Case Law Details
Sunflag Iron & Steel Co Ltd Vs J. Poonamchand & Sons (Bombay High Court)
Bombay High Court clarifies that the mere filing of an application under Section 7(1) of the Insolvency and Bankruptcy Code (IBC) is insufficient to invoke the bar of Section 238 of the IBC. The court emphasizes that the Adjudicating Authority must fulfill certain requirements, such as ascertaining the existence of a default and recording its satisfaction, before the bar under Section 238 can be invoked.
Facts- This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A & C Act, for short hereinafter) for appointment of an Arbitrator in view of an arbitration clause no.15 in the agreement dated 30/08/2019 (pg.16) between the parties hereto, the existence and invocation of which is not disputed.
Conclusion- Held that mere filing of such an application by itself, does not mean that the Adjudicating Authority, has taken cognisance of the matter. This is so for the reason that sub-section 4 of Section 7 of the IBC, casts a duty upon the Adjudicating Authority, within fourteen days of the receipt of such application to, ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section 3 of Section 7 of the IBC. The proviso to Section 7(4) of the IBC further enjoins the Adjudicating Authority to record reasons for not ascertaining the factors, as contemplated by Section 7(4) of IBC, within the time frame stipulated therein. Further Section 7(5) of the IBC enjoins upon the Adjudicating Authority to record its satisfaction that the default has occurred and there is no disciplinary proceedings pending against the proposed resolution professional and upon such satisfaction permits admission of such application.
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