TMI Blog2019 (8) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... oment 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the NCLT for immediate repayment of the said debentures. Even while the said orders of NCLT are pending for execution, and have not been acted upon application has been made by some of the financial creditors for insolvency of the Corporate Debtor under sec. 7 of the IBC. There are two essential reasons why such an application for declaration of insolvency and moratorium under sec. 7 cannot be granted. First reason is purely a question of bonafide reasons for making the application, and the implications of the insolvency declaration and ensuing moratorium. There is no doubt that the enactment of the insolvency resolution process under the IBC is a step towards resolution or rectification of an insolvency. There is a company which had run into financial problems; the creditors are proposing to collectively bail the company out. These provisions are intended for repairing a broken house that still can be repaired, and can avoid demolition. The intent of Insolvency resolution process cannot be to interfere in cases where there are financial irregularities, illegalities or indications of a financial fraud. The present case is one where interests of a large number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Code The intent of the exclusion is simple if an entity is engaged in financial services business, it has a systemic significance. It involves money belonging to public. If such a company is put into a situation of moratorium, and the payments made by such entity are halted, the financial system could get into a tail spin. Such a serious implication to the fact, keeping such entities outside a benevolent, remedial law such as IBC, is all the more important for such a truant entity, which is sitting with public money, and that too, without any authorization. The consequential impact of the commencement of CIRP will be moratorium. This will actually mean the orders made by SEBI or NCLT for immediate refund of the money, raised from retail investors will not be implemented during the moratorium period. Also, the constitution of the Committee of Creditors and the system of voting there at, goes on the basis of majority by value. It is quite possible that the corporate person may have created creditors with high value, who may care feast for the interests of retail investors, from whom money has been. Hence, the so-called resolution plan may harm the interests of such invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority is required to take into consideration the relevant facts as recorded in Form-1 to find out whether debt is payable and the application is complete or not. If the debt is payable and default is of more than ₹ 1 lakh and record is complete, the Adjudicating Authority is bound to admit the application. 4. In spite of service of notice and publication of advertisement in two Newspapers one in English- Times of India, Allahabad Edition and another is Hindi- Hindustan, Allahabad Edition , the Corporate Debtor has not appeared. 5. From the impugned order, we find that the Adjudicating Authority has allowed intervention applications filed by different creditors, which is not the requirement of the I B Code / law. 6. In Innoventive Industries Ltd. v. ICICI Bank Anr.─ Company Appeal (AT) (Insolvency) Nos. 1 2 of 2017 , 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. 7. The matter subsequently fell for consideration before the Hon ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank and Anr.─ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. 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 auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Part IV and documents, records and evidence of default in Part V. 10. 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. 11. This Appellate Tribunal in numerous cases has stated that notice is to be given only to the Corporate Debtor in an application under Sections 7 or 9 of the I B Code . The question of intervention by a third party before the admission of the application under Sections 7 or 9 does not arise. 12. 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, has been held by this Appellate Tribunal in Binani Industries Limited vs. Bank of Baroda Anr.─ Company Appeal (AT) (Insolvency) No. 82 of 2018 etc. . For the said reason, we hold that the Adjudi ..... 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