Ferro Alloys Corporation Ltd. Vs. Rural Electrification Corporation Ltd.

1. The appeal at the instance of the Corporate Debtor through its (suspended) Board of Directors is not maintainable in view of the decision of the Hon’ble Supreme Court in “Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 (Civil Appeals Nos. 8337-38 of 2017)”-

After admission of an application under Section 7 or 9 or 10, as ‘Interim Resolution Professional’ is appointed and the Board of Directors stands suspended, the (suspended) Board of Directors have no right to move an appeal on behalf of the ‘Corporate Debtor’ though it is open to the Director(s) or shareholder(s) to challenge the same.

2. The consortium of banks have no role to play at the time of admission of application u/s 7-

It is clear that if the Adjudicating Authority is satisfied that there is a ‘debt’ and ‘default’ and otherwise if the application is in order is bound to admit the application. It is a ‘corporate debtor’ who can only point out that it does not owe any debt either in law or in fact, which is not the case of the ‘corporate debtor’. ‘Corporate debtor’ can also take a plea that the application has been filed by a person who is not a ‘financial creditor’ but such issue having not raised, the consortium of banks have no role to play at the time of admission of application under Section 7 of the I&B Code. The role of banks comes if they file claim after the admission of an application and when they are accepted as a ‘financial creditors’ and made members of the ‘Committee of Creditors’ in terms of Sections 27 and 28 of the I&B Code.

Such claims are looked into by the ‘Resolution Professional’ only after admission of the application under Section 7 or 9 or 10 and the order of moratorium was passed by the Adjudicating Authority.

3. Mere dispute of quantum of amount cannot be a ground and that too can be taken at the stage of admission-

If the ‘debt’ is more than one lakh and there is a ‘default’, the application to be admitted. The Adjudicating Authority not being a court of law or Tribunal and ‘corporate insolvency resolution process’ being not a litigation as held by this Appellate Tribunal in “Binani Industries Limited vs. Bank of Baroda & Anr. etc. – Company Appeal (AT)(Insolvency) No. 82 of 2018 etc.”, we hold that the Adjudicating Authority has no jurisdiction to decide any disputed question or claim based on evidence and at the stage of admission is only required to satisfy itself about existence of debt or not and if it is more than Rupees One Lakh and party has defaulted, and otherwise the application is complete, the Adjudicating Authority is required to admit the application.

4. Whether the application under Section 7 of the I&B Code is maintainable against the corporate guarantor without initiation of corporate insolvency resolution process against the principal borrower (principal debtor)-

NCLAT has held that it is not necessary to initiate ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’ before initiating ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Guarantors’. Without initiating any ‘Corporate Insolvency Resolution Process’ against the ‘Principal Borrower’, it is always open to the ‘Financial Creditor’ to initiate ‘Corporate Insolvency Resolution Process’ under Section 7 against the ‘Corporate Guarantors’, as the creditor is also the ‘Financial Creditor’ qua ‘Corporate Guarantor’.