CAN AN AUTHORISED REPRESENTATIVE BE ALLOWED TO FILE A PETITION UNDER INSOLVENCY AND BANKRUPTCY (I&B) CODE’?
Hon’ble National Company Law Appellate Tribunal in the matter of Palogix Infrastructure Private Limited Vs. ICICI Bank Limited has promulgated that an Authorized Representative can file petition under Insolvency and Bankruptcy Code, 2016(Hereinafter referred as ‘I&B CODE’).
WHAT IS THE MEANING OF THE TERM ‘APPLICANT’?
As per Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ‘Applicant’ means person(s) filing application under section 7,9, or 10, as the case may be. Accordingly an Operational Creditor(s), Financial Creditor(s), Corporate Person can be an Applicant. They can file petition to the Adjudicating Authority through Authorised representative.
HOW AN APPLICATION BE FILED?
Application under ‘I&B CODE’ can be filed as per procedure listed in Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016(Hereinafter referred as ‘Adjudicating Authority Rules’). Accordingly a ‘Financial Creditor’ or ‘Operational Creditor’ or ‘Corporate Applicant’ can file petition to the adjudicating authority under ‘I&B Code’ by submitting prescribed form , alongwith other documents , as may be required.
Hence, a financial creditor shall make an application for initiating the corporate insolvency resolution process against a corporate debtor under section 7 of the Code in Form 1, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Upon perusal of the Adjudicating Authority Rules and Form-1, it may be duly noted that the ‘I&B Code’ and the ‘Adjudicating Authority Rules’ recognize that a ‘Financial Creditor’ can only act through an “Authorised Representative”.
As per Entry 5 & 6 (Part I) of Form No.1, the Authorised Representative of ‘Financial Creditor’ is required to submit “name and address”.
The signature block of the aforementioned Form-1 also provides for the authorised person’s detail is to be inserted.
POSITION OF AUTHORISED REPRESENTATIVE AS PER NCLT RULES:
Rule 23(1) of NCLT Rules permits an authorised representative to present an application or petition before the Tribunal. Thus, we hold that ‘Authorised Representative’ can file an application under Section 7 of the ‘I&B Code’ on behalf of the ‘Financial Creditor’.
POSITION OF AUTHORISED REPRESENTATIVE IN CODE OF CIVIL PROCEDURE AND ITS APPLICABILITY IN ‘I&B CODE’:
Code of Civil Procedure, 1908 provides for recognized agents and pleaders, but such submission cannot be accepted, as the Code of Civil Procedure is not applicable for filing application under ‘I&B Code.
POSITION OF POWER OF ATTORNEY ACT, 1882 AND ITS APPLICABILITY IN ‘I&B CODE’ CODE:
‘I&B CODE’ Code being a complete code, Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a particular act/procedure should be done by a person in the manner as prescribed thereunder. Therefore, we hold that a ‘Power of Attorney Holder’ is not competent to file an application on behalf of a ‘Financial Creditor’ or ‘Operational Creditor’ or ‘Corporate Applicant’.
POSITION OF AUTHORISED REPRESENTATIVE AS PER COMPANIES ACT:
An Incorporated Company is a artificial judicial person . It perform it’s regular activities through Board of Directors. Section 179 of Companies Act, 2013 enumerates the power of the Board of Directors of a company. A company being a juristic person is capable of initiating and defending legal proceedings and, therefore, the Board of Directors is empowered to exercise such rights on behalf of the Company or may duly empower ‘Authorised Representative’ to do so on its behalf. Thereby, the Board of Directors of a Bank are empowered to delegate powers to any of its officer. So the person authorised by the Board of Directors is duly empowered to initiate or defend any legal proceedings by or against the ‘Financial Creditor’.
FRAUDULENT AND MALICIOUS INITIATION OF PROCEEDINGS BY INDIVIDUAL AUTHORIED REPRESENTATIVE:
If a person initiates the Insolvency Resolution Process or Liquidation proceeding fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority is empowered under sub section (2) of Section 65 to impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.
This provisions again makes it clear that an authorized representative can file petition under ‘I&B CODE’ and reinforce this view.
INSTRUMENT REQUIRES FOR MAKING AUTHORISED REPRESENTATIVE:
A person can be an Authorised Representative by passing a board resolution or letter of authority. If due general authorization is made by passing a Board Resolution by the Financial Creditor or Operational Creditor or Corporate Applicant mere use of word ‘Power of. Attorney’ while delegating such power will not take away the authority of such officer and ‘for all purposes it is to be treated as an ‘authorization’.
POSITION IF THE BADE OF BOARD RESOLUTION IS BEFORE PROMULGATION OF ‘I&B CODE’ CODE:
In case a Board Resolution is passed before the promulgation of ‘I&B CODE’ Code, even that the resolution will remain valid.
NORMAL PRACTICE OF BANK:
If an officer, such as senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a proceeding for ‘Corporate Insolvency Resolution Process’ against the person who have taken loan, in such case the ‘Corporate Debtor’ cannot plead that the officer has power to sanction loan, but such officer has no power to recover the loan amount by initiating ‘Corporate Insolvency Resolution Process’, in spite of default of debt. If a plea is taken by the authorised officer that he was authorized to sanction loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the ‘Financial Creditor’ in favour of such officer designate.
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