Authorised Officer Of Financial Creditor Can Also File Petition U/S 7 Of IBC: NCLT Mumbai
The National Company Law Tribunal (NCLT), Mumbai Bench, Court V, comprising Ms. Reeta Kohli, Hon'ble Member (Judicial) Ms. Madhu Sinha, Hon'ble Member (Technical), held that general authorization given to an officer of the Financial Creditor by means of a power of attorney, would not disentitle such officer to act as the authorized representative of the Financial Creditor while filing...
The National Company Law Tribunal (NCLT), Mumbai Bench, Court V, comprising Ms. Reeta Kohli, Hon'ble Member (Judicial) Ms. Madhu Sinha, Hon'ble Member (Technical), held that general authorization given to an officer of the Financial Creditor by means of a power of attorney, would not disentitle such officer to act as the authorized representative of the Financial Creditor while filing an application under Section 7 of the Insolvency and Bankruptcy Code (IBC). In this case, a petition under section 7 of the IBC was filed.
Brief Facts
The petition under section 7 of the Insolvency and Bankruptcy Code( IBC) was filed by Avendus Finance Private Limited (Financial Creditor) against Acute Retail Infra Private Limited (the Corporate Debtor). The claim arises from an agreement signed between the parties on March 9, 2018. This agreement was amended twice, in 2019 and 2020. The corporate debtor is alleged to have defaulted in complying with terms of the agreement. Under this agreement, the total amount of Rs. 115 crores was advanced to the corporate debtor by a consortium of lenders including the petitioner. The Avendus Finance provided Rs. 66 crores to the corporate debtor on March 28, 2019. The loan amount advanced was secured by myriad of documents like deeds of hypothecation, share. Pledge agreements and personal guarantees. A default was made by the corporate debtor of which it was notified by the petitioner on April 27, 2022. The petitioner moved ahead and issued a notice under section 176 of the Indian Contract Act, 1872 to sell the pledged shares.
Contentions
The respondent argued that its business was disrupted by the COVID-19 pandemic due to which it could not repay the loan amount. It admitted the debts and default but advanced the argument that the negotiations were under way to sell its Durgapur Plant to resolve the outstanding debts. Furthermore, the corporate debtor raised objection as to the manner in which the insolvency proceeding was initiated. It argued that no board resolution was passed before initiating the proceedings.
Per contra, the petitioner argued that the agreement was amended multiple times including the one-time restructuring (OTR) which was approved by the Reserve Bank of India (RBI) in 2020. In spite of this, the respondent continued to breach the conditions of the agreement. Neither did it create the mortgage over its Durgapur property nor pay lease rentals. The petitioner sent reminders to the personal guarantors by invoking the terms of the guarantees but no payment was made from this course either.
NCLT's Analysis
The tribunal analysed whether the default had occurred or not as per the agreement and whether petitioner was right in initiating the insolvency proceedings. The tribunal observed that the petitioner proffered ample evidence in the form of loan agreements, default notice and correspondence which led to the conclusion that in fact there was a debt and default had also occurred.
The tribunal also rejected the argument of the corporate debtor related to the board resolution. It observed that it is sufficient to obtain a general authorisation through a board resolution to initiate the insolvency proceedings. The petitioner provided a board resolution dated May 17, 2024 authorising its officers to initiate the insolvency proceedings. The tribunal further noted the judgment of the Supreme Court in Rajendra Narottamdas Sheth and Anr. Vs. Chandra Prakash Jain and Anr. (2022) wherein it was held that when officer of the financial creditor was empowered to sanction loan, he cannot be disentitled to initiate the insolvency proceedings under section 7 of the IBC.
There was no pre-existing dispute either which will bar the application of the petitioner from being admitted. The tribunal referred to the Supreme Court judgment in M/s. Innoventive Industries Ltd. vs. ICICI Bank (2018) wherein it was held that the moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete. It was observed by the tribunal that the financial creditor is entitled to claim its dues as it has been duly established that the default in payment of the financial debt has occurred. There exists no pre-existing dispute between the parties and the present Petition is not barred by Limitation.
Conclusion
The NCLT concluded that the corporate debtor had outstanding debts to pay but it had failed to repay the amount. No substantial argument was advanced by the respondent. On the other hand, it was proved by the petitioner through ample documentary evidence that the loan amount crossed the threshold limit provided under section 4 of the IBC for initiating the insolvency proceedings. Hence, the present petition was admitted.
Case Title: Avendus Finance Private Limited v. Acute Retail Infra Private Limited
Court: National Company Law Tribunal, Mumbai
Case Reference: C.P. (IB)/913(MB)2023
Judgment Date: 25/09/2024