TMI Blog2023 (3) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... red to issue Notice, and provide an opportunity to rectify the Defects, within seven days, failing which, the Petition, can be rejected. An incomplete or improper authorisation, may vitiates, the entire proceedings, rendering Legal Action, Devoid of Authority. It is therefore, felt that the rectification of defects, if any, is of utmost importance and cannot be ignored. This Tribunal, aptly points out the decision of the Hon ble Supreme Court of India in M/S. SURENDRA TRADING COMPANY VERSUS M/S. JUGGILAL KAMLAPAT JUTE MILLS COMPANY LIMITED AND OTHERS [ 2017 (9) TMI 1566 - SUPREME COURT ], wherein it is observed and held that the time provided for rectifying the Defective Application, under Section 9 (5) of the I B Code 2016, is directory in nature, and in the given circumstances, the Adjudicating Authority (Tribunal), can provide more than 7 days time, to rectify the defect. The requirement of Section 7 of the Code, is that the Application, should be complete in all respects and in case of defects, the Adjudicating Authority (Tribunal), should provide an opportunity, to the Applicant, for rectifying these defects, before Accepting/ Rejecting of the Application - The F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bankruptcy Code, 2016 ( in short I B Code, 2016 ). 2. Mr. Rupesh Anand is the Suspended Director of project name Prakruthi Solitaire is the Appellant herein and there are 39 Respondents who were Financial Creditors of Prakruthi Solitaire along with 40th Respondent Prakruthi Solitaire represented by IRP Mr. Vineet Gupta. 3. The Appellant is a Director of M/s Nandhini Hotels Pvt. Ltd., incorporated on 10.05.1991, is engaged in various business including construction of Real Estate Projects M/s Nandhini Hotels Pvt. Ltd. initiated a Real Estate Project under the name Prakruthi Solitaire for construction of 338 flats i.e. 146 flats in Phase-I and 192 flats in Phase-II and all 39 Respondents herein were Financial Creditors who applied for Phase-II. It has been brought out that out of 338 flats, 290 flats have been handed over to Homebuyers. 4. The 39 Respondents herein filed an application under Section 7 of the I B Code, 2016 on 27.07.2021 with a prayer to initiate Corporate Insolvency Resolution Process against M/s Nandhini Hotel Pvt. Ltd. ( Corporate Debtor ) in accordance with Construction Agreement between the Financial Creditors and the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further the case of the Appellant that the Respondents herein did not execute the proper verifying Affidavits as required under NCLT, Rules 2016. 12. As per the Appellant , total number of flats of the Corporate Debtor in the project Prakruthi Solitaire were 338 flats whereas the application was filed by 19 Financial Creditors thereby not meeting the minimum threshold as required under Section 7 of the I B, Code, 2016. 13. The Appellant also assailed the impugned order for not considering that Financial Creditors were not making payments of their due instalments in the project Prakruthi Solitaire . 14. The Appellant has also taken the plea that signatures of authority letters in several cases look different from one appearing on the agreement for sale, hence the authority letters cannot be treated valid and should have been rejected by the Adjudicating Authority . 15. The Appellant also states that the Financial Creditors have not signed as required in Form 1 of the Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 and the Adjudicating Authority should have treated Section 7 Application as defective. 16. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that No Authority Letters , were produced along with the Petition in respect of (i) Financial Creditor No. 20 Mr. Rahul Shinde (II) Financial Creditor No. 21 Bhoomika Shinde (iii) Financial Creditor No. 26 Subasri (iv) Financial Creditor No. 27 Sabaribalan Gandhi (v) Financial Creditor No. 16 Mr. Pradeep Verma (vi) Financial Creditor No. 17 Mousmi Verma (vii) Siva Kumar Verma (Financial Creditor No. 28) (viii) Financial Creditor No. 29 Ms. Suuhasini Verma. ➢ The Appellant assailed that the Adjudicating Authority , had erred in not appreciating the Objection , raised by the Corporate Debtor in the Sur-Rejoinder dated 06.06.2022 that the Authority Letters , are essential in view of the fact that the signatures on the Authority Letters , in several cases look different from the ones appearing on the Agreement for Sale , and the PAN Card , and therefore, do not pass through the test of Genuineness of these Authority Letters . ➢ The Appellant also alleged that the Adjudicating Authority , erred in not appreciating that the Financial Creditors , had not signed as required under Form 1 of the Insolvency Bankruptcy (Application to Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this Petition. Further, Shri Uttam Kumar Dubey (Financial Creditor No. 34) has signed on behalf of himself, Financial Creditor Nos. 35, 4, 5, 28 and 29. However, no authority letter was given to him by Financial Creditor Nos. 28 and 29 and thus cannot be treated as Parties to this Petition. ➢ At this juncture, this Tribunal , adverts to the ingredients of Section 7 of the I B Code, 2016, which reads as under :- 7. Initiation of corporate insolvency resolution process by financial creditor- (1) A financial creditor either by itself or jointly with 2[other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. [Provided that for the financial creditors, referred to in clauses (a) and (b) of subsection (6A) of section 21, an application for initiation corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) Where the Adjudicating Authority is satisfied that (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or (b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application: Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). (7) The Adjudicating Authority shall communicate- (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, the Adjudicating Authority ( Tribunal ), can provide more than 7 days time, to rectify the defect. The Hon'ble Supreme Court, has held that; 5. One of the conditions, with which we are concerned, is that application under sub-section (2) has to be complete in all respects. In other words, the adjudicating authority has to satisfy that it is not defective. In case the adjudicating authority, after the scrutiny of the application, finds that there are certain defects therein and it is not complete as per the provisions of sub-section (2), in that eventuality, the proviso to sub-section (5) mandates that before rejecting the application, the adjudicating authority has to give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice. 6. Sub-section (5) of Section 9, thus, stipulates two time periods. Insofar as the adjudicating authority is concerned, it has to take a decision to either admit or reject the application within the period of fourteen days. Insofar as defects in the application are concerned, the adjudicating authority has to give a notice to the applicant to rectify the defects before rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 7 or the proviso to sub-section (5) of Section 9 or the proviso to sub-section (4) of Section 10 to remove the defects within seven days as mandatory and on failure, applications to be rejected, is set aside. No costs. 26. We are also conscious of the fact that sometimes applicants or their counsel may show laxity by not removing the objections within the time given and may take it for granted that they would be given unlimited time for such a purpose. There may also be cases where such applications are frivolous in nature which would be filed for some oblique motives and the applicants may want those applications to remain pending and, therefore, would not remove the defects. In order to take care of such cases, a balanced approach is needed. Thus, while interpreting the provisions to be directory in nature, at the same time, it can be laid down that if the objections are not removed within seven days, the applicant while refiling the application after removing the objections, file an application in writing showing sufficient cause as to why the applicant could not remove the objections within seven days. When such an application comes up for admission/order before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of a given case. (emphasis supplied) ➢ In this connection, this Tribunal , takes into consideration, the ratio laid down, by the Hon ble Supreme Court of India, in the case of Ravi Yashwant Bhoir vs. District Collector, Raigad Ors. [(2012) 4 SCC 407], where a speaking order , has been held, to be of utmost importance . Further, the expanding horizon of the principles of natural justice provides for requirement to record reasons as it is now regarded as one of the principles of natural justice. The emphasis on recording reasons is that if the decision reveals the inscrutable face of the sphinx , it can by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind of the authority before the court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out the reasons for the order made, in other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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