{"id":282870,"date":"2023-02-01T14:00:58","date_gmt":"2023-02-01T08:30:58","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=282870"},"modified":"2023-02-10T16:54:01","modified_gmt":"2023-02-10T11:24:01","slug":"application-for-initiation-of-corporate-insolvency-resolution-process-can-be-rejected-if-it-is-filed-fraudulently","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/02\/01\/application-for-initiation-of-corporate-insolvency-resolution-process-can-be-rejected-if-it-is-filed-fraudulently\/","title":{"rendered":"NCLAT rejects application for initiation of CIRP for filing with fraudulent and malicious intent"},"content":{"rendered":"
\n

National Company Law Appellate Tribunal:<\/b> While deciding the appeal, the bench of Ashok Bhushan J., and Barun Mitra (Technical Member), held that when applications under Section 65 of the Code, 2016 were allowed holding that initiation of proceedings under Section 10 of the Code, 2016 was done fraudulently and maliciously for purpose other than resolution of insolvency, rejection of the application under Section 10 of the Code, 2016 is consequent and inescapable.<\/p>\n

Background<\/b><\/p>\n

In the present case, the appellant filed an application under Section 10<\/a> of Insolvency and Bankruptcy Code, 2016<\/a> (“Code, 2016”) praying for initiation of Corporate Insolvency Resolution Process (“CIRP”) on the ground of default on the part of the Corporate Debtor. The respondents filed applications under Section 65<\/a> of the Code, 2016<\/a> to reject the application filed under Section 10<\/a> of the Code, 2016<\/a>. The Adjudicating Authority allowed the applications filed under Section 65<\/a> of the Code, 2016<\/a> and rejected the application of appellant. The appellant aggrieved by the impugned order has filed this appeal.<\/p>\n

The counsel of the respondent submitted that the application under Section 10<\/a> of the Code, 2016<\/a> was filed with fraudulent intent and the purpose for filing the application was to save the appellant from liabilities and prosecution.<\/p>\n

The Tribunal noted that one of the directors of the company who was the director right from the inception of the Company, resigned and was transposed as financial creditor before filing application under Section 10<\/a> of Code, 2016<\/a>. The Court said that this fact fully proves the malicious intention of the Corporate Debtor.<\/p>\n

The Tribunal said that Sections 10<\/a> and 65<\/a> of the Code, 2016<\/a>, which are part of the same statutory scheme needs to be read together to give effect to the legislative scheme of the Code, 2016<\/a>. In cases where CIRP is initiated by a corporate applicant fraudulently with malicious intent for any purpose other than the resolution of insolvency, holding it obligatory for the Adjudicating Authority to admit application under Section 10<\/a> of the Code, 2016<\/a>, will be contrary to the statutory scheme under Section 65<\/a> of the Code, 2016<\/a>.<\/p>\n

The Tribunal further said that if conditions under Section 65<\/a> of the Code, 2016<\/a> are fulfilled, the application under Section 10<\/a> of the Code, 2016<\/a> can be rejected, even if debt and default is proved. Thus, Section 65<\/a> of the Code, 2016<\/a> must be read as enabling provision to reject an application and even on proving of debt and default, application under Section 10<\/a> of the Code, 2016<\/a> cannot be obligatorily admitted.<\/p>\n

The Tribunal concluded that in the present case, application under Section 10<\/a> of the Code, 2016<\/a> has been maliciously and fraudulently initiated for the purpose other than for the resolution of insolvency. When applications under Section 65<\/a> of the Code, 2016<\/a> were allowed holding that initiation of proceedings under Section 10<\/a> of the Code, 2016<\/a> was done fraudulently and maliciously for the purpose other than resolution of insolvency, rejection of the application under Section 10<\/a> of the Code, 2016<\/a> is consequent and inescapable. Thus, the Adjudicating Authority did not commit any error in allowing the application under Section 65<\/a> of the Code, 2016<\/a> and rejecting the application under Section 10<\/a> of the Code, 2016<\/a>.<\/p>\n

Hence, the Tribunal dismissed the appeal.<\/p>\n

[Wave Megacity Centre Private Limited v. Rakesh Taneja, 2023 SCC OnLine NCLAT 50<\/a>, decided on 05-01-2023<\/span>]<\/p>\n\n

Advocates who appeared in this case :<\/p>\n

Counsel for Appellant:- Sr. Advocate ANS Nadkarni, Advocate Hardeep Sachdeva, Advocate Sameer Sodhi, Adocate Abhyudai Singh, Advocate Kanika Singhal, Advocate Mukund, Advocate Dhruv Wadhwa, Advocate Deepty Arya, Advocate S S Rebello, Advocate Arzu Paul, Advocate Manisha Gupta, Advocate Rahul Singh, Advocate Nishant Shokeen, Advocate Sumita Singh, Advocate Altamash Rashid;<\/p>\n

Counsel for Respondents:- Sr. Advocate Sanjiv Sen, Advocate Sourav Roy, Advocate Kaushal Sharma, Advocate Prabudh Singh, Advocate Ratnesh Sharma, Advocate Rahul Raman, Sr. Advocate ML Lahoty, Advocate Dania Nayyar, Advocate Bhanu Tejaswi, Advocate Krishna Mohan K, Advocate Rakesh Taneja.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

National Company Law Appellate Tribunal held that rejection of application for initiation of Corporate Insolvency Resolution Process is inevitable if it is filed fraudulently and maliciously for purpose other than resolution of insolvency.<\/i><\/p>\n","protected":false},"author":67011,"featured_media":279124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[22814,54852,22014,54853],"class_list":["post-282870","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-corporate-insolvency-resolution-process","tag-fraudulent-and-malicious-intent","tag-nclat","tag-resolution-of-insolvency"],"yoast_head":"\nNCLAT rejects application for initiation of CIRP for filing with fraudulent and malicious intent | SCC Times<\/title>\n<meta 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