2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Dismiss an application for initiation of Corporate Insolvency Resolution Process - non-disclosure of facts beyond the statutory requirement under the I & B Code read with relevant form - Whether the penalty imposed by the Adjudicating Authority under Section 65 of the I & B Code is legal or not? - Held that:- There is nothing on record to suggest that the Corporate Applicant has suppressed any fact or has not come with the clean hands. The Adjudicating Authority has also not held that the application has been filed by the Corporate Applicant “fraudulently” or “with malicious intent” for any purpose other than for the resolution process or liquidation or that the voluntary liquidation proceedings have been initiated with the intent to defraud any person. In absence of any such reasons recorded by the Adjudicating Authority the impugned order cannot be upheld.

Further, as the Adjudicating Authority before imposing penalty under Section 65 has not given nor served any notice to the Corporate Applicant recording its prima facie view and intent to punish the Corporate Applicant, the impugned order dated 8th May, 2017 cannot be upheld having been passed in violation of rules of natural justice.

For the reasons aforesaid, the impugned order dated 8th May, 2017 passed in C.P.is set aside. The case is remitted back to the Adjudicating Authority for admission of the application under Section 10, if the application is otherwise complete. In case it is incomplete, the Adjudicating Authority will grant time to the appellant to remove the defects.

At this stage, it is desirable to state that the Central Government in Form 1 or 5 or 6 of the ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’, has not provision for the parties to state whether any winding up proceeding has been initiated or liquidation order has been passed against the Corporate Debtor or not. No provision has been made there in for the parties to state whether any of clause of Section 11 is attracted or not.

Non-disclosure of such relevant facts in the relevant Form 6, may be a ground to reject the application but a person can plead that the Form does not stipulate to disclose any ineligibility under Section 11. Therefore, we are of the view that the Central Government should make necessary amendment in the relevant Form 6 appended to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, which will enable the Adjudicating Authority to decide at the time of admission whether any fact has been suppressed or the person has come with the clean hand or not. We hope and trust that appropriate modification of the relevant Rules and Forms shall be made by the Central Government.

In the meantime, the Adjudicating Authority may direct the Financial Creditors / Corporate Applicant to file an affidavit giving declaration in terms of Section 11 of the I & B Code and to state whether any winding up proceeding has been initiated or liquidation order has been passed by any High Court or Tribunal or Adjudicating Authority or not. The appeal is allowed with the aforesaid observations