2019 (1) TMI 1566 - AT - Insolvency and Bankruptcy

Rejection of application filed under Section 7 of the I B Code - appeal preferred by corporate debtor - presence of defect or not - HELD THAT - The Adjudicating Authority is not required to decide mis-match of debt occurred in one place or the other place and the mis-match of debt cannot be a ground to reject the claim if the amount is due more than Rupees One Lakh and there is a default . Under Section 7(5) the Adjudicating Authority is to be satisfied that a default has been occurred. If the debt is more than Rupees One lakh then the Adjudicating Authority is required to admit the application except where there is defect which can be removed within seven days from the date of receipt of the notice from the Adjudicating Authority. The Adjudicating Authority has not pointed out any defect in the sense the record is not complete - the Adjudicating Authority is directed to pass appropriate order under Section 7 of the I B Code on merit after hearing the appeal on the next date without adjourning the matter failing which this Appellate Tribunal will decide whether the application filed under Section 7 of the I B Code is to be admitted or not. Appeal disposed off.

Summary

Issues:
1. Appeal against order of Adjudicating Authority granting time to financial creditor.
2. Delay in passing order by Adjudicating Authority on application under Section 7 of I&B Code.
3. Interpretation of Section 7 of I&B Code regarding default and debt due.

Analysis:
1. The appeal was filed by the corporate debtor against an order granting seven days to the financial creditor to address defects. The corporate debtor argued that the matter had been pending for a year without a decision on the application under Section 7 of the I&B Code. The financial creditor contended that the Adjudicating Authority had only sought clarification. The Appellate Tribunal referred to a previous case highlighting the need for timely decisions and directed the Adjudicating Authority to make a prompt ruling without unnecessary adjournments.

2. The issue of delay in passing orders by the Adjudicating Authority was addressed, citing a Supreme Court judgment in a related matter. The Tribunal emphasized that once a default is established, the application should be admitted unless there are rectifiable defects. The Adjudicating Authority was instructed to decide on the application promptly without undue delays, as mandated by the Insolvency Code's specific timeframes.

3. The Tribunal analyzed the interpretation of Section 7 of the I&B Code concerning defaults and debts due. It referenced the Supreme Court's ruling that a default need not be in favor of the applicant financial creditor, and the Adjudicating Authority must ascertain default within 14 days of receiving the application. The debtor can dispute the default based on law or fact, but if the debt exceeds one lakh rupees and a default is established, the application should be admitted unless correctable defects exist. The Tribunal directed the Adjudicating Authority to make a merit-based decision without unnecessary adjournments, emphasizing the importance of timely resolution under the Insolvency Code.