TMI Blog2021 (1) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority has drawn an inference that the corporate applicant has filed the application under Section 10 with an intention to defeat the SARFAESI measures initiated by the financial creditor. Thus the application is filed with an ulterior motive. We are unable to agree with the finding of ld. Adjudicating Authority and hold that this fact is unrelated and beyond the requirement under I B Code or forms prescribed under the Adjudicating Authority Rules. Therefore, the application cannot be rejected on this ground. The existence of debt and default is established and no winding up proceedings against the appellant and appellant is not covered by the ineligibilities provided under Section 11 of the I B Code. However, the adjudicating authority has rejected the application on extraneous grounds. Therefore, the impugned order is set aside. The case is remitted back to the adjudicating authority (NCLT, Chennai) to admit the application under Section 10 after notice to the parties if there is no defect. In case of any defect, appellant may be allowed time to remove the defects - Appeal allowed. - Company Appeal (AT) (Ins) No. 471 of 2020 - - - Dated:- 20-1-2021 - [Justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers, the Adjudicating Authority held that there are various discrepancies in audited balance sheets as on 31/03/2018, 31/03/2019 and for the period ending on 15/09/2019. It is further held that there is a depletion in the amount of general reserve as on 31/03/2018 as compared to 15/09/2018. The reason for drain in reserve could not be explained by the Corporate Applicant. With this finding, Adjudicating Authority held that the application filed by the corporate applicant is surrounded with doubts, therefore, rejected the application. 5. Being aggrieved with this order, the appellant (Corporate Applicant) filed this appeal. 6. Ld. Counsel for the appellant submitted that the Adjudicating Authority has acted beyond its scope by getting into details of the financial statements of the appellant though this Appellate Tribunal in Leo Duct Engineers Consultants Ltd vs. Canara Bank and Standard Charted Bank CA (AT) (Ins. 100/2017) has laid down the prerequisites for admission i.e. existence of debt, occurrence of default and the corporate applicant not suffering from any disqualifications laid down under Section 11 of the I B Code. In such a situation the Adjudicating Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 10 of I B Code. For this purpose, it is useful to refer the judgment of this appellate tribunal in Unigreen Global Pvt Ltd. (supra). In this judgment it is held that: 20. Under both Section 7 and Section 10, the two factors are common i.e. the debt is due and there is a default. Sub-section (4) of Section 7 is similar to that of sub-section (4) of Section 10. Therefore, we hold that the law laid down by the Hon ble Supreme Court in Innoventive Industries Ltd. (Supra) is applicable for Section 10 also, wherein the Hon ble Supreme Court observed as The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority . 21. In an application under Section 10, the financial creditor or operational creditor , may dispute that there is no default or that debt is not due and is not payable in law or in fact. They may also oppose admission on the ground that the Corporate Applicant is not eligible to make application in view of ineligibility under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under Section 19 of DRT Act, 1993 before a Debt Recovery Tribunal or appeal pending before the Debt Recovery Appellate Tribunal cannot be a ground to reject an application under Section 10, if the application is complete. 12. With the aforesaid the moment the Adjudicating Authority is satisfied that there is a debt and a default has occurred, the application must be admitted unless it is incomplete. Section 10 of I B Code does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information as required to be submitted in Form 6 of Adjudicating Authority Rules. 13. Ld. Adjudicating Authority assumed that Rule 7 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules 2016 empowers the authority to ascertain whether the documents annexed with the application under Section 10 of I B Code are in order. It is useful to refer Rule 7 which reads as under: (1) A corporate applicant, shall make an application for initiating the corporate insolvency resolution process against the corporate debtor under section 10 of I B Code in Form 6, accompanied with documents and records required therein and as specif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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