TaxTMI 
TaxTMI 
2019 (8) TMI 1700
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....nts purporting to be debentures. The debentures were issued to more than 3000 investors. In accordance with the provisions of sec. 67 of the Companies Act, 1956, these debentures were deemed to have been issued to public. - - - - The debentures were issued in breach of the public issue norms, and therefore, the debentures must be redeemed immediately. Additionally, some of the debentures were regarded to be "deposits", being unsecured debentures, and orders have been passed by the NCLT for immediate repayment of the said debentures. Even while the said orders of NCLT are pending for execution, and have not been acted upon application has been made by some of the financial creditors for insolvency of the Corporate Debtor under sec. 7 of the IBC. There are two essential reasons why such an application for declaration of insolvency and moratorium under sec. 7 cannot be granted. First reason is purely a question of bonafide reasons for making the application, and the implications of the insolvency declaration and ensuing moratorium. There is no doubt that the enactment of the insolvency resolution process under the IBC is a....
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.... included in the definition of "financial services". A financial services provider, as per sec. (17) is one who is engaged in the business of providing financial services, in accordance with authorization or registration granted under the law. Where an authorization or registration is required by statute, not obtaining the same cannot grant the entity the right to get out of the provisions which are intended to apply to an entity engaged in similar services. It is notable that sec.3 (7) excludes a financial services provider from the ambit of the Code The intent of the exclusion is simple if an entity is engaged in financial services business, it has a systemic significance. It involves money belonging to public. If such a company is put into a situation of moratorium, and the payments made by such entity are halted, the financial system could get into a tail spin. Such a serious implication to the fact, keeping such entities outside a benevolent, remedial law such as IBC, is all the more important for such a truant entity, which is sitting with public money, and that too, without any authorization. The consequential impact of the commencement of CIRP will be mora....
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.... Code against the petitioner/ financial creditors be issued. Reply against the notices may be filed within three weeks from today. A copy of this order be communicated to the SEBI and to the Central Government through RD(NR). List on dated 7th August, 2018 of further proceeding." 2. The Adjudicating Authority by impugned Judgment also directed for issuance of show-cause notice under Section 65 of the 'I&B Code' against the Appellants/ 'Financial Creditors' for further decision. 3. Learned counsel appearing on behalf of the Appellants submitted that the Adjudicating Authority is required to take into consideration the relevant facts as recorded in Form-1 to find out whether debt is payable and the application is complete or not. If the debt is payable and default is of more than Rs. 1 lakh and record is complete, the Adjudicating Authority is bound to admit the application. 4. In spite of service of notice and publication of advertisement in two Newspapers one in English- 'Times of India, Allahabad Edition' and another is Hindi- 'Hindustan, Allahabad Edition', the 'Corporate Debtor' has not appeared. 5. From the impugned order, we find that the Adjudica....
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....e a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the st....
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....ent even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more. 9. The Hon'ble Supreme Court specifically held that when it comes to a 'Financial Creditor' triggering the process, Section 7 becomes relevant. The application is made by a 'Financial Creditor' in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the 'Corporate Debtor' in Part II, particulars of the proposed 'Interim Resolution Professional' in Part III, particulars of the 'Financial Debt' in Part IV and documents, records and evidence of default in Part V. 10. Thus, it is clear that once the record is complete, Code is to be triggered if there is a default of more than Rs. 1 lakh. The 'Corporate Debtor' can only point out that the debt may not be due in a sense it is not payable in law or in fact. 11. This Appellate Tribunal in numerous cases has stated that notice is to be given only to the 'Corporate Debtor' in an application under Sections 7 or 9 of the 'I&B Code'. The question of intervention by a third party before the admission of the application u....