TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 144
X X X X Extracts X X X X
X X X X Extracts X X X X
....orate Debtor is in the business of setting up underground fiber network in the cities of Surat, Ahmedabad, Vapi, Silvasa, Ankleswar and in South Gujarat, and providing dedicated dark fiber, broadband, internet leased line, VPN, point-to-point, wi-fi and wiMAX connections and CCTV surveillance services to corporate entities, financial institutions and other organisations. Respondent No. 2, Union Bank of India (hereinafter referred to as the 'Bank' or 'Financial Creditor'), sanctioned a loan of Rs. 4.5 crore which was cleared by the Corporate Debtor on 08.12.2012. Another loan was granted by the Financial Creditor for Rs. 3.5 crore which was also repaid on 28.05.2018. Thereafter, loans were granted by the Financial Creditor to the Corporate Debtor but the Corporate Debtor was unable to settle the dues of the Financial Creditor in time. On 30.09.2014, the account of the Corporate Debtor was declared as nonperforming asset (NPA). The Financial Creditor issued notice for recovery of all dues payable by the Corporate Debtor on 01.10.2014. Pursuant to the notice, the Financial Creditor filed an application before the Ahmedabad bench of the Debt Recovery Tribunal under Section 19 of the Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at Section 18 of the Limitation Act is also not applicable to the facts of this case. The further argument of the Corporate Debtor was that the power of attorney in favour of the individual who has signed the application under Section 7 of the Code had been granted prior to the Code coming into force without any specific authorisation to initiate proceedings under the Code, and therefore, the application was not maintainable. 5. The NCLAT examined the power of attorney given by the Bank to Mr. Praveen Kumar Gupta and found no merit in the argument of the Corporate Debtor that the application under Section 7 of the Code was not maintainable as it was filed by a power of attorney holder. In so far as limitation is concerned, the NCLAT referred to all the documents as well as the "cut back arrangement" relied on by the NCLT to hold that the application under Section 7 of the Code was filed within the prescribed time. It was further observed by the NCLAT that the Corporate Debtor could not demonstrate any error in the order of the Adjudicating Authority. Accordingly, the NCLAT dismissed the appeal of the Corporate Debtor. 6. Essentially, there are two issues that arise for considerat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....financial creditor is required to make an application for initiating the corporate insolvency resolution process against the corporate debtor under Section 7 of the Code in Form 1, accompanied with documents and records required therein. Form 1 is in a tabular form and the financial creditor has to give particulars of the details sought. Further, the Form is required to be signed by the "person authorised to act on behalf of the financial creditor". 10. The authorisation, in terms of the power of attorney, given by the Financial Creditor to Mr. Praveen Kumar Gupta who has filed the application under Section 7 of the Code has been placed on record. Pursuant to the resolution passed by the board of directors of the Bank on 06.12.2008, the power of attorney was executed by the general managers in 2011. By way of the said power of attorney, Mr. Praveen Kumar Gupta was appointed by the Bank to act as its constituted attorney with respect to "all the business and affairs of the Bank and to conduct and manage and to assist in the conduct and management of all such businesses and affairs of the Bank, both within and outside India and to do all acts, deeds and things necessary or proper fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... application under Section 7 of the Code, merely because the authorisation was granted through a power of attorney. Moreover, the NCLAT in Palogix Infrastructure (supra) has held that if the officer was authorised to sanction loans and had done so, the application filed under Section 7 of the Code cannot be rejected on the ground that no separate specific authorisation letter has been issued by the financial creditor in favour of such officer. In such cases, the corporate debtor cannot take the plea that while the officer has power to sanction the loan, such officer has no power to recover the loan amount or to initiate corporate insolvency resolution process, in spite of default in repayment. We approve the view taken by the NCLAT in Palogix Infrastructure (supra). 12. In the present case, Mr. Praveen Kumar Gupta has been given general authorisation by the Bank with respect to all the business and affairs of the Bank, including commencement of legal proceedings before any court or tribunal with respect to any demand and filing of all necessary applications in this regard. Such authorisation, having been granted by way of a power of attorney pursuant to a resolution passed by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the adjudicating authority when a default has occurred. Subsection (2) thereof provides that the application shall be in the form and manner as prescribed. Sub-section (3) obligates the financial creditor to furnish the record of default recorded with the information utility or such other record or evidence of default as may be specified, along with the application. On the basis of records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3), the Adjudicating Authority within a period of 14 days shall ascertain the existence of a default, as stipulated under sub-section (4). According to sub-section (5), the Adjudicating Authority may admit the application filed under sub-section (2), where the Adjudicating Authority is satisfied that a default has occurred, the application filed is complete and no disciplinary proceedings are pending against the proposed resolution professional. As per sub-section (6), the corporate insolvency resolution process shall commence from the date of admission of the application. 16. Rule 4 of the 2016 Rules prescribes that the application under Section 7 of the Code shall be filed in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no bar for filing of documents as required under Section 7, until a final order either admitting or dismissing the application has been passed. While concluding, this Court had opined that in case of inordinate delay, the Adjudicating Authority, at its discretion, may allow or decline the request of the applicant to file additional pleadings and / or documents before passing the final order. 18. While examining the question of maintainability of an application filed under Section 7 of the Code in the absence of a plea regarding the acknowledgement of liability, this Court in Asset Reconstruction Company (India) Limited v. Bishal Jaiswal & Anr. (2021) 6 SCC 366, gave an opportunity to the financial creditor to amend its pleadings before the NCLAT on payment of costs of Rs. 1 lakh. In the said case, the corporate debtor's account was declared as NPA from 2010. The NCLT admitted the application under Section 7 on the ground that there was a continuing cause of action. The NCLAT dismissed the appeal of the corporate debtor on the ground that limitation would commence from the date on which the Code came into force, i.e., 01.12.2016. This Court remanded the matter back to the NCLAT to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....debts which are "due and payable" in law, meaning thereby that an application under Section 7 of the Code is maintainable only with respect to debts that are not time-barred. (See: B.K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633 ) The primary obligation of making out a prima facie case of default is on the financial creditor. There is no necessity for the corporate debtor to provide any information at the stage of admission of the application under Section 7 of the Code, as the burden of showing non-payment of a legally recoverable debt, which is not time-barred, is on the financial creditor. At the same time, it is clear from the judgments of this Court in Asset Reconstruction (supra) and Dena Bank (supra) that non-furnishing of information by the financial creditor at the time of filing an application under Section 7 of the Code need not necessarily entail in dismissal of the application. An opportunity can be provided to the financial creditor to provide additional information required for satisfaction of the Adjudicating Authority with respect to the occurrence of the default. 21. In the instant case, there is no dispute that the date ....