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2021 (12) TMI 244 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time limitation - Evidence of existence of debt - HELD THAT:- In the instant case, the ‘Appellant’ had confirmed the ‘default’ and the same is undisputed. Indisputably, to secure the repayment of ₹ 31,75,00,000/- invested by the 2nd and 3rd Respondents, the ‘Corporate Debtor’ had created numerous securities to and in favour of 2nd and 3rd Respondents like that of promissory notes, purchase option agreement, mortgage of freehold lands, mortgage of residential flats on an exclusive charge basis, which was contractually financed by corporate guarantee and first personal guarantees from it promoters. Time frame for admission - HELD THAT:- Before an admission of an application filed under Section 7 of the I&B Code, by a ‘financial creditor’, an ‘Adjudicating Authority’ as per Section 7(4) of the Code is to find out the existence of the default within 14 days of receipt of the application, as mentioned in Section 7(4). On being satisfied that such a default took place, then, an ‘Adjudicating Authority’ may admit such application, subject to rectification of defect, which the proviso in Section 7(5) of the Code enjoins that it must be done within 7 days of receipt of such notice from the ‘Adjudicating Authority’ by the ‘Applicant’ - As per Section 7(6) of the Code, the CIRP starts from the date of admission of the application. The ‘Adjudicating Authority’ as per Section 7(7) is to communicate the order either or accepting or rejecting the application of the ‘financial creditor’ or the ‘Corporate Debtor’ within 7 days of such admission or rejection. Debt and default or not - HELD THAT:- Ordinarily, an ‘Adjudicating Authority’ is not required to go into the claim or counter claim made by the parties except to ascertain whether or not the record is complete and whether or not there is a ‘debt’ and ‘default’ committed by the ‘Corporate Debtor’. Always a ‘Corporate Debtor’ has the option to point out that a ‘default’ had not occurred in the sense that ‘debt’ including a disputed claim is not due - it is open to the ‘Corporate Debtor’ or its Directors to mention that/point out that ‘debt’ is not payable by the ‘Corporate Debtor’ either in Law or on facts of a given case. A ‘debt’ may not be due if it is not payable either on facts of a given case or in Law. Evidence of existence of debt - HELD THAT:- When there is any change in the Directors or ownership’, the ‘Power of Attorney’, Authorisation letter need not be executed once again and that the subsisting authorisation is good enough in Law, all the more when the said authorisation was not revoked. Also that, in any event, no prejudice is caused to the ‘Corporate Debtor’ in regard to the aspect of ‘name change’ of the 2nd and 3rd Respondents. Further that, the aspect of name change will not affect the ‘default’ committed by the ‘Corporate Debtor’ especially when the ‘Corporate Debtor’ admittedly had defaulted in meeting its obligations to the 2nd and 3rd Respondents as a result of which the ‘CIRP’ was initiated by the 2nd and 3rd Respondents against the ‘Corporate Debtor’ by filing the Section 7 application under I&B Code before the ‘Adjudicating Authority’ - It cannot be gainsaid that the ‘Debenture Holders’ even in the absence of ‘Debenture Trustees’ is entitled to file an ‘Application’ under the I&B Code seeking necessary relief. In short, the right of the 2nd and 3rd Respondent is very much saved in the ‘Debenture Trust Deed’ - this ‘Tribunal’ holds that they do have a valid and legal right to file the Section 7 Application under the I&B Code, 2016. This ‘Tribunal’ considering the facts and circumstances of the case comes to a consequent conclusion that the existence of ‘financial debt’ and the ‘default’ of ‘financial debt’ were established on the part of the ‘Financial Creditors’/Applicant’ and ‘debt’ in question is payable not only in Law and also in fact - this ‘Tribunal’ unhesitatingly holds that the ‘impugned order’ passed by the ‘Adjudicating Authority’ dated 12.8.2021 (National Company Law Tribunal, Division Bench II, Chennai) in IBA/149/2020 in admitting the Application (Filed under Section 7 of the I&B Code) by the ‘Financial Creditors’/Applicants is free from any legal infirmities. Appeal dismissed.
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