TaxTMI 
TaxTMI 
2017 (5) TMI 373
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....a Road, Vadodara 390 007, Gujarat, India and a Regional Office at ICICI Bank House, 3A Gurusaday Road, Kolkata, had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, Code of 2016) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules, 2016 ( in short, Rules of 2016) against Palogix Infrastructure Private Ltd., a company incorporated under the laws of India with its registered office at 86 B/2, Topsia Road, Gajraj Chambers, Kolkata. 4. In the application, aforesaid ICICI Bank, (hereinafter referred to as financial creditor), has alleged that it had sanctioned a term loan to the tune of Rs. 111 crores to M/s Palogix Infrastructure Private Ltd., (hereinafter referred to as the corporate debtor). Out of the aforesaid loan amount, an amount to the tune of Rs. 65,60,00,000/- was disbursed to the Corporate Debtor. The dates of disbursement of loan, given in instalments, has been described in detail in the application. According to the financial creditor, on 31.12.2016, an amount to the tune of Rs. 32,21,97,699.06 remains as outstanding debt since the Corporate Debtor defaulted in repayment of the loan in....
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....plated section 5(7) of Code of 2016. 10. In support of such contention the decision in Shantilal Khuslaldas and Bors Pvt. Ltd Vs Smt Chandanbala Sughir Shah and Another -reported in (1993) 77 Comp Cas 253 as well as the decision in Coromandel International Ltd V Chemcel Biotech Ltd, reported in (2011) 166 Comp Cas 676 were relied on. In both those cases, it was held that it is a settled principle of law that the power of attorney needs to be interpreted strictly, reason behind such principle being that the powers given are not abused by agent or the actions are restricted within an only to the extent the power is indicated or given. 11. In the aforesaid cases, it was held that when the donor of a power of attorney had authorised the donee to initiate suits, the donee, being armed with such a power of attorney, cannot initiate a winding up proceeding since a winding up proceeding under the company law can never be equated with a suit. The relevant part of Coromandel International Ltd.'s case (supra) is reproduced below: "A suit for recovery of money is essentially a suit between the parties where no third party can seek any indulgence or impleadment. The proceedings under the....
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....ready reference, relevant parts of the orders, rendered by learned Member (J) and Learned Member (T) are reproduced below: Order by: (Member) (J) "In this case, general power of attorney is in favour of Shri Srinjoy Bhattacharjee which was given on 20.10.2014 to commence and institute any proceedings before any Court of Law including National Company Law Tribunal, but this power of attorney cannot be treated as specific power of attorney to initiate Corporate Insolvency Resolution Process under the Insolvency & Bankruptcy Code, 2016. The law laid down by the Hon'ble High Court is relating to the winding up cases which were moved under the Companies Act, 1956 and the provisions of IBC, 2016 are quite different. But in Corporate Insolvency proceeding also, the lis is not only between the Financial Creditor and the Corporate Debtor. Once the petition is admitted, the creditors, contributors, shareholders, etc. seek redress in the proceedings and even oppose proceedings. Upto this extent, insolvency proceedings are also like winding up proceedings which not only restrict the proceedings to the parties alone and its range is widened and all steps taken in insolvency proceedings ar....
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....e applicant may also proceed with the compliance of sections 13 and 14 of the IBC pertaining to declaration of moratorium and public announcement. The judgment of the Hon'ble High Courts referred to by Ld. Counsel for the Corporate Debtor specifically deal with the winding up proceedings under the Companies Act only'. 16. Following such divergence of opinions between the learned Members of NCLT, Kolkata, the Hon'ble President, NCLT was pleased to constitute a special Bench to decide the aforesaid point over which the learned Members of NCLT, Kolkata were in disagreement. For ready reference, the relevant part of the letter dated 20.02.2017 from Registrar NCLT, New Delhi addressed to the Hon'ble Members is reproduced below: "I am directed to convey that Hon'ble President is pleased to constitute following Bench to decide the matter regarding passing of different orders in Company Petition 37/2017 under section 7 of the Insolvency & Bankruptcy Code 2016 by Shri Vijai Pratap Singh, Member (Judicial) and Shri S. Vijaraghavan, Member (Technical) NCLT Kolkata. NCLT, Special Bench at Guwahati. Justice Shri P.K. Saikia, Member (Judicial)" 17. This is how the prese....
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....rding to Mr. Banerjee a harmonious reading of various clauses in the power of attorney, more particularly, clauses 3, 4 and 5, would undoubtedly show that under the power of attorney in question, the financial creditor gave his attorney full and complete authority to file any suit/winding up proceeding, and, more importantly, the "proceeding of any kind whatsoever", and that too, before any Court/Tribunal including the NCLT. 22. Referring to clause 9 of the power of attorney, it has also been submitted that under the power, the donor thereof had also authorized the donee to initiate insolvency/ bankruptcy proceeding even before the NCLT. Being so, when one reads the power of attorney in question taking into account all the facts and circumstances, specified therein in their proper perspective, there cannot be any escape from the conclusion that Shri Srinjoy Bhattacharjee (donee) had required competence or authority to initiate a proceeding even under the Section 7 of the Code of 2016. 23. It is also the case of the financial creditor that there was no provision in the Code of 2016 requiring the Tribunal to issue notice to the corporate debtor giving the later an opportunity to ob....
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....heir respective case, in order to appreciate the rival submission, I find it necessary to have a look at the relevant part of the Power of Attorney. For ready reference, the relevant parts of the same which have huge bearing on the question before this court are reproduced below: "4. To appoint pleaders, advocates and solicitors to appear and act on behalf of ICICI Bank in any Court of justice or Tribunal or Recovery Officer or before any revenue and/or Income-tax, Gift-tax, Wealth-tax, Recovery, Refund, Appellate, Assistant Commissioner, Income-tax, Tribunal, Company Law Board/ National Company Law Tribunal and/or before other forums and/or other officer or officers and to revoke such appointment and to substitute any others in their place and stead. 5. To sign, verify and execute all vakalatnamas, plaints, recovery applications, written statements, counter-claims, complaints, petitions, company petitions, winding up petitions, appeals, reviews, applications, affidavits, power of attorney and papers of every description that may be necessary to be signed, verified and for the purpose of any suit, proceeding for recovery or for enforcement of security or for preservation and prot....
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....ares or securities or as otherwise interested in any company or corporation". 29. However, before proceeding further, I find it necessary to have a look at the decision, rendered by Hon'ble Madras High court in the case of P.M. Desappa Nayanim Varu v. Ramabhaktula Ramiah AIR 1952 Mad. 559 where Hon'ble Madras High court, amongst other things, had the occasion to consider the law relating to interpretation of power of attorney. For ready reference the relevant part is reproduced below: - Para 3. .......... The principle governing the construction of a power of attorney are succinctly stated in Bowstead on Agency (sixth edition). The learned author says as follows as Page 73, "Powers of attorney must be strictly pursued, and are construed as giving only such authority as they confer expressly or by necessary implication. The following are the most important rules of construction: 1. The operative part of the deed is controlled by the recitals. 2. Where authority is given to do particular acts, followed by general words, the general words are restricted to what is necessary for the proper performance of the particular acts. 3. General words do not confer general powers, b....
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.... under the Code of 2016. More importantly, such a regime establishes detailed procedures for realisation of purposes for which such a system was brought into existence. 35. Equally importantly, the Code of 2016, amongst other things, constituted different Adjudicating Authorities to deal with the matters incorporated therein. Thus, for the adjudication of corporate insolvencies/liquidation etc, an Adjudicating Authority is constituted. Similarly, for the adjudication corporate insolvencies/bankruptcy of individual/partnership firm, another Adjudicating Authority is also created. 36. Quite significantly, the Code of 2016 also prescribes detailed but separate procedures for each of such Authorities for realisation of such conceptions/ objects etc which were, however, almost unknown to the old regime. A careful perusal of various provisions in the aforesaid Code makes such a conclusion inevitable. 37. One may note here that though the procedures for adjudication of insolvency and liquidation for corporate person etc, or the procedures for adjudication corporate insolvencies/ bankruptcy of individual/ partnership firm under the Code of 2016 have some resemblances to some of the proc....
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....so be stated here that the learned counsel for the financial creditor has laid enormous reliance on the clause 9 of the power of attorney to contend that under such power, attorney concerned, was clearly authorized to initiate insolvency or bankruptcy proceeding under the Code of 2016. But such contention is found to be too farfetched one. Our foregoing discussion has made it more than clear and it needs no further restatements. 43. Even otherwise too, such argument hardly holds any water. This is because of the fact that under the instrument in question, the attorney was authorized only "to attend meetings of creditors in insolvency or bankruptcy or winding up matters of any borrower or debtor and to vote at such meetings and to accept composition and to take such proceedings as the said Attorney shall or may think proper". 44. Such authorization, therefore, can never be construed to mean that under the power, the attorney was also authorized to initiate insolvency or bankruptcy proceeding, as contemplated in the code of 2016. In that view of the matter, the contention of the learned counsel for the financial creditor, premised on clause 9 of the power of attorney, being found w....
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.... the said suit. He is also authorised to conduct the entire proceedings which, have to be taken in the said suit. The document therefore confers an express power on Narayanaswami Naidu to conduct a particular suit pending in a particular Court. It does not expressly engage the attorney for the purpose of conducting the litigation generally in respect of the plaint schedule properties. But Mr. Ramaswami Ayyangar argued that such power must be inferred by necessary implication; as if the plaint is returned for want of jurisdiction or for any other similar reason, some such power is necessary to enable the power of attorney to re-present the plaint and conduct the suit in a proper forum. If that were the intention' of the parties, they would have expressly conferred such power also. Further it cannot be assumed that the parties contemplated any such contingency as when the plaintiffs filed the suit they must have filed it only on the basis that that Court had jurisdiction to entertain and dispose of the suit. If the contention put forward on behalf of the appellants is accepted, the Court will be introducing new words in the power of attorney and also confer a new power on him. Wh....