Icici Bank Limited vs Palogix Infrastructure Private ...

Company Appeal tATHinsol.) No.37 of 2017 (Arising out of Order dated 12th April, 2017 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in Company Petition No. 37 of 20171 In the matter of: ICICI Bank Limited .. .Appellant Vs Palogix Infrastructure Private Limited . . .Respondent

Present For Appellant: Mr. Ramji Srinvasan, Senior Advocate with Mr. Anand Shankar Jha, Mr. Mohammad All, Mr. Vivek Paul and Ms. Divyani Tripathi, Advocates 2

For Respondent : Mr. Arun Kathpaiia, Senior Advocate with Mr. Jayant Mehta, Ms. Smita Mukherjee, Ms. Manju Bhuteria, Mr. Rajesh Gupta, Ms. Sonia Dube, Mr. Satadru Chakraborty, Mr. Anurag Singh and Ms. Harshita Verma, Advocates

Company Appeal (AT)(Insol.) No.54 of 2017

(Arising out of Order dated 16th May, 2017 passed by the Adjudicating Authority (National Company Law, Tribunal), Kolkata Bench, Kolkata in C.P.(I.B.) No. 37/2017] In the matter of: Palogix Infrastructure Private Limited . . .Appellant Vs ICICI Bank Limited .Respondent

Present: For Appellant : Mr. Arun Kathpalia, Senior Advocate with Mr. Jayant Mehta, Ms. Smita Mukherjee, Ms. Manju Bhuteria, Mr. Rajesh Gupta, Ms. Sofia Dube, Mr. Satadru Chakraborty, Mr. Anurag Singh and Ms. Harshita Verma, Advocates

For Respondent : Mr. Ramji Srinvasan, Senior Advocate with Mr. Anand Shankar Jha, Mr. Mohammad All, Mr. Vivek Paul and Ms. Divyani Tripathi, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

ICICI Bank Limited (Financial Creditor) filed an application under

section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter

referred to as "I&B Code") for initiation of 'Corporate Insolvency Resolution Process' against 'Palogix Infrastructure Private Limited'-

(Corporate Debtor).

2. The case was heard by a Division Bench of the Adjudicating

Authority which having noticed that the 'Financial Creditor' preferred

the application under section 7 through Power of Attorney Holder,

passed two separate orders, one holding the application through Power

of Attorney is not maintainable (Member Judicial) and the other

(Member Technical) held that the application was maintainable as the

Power of Attorney was given in favour of the Legal Manager to initiate

proceedings before the National Company Law Tribunal which is the

Adjudicating Authority under 'I&B Code'.

3. The case was referred to the Hon'ble President, National Company

Law Tribunal exercising power under sub Section (5) of Section 419 of

the Companies Act, 2013 for constituting a larger Bench for decision on

the following questions: -

"Whether The Constituted Attorney authorised on

20/10/2014 to file suits and/or proceedings against the

company for recovery of the amount and also to affirms

plaints cum affidavits and other pleadings in any court

of India including NCLT can file application for initiation

of corporate insolvency process under Section 7 of the

Insolvency and Bankruptcy Code 2016 without having

specifically authorized to lodge Application/Petition

under IBC 2016?"

4

4. By majority judgment, the Adjudicating Authority held that for

initiation of 'Corporate Insolvency Resolution Process', there should be

specific authorization to the Power of Attorney Holder to initiate the

'Corporate Insolvency Resolution Process'. The 'Financial Creditor'-ICICI

Bank having not filed specific authorization to initiate 'Corporate

Insolvency Resolution Process', was directed by the order dated 12th

April, 2017 to rectify the defects. The said order has been challenged by

the 'Corporate Debtor' in Company Appeal (AT) (Insolvency) No. 30 of

2017.

5. The 'Financial Creditor' has also challenged the said order dated

12th April, 2017 in Company Appeal (AT) (Insolvency) No. 37 of 2017 on

the ground that no specific authorisation required for initiation of

'Corporate Insolvency Resolution Process'.

6. By subsequent order dated 16th May, 2017, the Adjudicating

Authority admitted the application on removal of defects; ordered

Moratorium and appointed 'Interim Resolution Professional' who has

been directed to convene a meeting of the Committee of Creditors in

accordance with 'I&B Code'. The said order has been challenged by

'Corporate Debtor'- Palogix Infrastructure Private Limited in Company

Appeal (AT) (Insolvency) No.54 of 2017.

The stand of the 'Financial Creditor'- ICICI Bank

7. According to 'Financial Creditor', the 'Corporate Debtor' has not

disputed the existence of the debt and default on their part. They are 5

opposing the matter on technical ground, which is incorrect and in any

case if there was a defect it has been removed.

8. Learned Counsel appearing on behalf of the 'Financial Creditor'-

ICICI Bank referred to Section 7 of the 'I&B Code' and Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules, 2016

(hereinafter referred to as "Adjudicating Authority Rules") and

submitted that the 'form and manner' in which an application under

section 7 of the 'I&B Code' is to be filed by a 'Financial Creditor' is

provided in 'Form-i' of 'Adjudicating Authority Rules'.

9. 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' being a juristic person can

only act through an "Authorised Representative". Entry 5 & 6 (Part I) of

Form No.1 mandates the 'Financial Creditor' to submit "name and

address of the person authorised to submit application on its behalf

(Enclose Authorisation)".

10. The signature block of the aforementioned Form-1 also provides

for the authorised person's detail is to be inserted and also includes

inter alia the position of the authorised person in relation to the

'Financial Creditor'.

Thus, it is clear that an authorised person of the 'Financial

Creditor' can make an application under Section 7 of the 'I&B Code'.

11. Learned Counsel for the 'Financial Creditor' referred to Rule 2(6)

of the NCLT Rules, 2016 which defines an "authorised representative" to 6

be a person authorised in writing by a party to present his case before

the Tribunal as the representative of such party as provided under

Section 432 of the Companies Act, 2013. The said Rule having not been

adopted under 'T&B Code' or Rules framed thereunder, we are of the

view that no reliance can be placed on Rule 2(6) of NCLT Rules, 2016.

12. Rule 10 of 'Adjudicating Authority Rules' states that till the time

rules of procedure for conduct of proceedings under the 'I&B Code' are

notified, an application made under section 7(1) shall be filed before the

Adjudicating Authority in accordance with Rules 20, 21, 22, 23, 24 and

26 of Part III of NCLT Rules, 2016.

13. 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'.

14. Learned Counsel for the appellant relied on Order III of the Code

of Civil Procedure, 1908 which 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'.

15. Section 179 of Companies Act, 2013 empowers the Board of

Directors to do all such acts that a company is authorised to do. 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. 7

16. Thereby the person authorised by the Board of Directors is duly

empowered to initiate or defend any legal proceedings by or against the

'Financial Creditor'! Corporate Debtor' in any Court of law including the

matters relating to Insolvency and Bankruptcy proceedings. Thereby,

the Board of Directors of a Bank are empowered to delegate powers to

any of its officer.

17. The question arises whether the 'Power of Attorney Holder' given

power of attorney prior to enactment of 'I&B Code', is entitled to file an

application under Section 7 or 9 or 10 of the 'I&B Code'?

18. Learned counsel for the 'Financial Creditor' submitted that ICICI

Bank vide Board's Resolutions dated 3rd May, 2002 and 30th October,

2009 resolved to authorise and execute Power of Attorney in favour of

designated officers of the Bank. These resolutions continue to be in

force, and authorise officers/Power of Attorney Holders of Bank are

entitled to deal with all the legal proceeding for or against the Bank.

19. Reliance has been placed on Hon'ble Supreme Court's decision in

"A. C. Narayanan vs. State of Maharashtra (2014) 11 SCC 790"

wherein the Hon'ble Supreme Court held:

"28. The power:ofattomey holder is the agent of the

grantor. When the grantor,authorises the attorney

holder to initiate legal proceedings and the attorney

holder accordingly initiates such legal proceedings,

he does so as the agent of the grantor and the 8

initiation is by the grantor represented by his

attorney holder in his personal capacity..."

20. According to Learned Counsel for the 'Corporate Debtor', the

application under Section 7 of the 'I&B Code' if signed and filed by a

'General Power of Attorney Holder' without specific authorization is not

maintainable. According to him, the procedure prescribed requires

specific authorization such as:

(i) The Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016 (Rules 4 & 10) incorporate by reference

procedure prescribed under Rule 23 and 26 of the National

Company Law Tribunal Rules 2016.

(ii) Rule 23 read with Rule 26 of the National Company Law

Tribunal Rules, 2016 requires petition/ application to be

signed and verified by 'Authorized Representative' of the

petitioner.

21. According to the 'Corporate Debtor' the 'Authorization' in the case

of a company would mean a specific authorization by the Board of

Directors of the company by passing a resolution. The reliance has been

placed on the Hon'ble Supreme Court's decision in "State Bank of

Travancore vs. Kingston Computers India Fyi. Ltd. (2011) 11 SCC

524".

22. Therefore, according to the 'Corporate Debtor', an application

under section 7 of the 'I&B Code' in absence of any supporting affidavit

verifying the petition is not maintainable. It was also contended that 9

prerequisites under the 'I&B Code' are mandatory and it should be

strictly construed and barring specific Power of Attorney, no application

can be entertained.

23. Learned counsel for the 'Corporate Debtor' submitted that a

Power of Attorney is an authorization by a 'principal' to its 'agent' to do

an act. A fortiori, such authorisation can only be of acts which are in

the contemplation and knowledge of the 'principal' as on the date when

such authorisation is given. If the 'principal' itself is unaware of an

eventuality, it cannot authorize its agent for such eventuality. This is

more so when 'I&B Code' sets in motion a very serious and irreversible

process, therefore, according to the 'Corporate Debtor', the procedural

pre-requisites under the 'I&B Code' must be strictly construed.

In this connection, our attention was drawn by referring to

judgments relating to winding up under the erstwhile Companies Act,

1956 but we are not referring the same as the decisions under the

Companies Act, 1956, has no relevance with the procedure to be

followed under 'I&B Code'.

24. It was also contended by learned counsel for the 'Corporate

Debtor' that the removal of defect as was ordered by the Adjudicating

Authority was not removed by the 'Financial Creditor' within seven

days.

25. In reply, Learned Counsel for the 'Financial Creditor' pointed out

that during seven days' period, there were Saturday, Sunday and other

holidays which cannot be counted for the purpose of counting seven 10

days' period of completion of removal of defect. Otherwise defect was

removed within seven days.

26. Having regard to objection regarding the removal of defect, we

reject the submission made on behalf of the 'Corporate Debtor, in view

of the proviso to sub-section (5) of Section 7 of the 'I&B Code', which

reads as follows:-

"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."

Similar provision has been made under proviso to sub-section (5)

of Section 9 and sub-section (4) of Section 10 of the 'J&B Code'.

27. The seven days for rectification of defects is to be counted not

from the date of the order passed by the Adjudicating Authority but

from the date of "receipt of such notice from the Adjudicating

Authority to rectify the defects in the application." The 'Corporate

Debtor', though raised objection that the defects were not removed

within seven days, but not given the date on which the notice for

correction of defect was served by the Adjudicating Authority on the

'Financial Creditor'-ICICI Bank. In absence of such specific pleadings

stand taken by the 'Corporate Debtor' that objection that defect was not

removed within seven days cannot be accepted. This apart, we accept 11

the stand taken by the 'Financial Creditor' that for the purpose of

counting the period of seven days, apart from the date of receipt of the

order for removal of defects, the holidays such as Saturdays, Sundays

and other holidays of the Tribunal to be excluded.

28. For determination of question relating to Power of Attorney, as

raised in this appeal, it is desirable to refer Section 2 of Power of

Attorney Act, 1882 which reads as follows:-

"2. Execution under Power-of-Attorney: The donee of a

power-of-attorney may, if he thinks fit, execute or do

any instrument or thing in and with his own name and

signature, and his own seal, where sealing is required,

by the authority of the donor of the power; and every

instrument and thing so executed and done, shall be as

effectual in law as if it had been executed or done by

the donee of the power in the name, and with the

signature and seal, of the donor thereof. This section

applies to powers-of-attorney created by instruments

executed either before or after this Act comes into force."

29. In "T.C. Mathal and Another Vs. District & Sessions Judge,

Thiruvananthapuram, Kerala, (1999) 3 SCC 614" the Hon'ble

Supreme Court held that "Section 2 of the Power of Attorney Act, 1882

cannot override the specific provision of a statute which requires that a

particular act should be done by a party-in-person." 12

30. 'I&B Code, 2016 is a complete Code in itself. The Hon'ble

Supreme Court in "MIs. Ihnoventive Industries Ltd. Vs. ICICI Bank

& Anr. 2017 SCC OnLine SC 1025" held:

"59. The Insolvency and Bankruptcy Code, 2016 is

an Act to consolidate and amend the laws relating to

reorganization and insolvency resolution, inter, alia of

corporate persons. Insofar as corporate persons are

concerned, amendments are made to the following

enactments by Sections 249 to 252 and 255 Ap

The Hon'ble Supreme Court further held: -

"60. It is settled law that a consolidating and

amending act like the present Central enactment forms

a code complete in itself and is exhaustive of the

matters dealt with therein

The Hon'ble Supreme Court further proceeded to held: -

`63. There can be no doubt, therefore, that the Code 4

is a Parliamentary law that is an exhaustive code on

the subject matter of insolvency in relation to corporate

entities, and is made under Entry 9, List III in the 7th

Schedule which reads as under:

"9. Bankruptcy and insolvency"

31. As per Section 7 of the 'I&B Code' an application for initiation of

'Corporate Insolvency Resolution Process' requires to be filed by 13

'Financial Creditor' itself. The form and manner in which an application

under section 7 of the 'I&B Code' is to be filed by a 'Financial Creditor'

is provided in 'Form-l' of the Adjudicating Authority Rules. 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' being a juristic person can only act

through an "Authorised Representative". Entry 5 & 6 (Part I) of Form

No.1 mandates the 'Financial Creditor' to submit "name and address of

the person authorised to submit application on its behalf. The

authorization letter is to be enclosed. The signature block of the

aforementioned Form 1 also provides for the authorised person's detail

is to be inserted and also includes inter alia the position of the

authorised person in relation to the 'Financial Creditor'. Thus, it is clear

that only an "authorised person" as distinct from "Power of Attorney

Holder" can make an application under section 7 and required to state

his position in relation to "Financial Creditor".

32. The 'I&B Code' is a complete Code by itself. The provision of the

Power of Attorney Act, 1882 cannot override the specific provision of a

statute which requires that a particular act should be done by a person

in the manner as prescribed thereunder.

33. 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'. 14

34. At this stage, it is desirable to refer Section 65 of 'I&B Code'

which relates to 'fraudulent and malicious initiation of proceedings', by a

person who 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.

In such case, 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.

35. In a case where it is noticed that the Insolvency Resolution

proceeding has been initiated by a person fraudulently or with

malicious intention for personal act on the part of an individual, can a

Power of Attorney Holder be punished? This is one of the reasons we

have noticed to hold that a 'Power of Attorney holder' cannot file any

application under Section 7 or Section 9 or Section 10 of 'I&B Code'.

36. In so far as, the present case is concerned, the 'Financial

Creditor'-Bank has pleaded that by Board's Resolutions dated 30th May,

2002 and 30th October, 2009, the Bank authorised its officers to do

needful in the legal proceedings by and against the Bank. If general

authorisation is made by any 'Financial Creditor' or 'Operational

Creditor' or 'Corporate Applicant' in favour of its officers to do needful in

legal proceedings by and against the 'Financial Creditor' / 'Operational 15

Creditor'! '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' by

the 'Financial Creditor'! 'Operational Creditor'! 'Corporate Applicant' in

favour of its officer, which can be delegated even by designation. In

such case, officer delegated with power can claim to be the 'Authorized

Representative' for the purpose of filing any application under section 7

or Section 9 or Section 10 of 'I&B Code'.

37. As per Entry 5 & 6 (Part I) of Form No. 1, 'Authorised

Representative' is required to write his name and address and position

in relation to the 'Financial Creditor'/Bank. If there is any defect, in

such case, an application under section 7 cannot be rejected and the

applicant is to be granted seven days' time to produce the Board

Resolution and remove the defect.

38. This apart, 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 or to initiate 'Corporate Insolvency

Resolution Process', in spite of default of debt.

39. If a plea is taken by the authorised officer that he was authorised

to sanction loan and had done so, the application under section 7 16

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.

40. In view of reasons as recorded above, while we hold that a 'Power

of Attorney Holder' is not empowered to file application under section 7

of the 'I&B Code', we further hold that an authorised person has power

to do so.

41. For the reasons aforesaid, we find no ground to interfere with the

impugned order(s). All the appeals are dismissed, the order of

admission of application under section 7 is affirmed. However, in the

facts and circumstances of the case, there shall be no order as to cost.

(Balvinder Singh) (Justice S.J. Mukhopadhaya) Member (Technical) Chairperson

NEW DELHI f10 W\ September, 2017

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