TaxTMI 
TaxTMI 
2018 (7) TMI 512
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....a company registered under the Companies Act with its registered office at Makum Pathar, A.T. Road, Margherita, Tinsukia, Assam and its date of incorporation was 26.08.1982. 4. It may be stated that in 1994, a loan to the tune of Rs. 500 lakhs was granted to the CD by the FC in order to felicitate the CD to run its business in a better way. A schedule of repayment was also prepared so that the loan can be repaid within a certain time frame. However, there was default in repayment of the loan. Ultimately, in 2008, a one-time settlement (OTS, in short) was arrived at between the parties. 5. Under such OTS, the CD was to pay Rs. 77.56 crores out of which Rs. 46.10 crores was to be paid in cash and balance part thereof was to be paid by way of 6% Cumulative Non-Convertible Debentures amounting to Rs. 31.55 crores, which would be redeemed in two equal yearly instalments in March, 2013 and March, 2014. 6. In compliance thereof, the CD had paid Rs. 46.10 crores in cash and also issued 6% Cumulative Non-Convertible Debentures amounting to Rs. 31.55 crores which could be redeemed in two equal yearly instalments, one in March, 2013 and other in March, 2014. However, the CD once agai....
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.... Industrial & Financial Reconstruction (BIFR) which is pending and due to financial distress it is not in a position to redeem any debenture and the same can take place only in terms of the rehabilitation scheme to be worked out under the aegis of Hon'ble BIFR. In view of the aforesaid, we request you to kindly withdraw your erroneous letter dated February 29, 2016 based on wrong factual understanding and the threat made thereunder and bear and co-operate with us to overcome the situation by working out a rehabilitation scheme for the benefit of all stakeholders including IDBI before the Hon'ble BIFR. Thanking You, Your faithfully For Kitply Industries Limited Sd/- P.K. Goenka Chairman & Managing Director" 8. The CD further stated in the aforesaid letter that it is no longer possible on its part to repay the loan in pursuance to the demand, made by the FC stating that since it has already approached the concerned authority to declare it as a sick industry under the Sick Industrial Companies (Special Provisions) Act, 1985, it cannot legally be asked to repay the loan, if any, to the FC. 9. It may be stated here tha....
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....s the remaining amount, same being Rs. 22,31,99,011.75, was payable towards the interest accrued on the principal amount till 31.10.2017. Since there was debt due from CD and since there was clear default in repayment of such loan, the FC has validly initiated the proceeding under Section 7 of the Code of 2016. 12. It has also been contended that the application has been filed in accordance with the prescription of law and the Rules framed thereunder. However, the Registry of this Authority had notified some defects therein which were duly rectified and the rectified application has also been filed with this Authority, copy of which was also served to the CD after presentation of the rectified application before this Authority. 13. Though the CD has raised some objections against the IRP, so named by the FC in the application, questioning his impartiality alleging that such IRP has a close nexus with the FC and, therefore, the CD apprehends that the IRP, so named by the FC, cannot be expected to act impartially in the dispute between the parties in the event the application under consideration is admitted. However, according to the FC, such apprehension was wholly unfounded a....
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....ll Chief General Managers (Grade F), and all General Managers (Grade E) to do various acts which included the power to file application under Section 7 of the Code of 2016. As per the said Board resolution dated 14.08.2017, when the Bank's exposure is less than Rs. 100 crores, the authority to file claim has been delegated to the jurisdictional Deputy General Manager. 19. However, when the Bank's exposure is Rs. 100 crores or above, the power to file claim has been delegated to the concerned General Manager. In the present case, the total amount of claim to be in default including interest is calculated at Rs. 53,87,09,1011.75 (Fifty-Three Crores Eighty-Seven Lakhs, Nine Thousand and Eleven Rupees Seventy-Five Paisa). Being so, in terms of the arrangements, made in the aforesaid Board resolutions, the power to file present application was conferred only on the jurisdictional Deputy General Manager. 20. But surprisingly enough, the application under consideration was filed by Shri Dattaraya Bapurao Sawangikar who is the General Manager of the applicant bank. Since in terms of resolution dated 14-08-2017, Shri Sawangikar , General Manager, did not have requisite authority to pr....
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....Singh to work as IRP. 25. However, the letter dated 22-11-2017 reveals some facts which raises a serious doubt about the impartiality of such a person to work as IRP and therefore, same was conveyed to the FC through the Registry of this Authority. On coming to know about such apprehensions, expressed by the CD, the FC, in its rejoinder, stated that Sri Anup Kumar Singh had rescued himself from the proceeding and as such, he was replaced by one Sri Vijay Murmuria. 26. However, the replacement of Sri Anup Kr. Singh by Sri Vijay Murmuria was as worse as earlier one. This is because of the fact that now, FC, instead of naming a person to act as IRP as required under section 7(3)(b) of the Code, 2016, appointed such a person as the IRP, as is evident from Annexure-A of the rejoinder which is, however, not permissible under the law since law requires the FC only to name a person having the qualifications, specified in the Code, to act as IRP. According to the CD, this is another reason why the present application is required to be rejected. 27. The FC in its reply submitted that the allegations, advanced from the side of the CD, aimed at dislodging the proceeding under consider....
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....of the 'I & B Code' is to be filed by a 'Financial Creditor' is provided in 'Form-1' of the Adjudicating Authority Rules. Upon perusal of the Adjudicating Authority Rules and Form-1, it may be duly noted that the 'I & B Code' and the Adjudicating Authority Rules recognize that a 'Financial Creditor' being a juristic person can only act through an "Authorized Representative". Entry 5 & 6 (Part I) of Form No. 1 mandates the 'Financial Creditor' to submit "name and address of the person authorized to submit application on its behalf. The authorization letter is to be enclosed. The signature block of the aforementioned Form 1 also provides for the authorized person's detail is to be inserted and also includes inter alia the position of the authorized person in relation to the 'Financial Creditor'. Thus, it is clear that only an "authorized person" as distinct from "Power of Attorney Holder" can make an application under section 7 and required to state his position in relation to "Financial Creditor". 32. The 'I & B Code' is a complete Code by itself. The provision of the Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a parti....
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....uired to write his name and address and position in relation to the 'Financial Creditor '/Bank. If there is any defect, in such case, an application under section 7 cannot be rejected and the applicant is to be granted seven days' time to produce the Board Resolution and remove the defect. 38. This apart, if an officer, such as senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a proceeding for 'Corporate Insolvency Resolution Process' against the person who have taken loan, in such case the 'Corporate Debtor' cannot plead that the officer has power to sanction loan, but such officer has no power to recover the loan amount or to initiate 'Corporate Insolvency Resolution Process', in spite of default of debt. 39. If a plea is taken by the authorised officer that he was authorised to sanction loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the 'Financial Creditor' in favour of such officer designate. 40. In view of reasons as recorded above, while we hold that a 'Power of Attorney Holder' is not empowered to f....
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....he defect of the nature, so pointed out by the CD, cannot come in the way of initiating CIRP against the CD. 35. I have considered the rival submissions having regard to the materials on record as well as the decisions, relied on by the parties. Coming to the allegation that a defective power of attorney cannot give requisite authority to Sri Dattaraya Bapurao Sawangikar, General Manager IDBI Bank Ltd. Kolkata to file the application under consideration, it is found that the FC too admitted that the aforesaid power of attorney suffers from the defects, so pointed out by the learned counsel for the CD. 36. Since the power of attorney dated 29-11-2017 admittedly suffers from lapses, and since such lapses are found to be quite serious in nature, such lapses, in my considered view, reduce the aforesaid power of attorney to a piece of paper, which has no legal validity whatsoever. Therefore, I have no hesitation in concluding that the power of attorney dated 29-11-2017 could not give any authority whatsoever to Sri Dattaraya Bapurao Sawangikar to present before this Authority the application under consideration. 37. In such a scenario, it needs to be seen if the claim of the FC....
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.... dated 14.08.2017 was brought into record subsequently by the Financial Creditor along with its Rejoinder wherein it was specifically stated in paragraph 8 that "to avoid further controversies and to put at rest all the purported objections with regard to my authority to file and proceed with the case, I am enclosing herewith an Extract form Minutes of the 134th Meeting of the Board of Directors of IDBI Ltd. held on 14.8.2017at Mumbai regarding the Revision in Delegation of Powers of the Bank to competent individuals. By the said resolution dated 14.08.2017 the Board of Directors of the IDBI Bank Limited had resolved to approve the revision in the Delegation of Powers (DOPs) with directions that Standard Operating Procedures (SOP) be devised for NCLT/JLF cases. Accordingly, it was specifically provided in therein that when the bank's exposure is less than Rs. 100 crore, the authority to file claim been delegated to Deputy General Manager and the when the bank's exposure is Rs. 100 crore and above the power to file claim has been delegated to the General Manager. In the present case the total amount claimed to be in default including interest is Rs. 53,87,09,011.75/- (Fifty three Cr....
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....ge of such resolution. 45. Being so, one cannot find fault with the resolution dated 23-06-2017 for its not containing signature of the directors of the Board of the applicant bank. The fact that such a copy is certified by the Company Secretary of the FC makes such a conclusion inevitable. In the face of above revelations, one needs to conclude that the allegation that Sri Sawangikar could not have presented the application u/s 7 of the Code is found to be wholly without any substance. 46. In regard to the allegation that since in presenting the application u/s 7 of the Code, Sri Dattaraya Bapurao Sawangikar, GM of the applicant bank, paid no regard whatsoever to the pecuniary qualifications, specified in the resolution, dated 14-08-2017, thereby requiring this Authority to reject the application under consideration, I have found that such contention too carries no conviction. It is true that as per aforesaid resolution, GM is authorised to initiate the proceeding before the Adjudicating Authority when the value of the claim is Rs. 100 crores or more. 47. It is also true that when the amount in default is less than Rs. 100 cores, in terms of aforesaid resolution, the nece....
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....(P.) Ltd.'s case (supra), it has been held that when the authority to file application u/s 7 of the Code is found defective for one reason or other, the Authority concerned, instead of rejecting the application straightway, needs to give the applicant an opportunity to rectify the defects in authority in presenting the application. Such a decision also demonstrates that a too technical approach qua defect in authority/power may not advance the cause of justice. 53. On considering the present controversy in the light of what has been decided in Palogix Infrastructure (P.) Ltd.'s case (supra), I have found that this authority must take into consideration the Board resolution dated 23-06-2017 as well as the resolution dated 14-08-2017 in ascertaining if Sri Dattaraya Bapurao Sawangikar had valid authority to present the application under consideration before this authority. This is more so, when such resolutions are already brought on record when the application was taken up for consideration. 54. It needs to be stated here that I have already scrutinised the aforesaid resolutions and have found that such resolutions very clearly show that under those resolutions, the applicant ....
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....forthwith a copy of the application, filed with Authority, to the registered office of CD. More importantly, the copies of such application were also furnished to learned counsel for the CD. On the perusal of the materials, I feel inclined to accept such contention which, in turn, requires me to hold that this proceeding cannot be rejected at the threshold as prayed for by the CD for alleged violation of Rule 4(3) of the Rules, 2016. 59. But then, even if one assumes for the sake of argument that the copy of the application was despatched only to the corporate office of the CD, as alleged by the learned Sr. counsel appearing for the CD -- yet then--- there are enough materials on record to show that the CD received the copy of the application in time , filed with Adjudicating Authority and having been so furnished with copy of the application, the CD duly participated in the proceeding under consideration and also challenged the application on grounds more than one. 60. Here, it needs to be stated that the CD has informed that it had already filed an application against the FC seeking initiation of appropriate proceeding against the FC. According to the CD, it had to file sai....
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....s letter head as alleged or at all. I say that the alleged letter does not bear any signature of IRP. I say that the said letter was prepared at the office of the Advocate and was forwarded to the Corporate Debtor. The IRP was completely unaware of the exercise of service of the copy of such application and he has no role therein. I say that the forwarding letter was inadvertently made due to misinterpretation of the newly enacted Insolvency and Bankruptcy Code, 2016 by a junior Advocate at the office of the advocate-on-record of the Financial Creditor. I say that the alleged forwarding letter of IRP does not bear his signature either. It cannot be said that such a letter was issued by him or the service of the said application was effected by the IRP. I deny that there is any occasion of raising a question mark on the independence of the proposed IRP. In any event, upon such unfounded allegation being made the IRP has sought to excuse himself from the present proceedings and has withdrawn his name by a letter dated 9.03.2018 issued to the Financial Creditor. I say that in view of the fact that Mr. Anup Kumar Singh, the erstwhile IRP has excused himself from the present proceedings....
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....7(3)(b) of the Code, 2016. 69. Therefore, when one considers the aforesaid lapses, on the part of the FC, in attending the duty imposed on it by law having regard to the scheme of the section 7(3)(b) of the Code of 2016--as is evident from our foregoing discussion--- it would appear clear that if the person concerned otherwise fulfils the requirements which law wants to see in an IRP, the small and minor lapses which occurred in naming the IRP by the FC cannot be allowed to have size larger than their lives to overthrow the entire proceeding U/s 7 of the Code. 70. Coming back to our case, it is found that Sri Bijoy Murmuria who was appointed as IRP by the FC---off course in an unauthorized way----possessed enough qualification to be appointed as IRP in the event of admission of application under consideration. The documentation of his qualifications in the Annexure B and C to the rejoinder makes such position clear. The fact that he has already worked as IRP as well as the liquidator and that no proceeding said to have been pending against him are testimonies to such a conclusion. Being so, the lapses on the part of the FC in naming the IRP seems to be of no consequences. ....