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2020 (8) TMI 456 - AT - Insolvency and BankruptcyReplacemnet of Resolution Professional - Collusion between Creditor and Debtor to initiate CIRP - Related Party - Recall of order - levy of penalty - Jurisdiction of Adjudicating Authority - It is the case of the Appellant that the Appellant- ‘Bank of India’ is a secured creditor which did not trigger any ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’ but ‘Laxmi Kantha Rao Thota’ (Respondent No.3), who is a ‘related party’ of the ‘Corporate Debtor’, filed an application under Section 7 of the ‘I&B Code’ in connivance with the ‘Corporate Debtor’. HELD THAT:- The Adjudicating Authority has failed to exercise jurisdiction vested in it. The material irregularity brought to our notice in the resolution proceeding goes to the root of the matter and the impugned order cannot be sustained. This is notwithstanding the fact that the order of admission of application under Section 7 has not been assailed in appeal. Once it was brought to the notice of the Adjudicating Authority that the initiation of the ‘Corporate Insolvency Resolution Process’ was at the instance of Respondent No.3, who was allegedly a ‘related party’ on the date of filing of application as also on the date of admission of such application, fraudulently i.e. with intent to defraud the Appellant being the ‘Sole Secured Financial Creditor’ of the ‘Corporate Debtor’, the Adjudicating Authority should not have abdicated its duty by deferring the decision on application under Section 65 of the ‘I&B Code’ preferred by the Appellant until final hearing despite recording findings and making observations that the provisions of the ‘I&B Code’ had been blatantly infracted by the ‘Interim Resolution Professional’ by excluding Appellant from the purview of the ‘Committee of Creditors’. Admittedly, the Resolution Process has failed to fructify and the Adjudicating Authority is considering the recommendation for liquidation of the ‘Corporate Debtor’. It is queer that the pivotal issue remains to be determined while the ‘Corporate Debtor’ may go into liquidation leaving the Appellant remediless, which would result in great miscarriage of justice. It is for this Appellate Tribunal to step in and ensure that such miscarriage of justice is prevented. The impugned order cannot be sustained - Matter restored before the Adjudicating Authority - Certain period to be excluded. - Appeal allowed.
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