholders were entitled to have their application considered, and the rejection solely on the ground of no locus was not sustainable.
Issue (ii): Whether the Adjudicating Authority was required to examine the allegations of fraudulent and malicious initiation of insolvency proceedings on merits and not reject the application merely on the ground of locus standi.
Analysis: Section 65 embodies a statutory prohibition against fraudulent or malicious initiation of insolvency proceedings. Once such allegations are specifically raised in a proper application, the Adjudicating Authority must examine them in accordance with law. The pendency of a separate avoidance application under Section 66 did not by itself justify refusal to consider the Section 65 plea. The correct approach was to test the allegations on merits and, if necessary, hear the intervention petition along with the Section 7 matter. A summary rejection on the premise that only the corporate debtor could raise such objections was too narrow and did not accord with the statutory scheme.
Conclusion: The Adjudicating Authority ought to have considered the application under Section 65 on merits, and the impugned rejection order was set aside.
Final Conclusion: The appeal succeeded, the intervention petition was revived, and the matter was remitted for consideration in accordance with law, including simultaneous hearing with the Section 7 proceeding if so directed by the Adjudicating Authority.
Ratio Decidendi: An application alleging fraudulent or malicious initiation of insolvency proceedings under Section 65 cannot be rejected merely for want of locus when filed by affected stakeholders; such allegations must be examined on merits in accordance with the statutory mandate.
TaxTMI 
