Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + HC Insolvency and Bankruptcy - 2023 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (3) TMI 450 - HC - Insolvency and BankruptcyConstitutional validity of section 7 of IBC - Adjudication on an application under Section 7 filed by a financial creditor - challenge is on the premise that no power is conferred on the adjudicating authority to adjudicate on any issues on the filing of an application Under section 7 by a financial creditor, and the adjudicating authority is under statutory compulsion to appoint a Resolution Professional. HELD THAT:- It is pertinent to note that, over a period of time, the Supreme Court has analysed and interpreted Section 7 and held that Section 7(5)(a) confers the adjudicating authority with the discretion to decide whether to admit the application or not, after considering all relevant aspects. The scope and ambit of Section 7 had come up for consideration in Innoventive Industries Ltd [2017 (9) TMI 58 - SUPREME COURT] where the Apex Court had taken note of the difference in procedure with respect to the claims raised by financial creditors and operational creditors. The Court also opined about the limited scope of adjudication on an application under Section 7 filed by a financial creditor. The legal position emanating from the above decision leaves no room for doubt that the adjudicating authority is vested with the discretion and is legally bound to consider all relevant aspects, including the financial health and viability of the corporate debtor, while taking a decision on the application filed by the financial creditor. As such, the contention that Section 7 is a draconian provision loaded against the corporate debtor, cannot be countenanced. Therefore, the challenge against constitutional validity of section 7 of IBC on the ground that the provision is arbitrary and discriminatory, is liable to be rejected. It is hence clear that the petitioner has the right to file objections against Ext.P7 application and in such event, the adjudicating authority is bound to consider the objection on merits and take a decision on the admissibility or otherwise of Ext.P7 application after considering all relevant aspects, including those urged in this writ petition. The writ petition is accordingly dismissed.
|