Power Of Attorney Having Authorisation Of Financial Creditor Can File Application U/s 7 IBC : Supreme Court

The Supreme Court observed that the power of attorney holder of a financial creditor who has been given authorisation can file an application under Section 7 of Insolvency and Bankruptcy Code on behalf of it.In this case, one Praveen Kumar Gupta was given general authorisation by the Bank (financial creditor) with respect to all the business and affairs of the Bank, including commencement of legal proceedings before any court or tribunal with respect to any demand and filing of all necessary applications in this regard. On behalf of the Financial Creditor,he filed an application under Section 7 of the Code seeking initiation of corporate insolvency resolution process. The Adjudicating authority rejected the corporate debtor's contention that the application under Section 7 of the Code was not maintainable as it was filed by a power of attorney holder.Before the Apex court, one of the issues raised was regarding the maintainability of the application under Section 7 of the Code filed by a power of attorney holder. The appellant relied on an NCLAT judgment in Palogix Infrastructure Private Limited v. ICICI Bank Limited in which it was held that only an 'authorised person', distinct from a 'power of attorney holder', can file an application under Section 7 and that a 'power of attorney holder' is not competent to file an application on behalf of a financial creditor. On the other hand, the respondent contended that a person authorised by way of a power of attorney can file an application under Section 7 of the Code.Section 7 provides that a financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. 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. The Form appended to the rules mandates the Financial Creditor to submit "name and address of the person authorised to submit application on its behalf.The bench of Justices L. Nageswara Rao, BR Gavai and BV Nagarathna noticed the NCLAT judgment in Palogix Infrastructure (supra) and observed:The NCLAT was of the opinion that general authorisation given to an officer of the financial creditor by means of a power of attorney, would not disentitle such officer to act as the authorised representative of the financial creditor while filing an application under Section 7 of the Code, merely because the authorisation was granted through a power of attorney. Moreover, the NCLAT in Palogix Infrastructure (supra) has held that if the officer was authorised to sanction loans and had done so, the application filed under Section 7 of the Code cannot be rejected on the ground that no separate specific authorisation letter has been issued by the financial creditor in favour of such officer. In such cases, the corporate debtor cannot take the plea that while the officer has power to sanction the loan, such officer has no power to recover the loan amount or to initiate corporate insolvency resolution process, in spite of default in repayment. The court approved the above view taken by the NCLAT and observed that, in the present case, the authorisation, was granted by way of a power of attorney pursuant to a resolution passed by the Bank's board of director. "It does not impair Mr. Gupta's authority to file an application under Section 7 of the Code. It is therefore clear that the application has been filed by an authorised person on behalf of the Financial Creditor and the objection of the Appellants on the maintainability of the application on this ground is untenable.", the court said. Case name and Citation: Rajendra Narottamdas Sheth vs Chandra Prakash Jain LL 2021 SC 524Case no. and date: CA .4222 of 2020 | 30 September 2021Coram: Justices L. Nageswara Rao, BR Gavai and BV NagarathnaClick here to Read/Download Judgment

Power Of Attorney Having Authorisation Of Financial Creditor Can File Application U/s 7 IBC : Supreme Court

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Power Of Attorney Having Authorisation Of Financial Creditor Can File Application U/s 7 IBC : Supreme Court

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