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2019 (8) TMI 1700 - AT - Insolvency and BankruptcyMaintainability of insolvency application can be entertained in a case where financial fraud exists - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Adjudicating Authority has allowed intervention applications filed by different creditors, which is not the requirement of the ‘I&B Code’/ law - In Innoventive Industries Ltd. v. ICICI Bank & Anr. [2017 (6) TMI 959 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI], this Appellate Tribunal held that before admitting an application under Sections 7 or 9, a limited notice is required to be given to the ‘Corporate Debtor’ by the Adjudicating Authority - the matter subsequently fell for consideration before the Hon’ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank and Anr. [2017 (9) TMI 58 - SUPREME COURT] wherein dealing with the provisions of Sections 7 or 9, the Hon’ble Apex Court observed and held that the ‘debt’ means a liability of obligation in respect of a ‘claim’ and a ‘claim’ means a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more. The Hon’ble Supreme Court specifically held that when it comes to a ‘Financial Creditor’ triggering the process, Section 7 becomes relevant. The application is made by a ‘Financial Creditor’ in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the ‘Corporate Debtor’ in Part II, particulars of the proposed ‘Interim Resolution Professional’ in Part III, particulars of the ‘Financial Debt’ in Part IV and documents, records and evidence of default in Part V - Thus, it is clear that once the record is complete, Code is to be triggered if there is a default of more than ₹ 1 lakh. The ‘Corporate Debtor’ can only point out that the debt may not be due in a sense it is not payable in law or in fact. It is a settled law that the Adjudicating Authority is only required to ensure whether there is a debt and default on the basis of record (Form 1). It cannot take into consideration any other facts which are irrelevant. The ‘Corporate Insolvency Resolution Process’ not being a litigation much less adversarial litigation or a recovery proceeding or a money suit - the Adjudicating Authority cannot notice to hold that owing to the financial fraud the amount was not paid by the ‘Corporate Debtor’. In the present case, the Adjudicating Authority has failed to show that the present proceeding under Section 7 was filed by the Appellant fraudulently or with malicious intention for initiation of the ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’. Whatever the grounds shown for not entertaining the application are not related and beyond Form 1 and were not to be pleaded. In fact, nothing on the record to suggest that the Appellant filed application fraudulently with malicious intention for initiation of the ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’. The case is remitted back to the Adjudicating Authority to admit the application after notice to the ‘Corporate Debtor’ so as to enable the ‘Corporate Debtor’ to settle the claim - appeal allowed.
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