AA Didn’t Error in Admitting CIRP Plea Filed u/s 7 by a Duly Authorised Person on Behalf of FC At All Points of Time | NCLAT

Case Details: Sanjeev Kumar Sharma v. SREI Equipment Finance Ltd. - [2023] 155 taxmann.com 216 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Joy Saha, Sr. Adv. Nikunj Berlia, Dhruv Surana, Arya Hardik & Rajeev Ahuja, Advs. for the Appellant.
  • Sanjiv Sen, Sr. Adv. Ankit Kohli, Ms Anjali Singh, Mridul Suri, Gaurav Sethi & Deeptanshu Chandra Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor had a business relationship with the respondent no. 1-financial creditor, which was a Non-Banking Financial Company (NBFC). During the course of the business relationship between the corporate debtor and respondent No. 1-financial creditor, several loan agreements were signed following which funds were transferred by the financial creditor to the corporate debtor.

Thereafter, on default in making due payment, the financial creditor filed a petition u/s 7 of IBC against the corporate debtor. In the meantime, the financial creditor itself was admitted into the CIRP and was taken over by the Administrator. Later, when the authorized signatory of the financial creditor, in respect of the main petition retired from service, the Administrator appointed another person by a special power of attorney (PoA).

An application was filed by a financial creditor to re-sign, re-verify and make formal amendments to the main petition, which was allowed by the Adjudicating Authority (NCLT). Thereafter, the corporate debtor filed an application before the NCLT to decide the maintainability of the main petition on the ground that despite amendments made, the main application continued to remain defective invalid and not maintainable.

However, the NCLT by the impugned order allowed the CIRP petition and the corporate debtor was admitted into the CIRP. Thereafter, an appeal was made before the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

NCLAT Held

The NCLAT observed that the institution of the main petition and continuance of proceedings on behalf of the financial creditor had been done by duly authorized persons at all points of time and, therefore, the NCLT did not commit any error in finding the main petition to be maintainable and valid.

The NCLAT held that the mere use of the word Power of Attorney ‘PoA’ does not take away the power to file a section 7 application as long as a general authorization has been made for its officers to do needful in legal proceedings.

The NCLAT, further held that since debt and default were above the threshold limit, there was sufficient reason for admission of the main petition and admitting the corporate debtor into the rigours of the CIRP. Thus, there were no sufficient and plausible grounds made which warranted any interference with the impugned order.

List of Cases Reviewed

• • SREI Equipment Finance Ltd. v. Dadheech Infrastructures (P.) Ltd. [2023] 155 taxmann.com 215 (NCLT – Kol.) (para 22) affirmed [See Annex].
  • Palogix Infrastructure (P.) Ltd. v. ICICI Bank Ltd. [2017] 86 taxmann.com 81/144 SCL 319 (NCLAT – New Delhi)
  • Rajendra Narottamdas Sheth v. Chandra Prakash Jain [2021] 131 taxmann.com 2/168 SCL 466 (SC) (para 15) followed.

List of Cases Referred to

• • Palogix Infrastructure (P.) Ltd. v. ICICI Bank Ltd. [2017] 86 taxmann.com 81/144 SCL 319 (NCLAT – New Delhi) (para 15)
  • Rajendra Narottamdas Sheth v. Chandra Prakash Jain [2021] 131 taxmann.com 2/168 SCL 466 (SC) (para 15)
  • Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252/173 SCL 355 (SC) (para 18)
  • Manish Kumar v. Union of India [2021] 123 taxmann.com 343 (SC) (para 19).