TaxTMI 
TaxTMI 
2017 (7) TMI 74
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....d the impugned order on one of the ground that in absence of notice given to the Appellant before admitting the case under Section 7 of the I&B Code, the impugned order is violative of rules of natural justice. 3. The other ground taken by the Appellant is that the application preferred by Respondent! Financial Creditor under Section 7 is incomplete, misleading and being not bonafide was fit to be rejected. 4. Ld. Counsel for the Appellant submitted that the Appellant could have brought the aforesaid facts to the notice of the 'adjudicating authority' had it been given notice prior to admission. Detailed argument has been made by Ld. Senior Counsel for the Appellant on the question of issuance of notice prior to admission, in adherence to principle of rules of natural justice, 5. The aforesaid issue now stands decided by decision of the Appellate Tribunal in "M/s. Innoventive Industries Limited vs ICICI Bank & Anr. in CA (AT) (Insolvency) No. 1 & 2 of 2017" wherein the Appellate Tribunal observed and held :- "43. There is no specific provision under the I&B Code, 2016 to provide hearing to Corporate debtor in a petition under Section 7 or 9 of the I&B Code....
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.... the Code of 2016, therefore, it must afford a reasonable opportunity of hearing to the corporate debtor as Section 424 of the Companies Act, 2013 mandates it to ascertain the existence of default as claimed by the financial creditor in the application. The NCLT is, therefore, obliged to afford a reasonable opportunity to the financial debtor to contest such claim of default by filing a written objection or any other written document as the NCLT may direct and provide a reasonable opportunity of hearing to the corporate debtor prior to admitting the petition filed under Section 7 of the Code of 2016. Section 7(4) of the Code of 2016 requires the NCLT to ascertain the default of the corporate debtor. Such ascertainment of default must necessarily involve the consideration of the documentary claim of the financial creditor. This statutory requirement of ascertainment of default brings within its wake the extension of a reasonable opportunity to the corporate debtor to substantiate by document or otherwise, that there does not exist a default as claimed against it. The proceedings before the NCLT are adversarial in nature. Both the sides are, therefore, entitled to a reasonable opport....
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....rcumstances, the challenge to the vires to Section 7 of the Code of 201 6 fails." 6. Therefore, it is clear that before admitting an application under Section 9 of the MB Code it is mandatory duty of the 'adjudicating authority' to issue notice. 7. In the present case admittedly no notice was issues by the 'adjudicating authority' to the corporate debtor, before admitting the application filed under Section 9 of the I&B Code. For the said reason the judgement order cannot be upheld having passed in violation of principle of natural justice. 8. Next contention of Ld. Senior Counsel for the Appellant was that the Financial Creditor misrepresented material facts before the 'adjudicating authority' in order to obtain order of admission of the application. He highlighted the conduct of the Financial Creditor by highlighting the following facts. 9. On 6th February, 2017, the Financial Creditor addressed a notice to the Appellant calling upon to pay a sum of Rs. 10,02,28,27 1.60 (Rupees ten crore two lac twenty eight thousand two hundred seventy one and paise sixty only) which was overdue as on 6th February, 2017. The notice dated 6th February, 2017 was....
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....h June, 2014. Thereafter, from 14th June 2014till 2nd February, 2017, the Respondent along with the other lenders of the Appellant and the Appellant itself, have been participating in the periodically held meetings of the JLF, in all of which meetings the JLF had unanimously agreed to adopt 'rectification' as the corrective action plan (CAP) for the Appellant. It is pertinent to note that the Respondent itself had requested the lead lender of the Appellant (L&T Infrastructure Finance Company) to convene the JLF meetings as the lead lender from February 2016 onwards. b. As per the minutes of the meeting held on 2nd February 2017 circulated by the Lead Lender, the effect of the JLF meeting is that the JLF has decided to continue with rectification as CAP for the Appellant and members of JLF have been requested 'not to proceed with any individual asset level action'. The Respondent however, chose to dispute these minutes vide their email dated 16th February 20 l7as circulated by Respondent No. 33. As per the purported minutes of the meeting, the JLF lenders had resolved that rectification as the CAP has failed and the JLF members have decided to explore their ....
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....tries Limited, inter alia, laying down two propositions - firstly, circulars issued by the RBI pertaining to JLF are statutory in nature and binding upon the banks and secondly, that member of JLF cannot independently resort to/adopt any proceedings during the on-going process of rectification through the JLF. 16. Similar argument was raised in M/s. Innoventive Industries Ltd v ICICI Bank & Anr. Having noticed such argument, the Appellate Tribunal in "M/s. Innoventive Industries Ltd v ICICI Bank & Ann" held that:- "82. As discussed in the previous paragraphs, for initiation of corporate resolution process by financial creditor under sub-section (4) of Section 7 of the Code, 2016, the 'adjudicating authority' on receipt of application under sub-section (2) is required to ascertain existence of default from the records of Information Utility or on the basis of other evidence furnished by the financial creditor under subsection (3). Under Section 5 of Section 7, the 'adjudicating authority' is required to satisfy - (a) Whether a default has occurred; (b) Whether an application is complete; and (c) Whether any disciplinary proceedi....
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....ls dated 6th march and 7th March 2017 and so on to the Appellant in respect of the Appellant's cranes commissioned at G.E's Kadappa site. GE, inter-alia, required the Appellant to urgently release funds for the crane's diesel, send a safety engineer at the project site and take necessary action in respect of replacement of cotter pin in one of the ancillary equipments. 18.3 The appellant's Project Manager forwarded each of these emails to the IRP along with an explanation regarding the nature of the service and the time lines for the same, wherever required. 18.4 Despite the lengthy trail of correspondence and constant service requests, IRP failed to do much as satisfactorily reply to GE's concerns, much less release the necessary funds and take actions. As a result of IRP's failure to release necessary funds and act on the service requests in a timely manner, the Appellant was unable to perform its contractual obligations qua G.E. 18.5 Ultimately vide an email dated 18th march 2017, G.E has terminated the contract with the Appellant resulting in a financial loss of at least Rs. 2,70,00,000/- as well as loss of goodwill that the Appellant has painst....
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....judicating authority' on the following coouunnttss::-- 20.1 The ascertainment of existence of default by the 'adjudicating authority' which under the provisions of Sub-Section (4) of Section 7 of the I&B Code has to be based on the application/ other evidence submitted by the financial creditor, suffers from non-application of mind given the apparent and conspicuous mismatch between the amount demanded by the Respondent from the Appellant in its demand notice dated 6th February 2017 and the amount stated to be in default in the said application. 20.2 Secondly, the 'adjudicating authority' in paragraph 8 of the impugned order has recorded that proof of service showing service of notice upon the corporate debtor before filing the petition has been filed by the Financial Creditor, without considering the true nature and purport of the so called notice dated 8th February 2017 which did not even mention the essential details which were to be mentioned, such as:- a. Whether the application has been filed; b. if the application is filed, what is the filing number; and c. date of listing, if notified. 20.3 The notice has been given wi....