SB Case No. 01/IBC/GB/2017 (C.P. No. 37 of 2017). Case: ICICI Bank Ltd. Vs Palogix Infrastructure Pvt. Ltd. and Ors.. Company Law Board
| Case Number | SB Case No. 01/IBC/GB/2017 (C.P. No. 37 of 2017) |
| Counsel | For Appellant: R. Banerjee, Sr. Advocate and V. Jhunjhunwala, Advocate and For Respondents: M. Bhuteria, R. Gupta and S. Mukherjee, Advocates |
| Judges | P.K. Saikia, Member (J) |
| Issue | Insolvency And Bankruptcy Code, 2016 - Sections 13, 14, 16, 20, 5 (1), 5(7), 7, 79 (1) |
| Judgement Date | March 30, 2017 |
| Court | Company Law Board |
Order:
P.K. Saikia, Member (J)
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This Proceeding has been necessitated in view of two divergent orders, passed by the learned Members of NCLT, Kolkata Bench in C.P. No. 37/2017. While Mr. V.P. Singh, learned Member (J) directed that application be returned to the applicant for rectifying the defects notified in the order, Mr. S. Vijaraghavan, learned Member (Technical) was of the opinion that the application was duly filed and, as such, same is required to be admitted.
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Facts leading to filing of C.P. No. 37/2017 may be narrated in a narrow campus as follows:
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ICICI Bank, a bank incorporated under the laws of India with its registered office at ICICI Bank Tower, Near Chakli Circle, Old Padra Road, Vadodara 390 007, Gujarat, India and a Regional Office at ICICI Bank House, 3A Gurusaday Road, Kolkata, had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, Code of 2016) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules, 2016 (in short, Rules of 2016) against Palogix Infrastructure Private Ltd., a company incorporated under the laws of India with its registered office at 86 B/2, Topsia Road, Gajraj Chambers, Kolkata.
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In the application, aforesaid ICICI Bank, (hereinafter referred to as financial creditor), has alleged that it had sanctioned a term loan to the tune of Rs. 111 crores to M/s. Palogix Infrastructure Private Ltd., (hereinafter referred to as the corporate debtor). Out of the aforesaid loan amount, an amount to the tune of Rs. 65,60,00,000/- was disbursed to the Corporate Debtor. The dates of disbursement of loan, given in instalments, has been described in detail in the application. According to the financial creditor, on 31.12.2016, an amount to the tune of Rs. 32,21,97,699.06 remains as outstanding debt since the Corporate Debtor defaulted in repayment of the loan in accordance with schedule fixed earlier.
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In the application, it has been stated that the first default occurred on 26.06.2016 and thereafter, on 30.06.2016. In such circumstances, financial creditor, through its attorney, has filed an application under Section 7 of the Code of 2016 read with Rule 4 of the Rules, 2016 seeking initiation of resolution process as contemplated in the Code of 2016 which was registered as CP No. 37/2017.
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On the same day, a copy of the application was sent for delivery to the Corporate Debtor as required under Rule 4 of the Rules, 2016. On hearing both the parties, the learned Members, NCLT, Kolkata Bench rendered orders expressing divergent views on the qualification of attorney holder to initiate proceeding under Section 7 of the Code of 2016.
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I have perused the orders aforesaid and found that without any notice having been served on it, the corporate debtor entered appearance and objected the application on the ground that the Attorney who had filed the application under Section 7 did not have the requisite power to initiate a resolution process under Section 7 of the Code of 2016. In that connection, it has been stated that the power of attorney in question did not at all authorise the attorney holder Sri Srinjoy Bhattacharjee to initiate aforesaid proceeding.
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In support of such contention, it has been pointed out that the Code of 2016 was brought into existence in 2016 whereas the Power of Attorney was executed on 20.10.2014. The Code of 2016, it is argued, contemplated and also put in place a whole lot of new ideas and conceptions vis-a-vis the recovery of debt etc. due from various debtors which include the corporate debtors as well. What is however, important to note is that it has also prescribed very special procedures for realisation of such debts etc. which were mostly unknown to the Statutes holding the field till the time of coming into operation of Code of 2016.
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In such a complex scenario, on the date of executing the power of attorney in favour of Sri Srinjoy Bhattacharjee, ICICI Bank {herein after also referred as to donor) could not have contemplated even remotely about authorizing Sri Srinjoy Bhattacharjee (hereinafter referred to as donee), to initiate corporate insolvency resolution process under the section 7 of Code of 2016, and that too, in the capacity of the financial creditor as contemplated section 5(7) of Code of 2016.
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In support of such contention the decision in Shantilal Khuslaldas and Bors Pvt. Ltd. Vs. Smt Chandanbala Sughir Shah and Another-reported in (1993) 77 Comp Cas 253 as well as the decision in Coromandel International Ltd. V. Chemcel Biotech Ltd., reported in (2011) 166 Comp Cas 676 were relied on. In both those cases, it was held that it is a settled principle of law that the power of attorney needs to be interpreted strictly, reason behind such principle being that the powers given are not abused by agent or the actions are restricted within an only to the extent the power is indicated or given.
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In the aforesaid cases, it was held that when the donor of a power of attorney had authorised the donee to initiate suits, the donee, being armed with such a power of attorney, cannot initiate a winding up proceeding since a winding up proceeding under the company law can never be equated with a suit. The relevant part of Coromandel International Ltd. (supra) is reproduced below:
"A suit for recovery of money is essentially a suit between the parties where no third party can seek any indulgence or impleadment. The proceedings under the Companies Act for winding up are entirely different, a special remedy provided for and the idea is not to restrict the proceedings to the parties alone and its range is widened and all steps taken in winding up proceedings are in public interest. Sometimes the relief for winding up is denied when it is against public interest".
The settled principle is that the power of attorney must be strictly construed, the rationale behind the principle being that the powers given are not abused by agent or the actions are restricted within an only to the extent the power is indicated or given".
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Refuting such contentions, learned counsel for the financial creditor argued that the power of attorney in question had very specifically empowered Sri Srinjoy Bhattacharjeet to do varieties of acts which clearly included the power to initiate a resolution process under Section 7 of the Code of 2016 as well. The fact that under the power in question, the attorney holder was authorised to institute suit/winding up proceeding/other proceeding even before a whole lot of authorities including High Court/CLB/NCLT makes such a conclusion inescapably inevitable
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According to the learned counsel for the financial creditor, the decisions, relied on by the counsel for the corporate debtor, have no application to the proceeding in hand since the facts and circumstances in the cases, relied on, and facts and circumstances in the case, before the Tribunal, are fundamentally different inasmuch as in the case in hand, the power of attorney had clearly authorised the Attorney to institute all kinds of suits or proceedings including a winding up proceeding/insolvency proceeding/bankruptcy proceeding, and that too, even before the NCLT. However, such facts are conspicuously lacking in the cases, referred to from the side of the corporate debtor.
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On hearing the learned counsel for the parties, the learned Members rendered, as stated above, two divergent opinions on the competence of the attorney holder to initiate the proceeding under section 7 of the Code. While the learned Member (Technical) did not find any fault in attorney holder's initiating a proceeding under section 7 of the Code, the learned Member (Judicial) upheld the objection, raised, holding that the Attorney holder did not have the required competence to initiate the proceeding under consideration.
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For ready reference, relevant parts of the orders, rendered by learned Member (J) and Learned Member (T) are reproduced below:
Order by: (Member) (J)
"In this case, general power of attorney is in favour of Shri Srinjoy...
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