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Issues prior to the enactment of I&B Code can be looked into for the purpose of entertaining an Application under Section 7 or 9 of the Code: NCLAT

Filing a petition under Section 9 of the Code before the commencement of the Code can be treated as a valid authorization. The judgment passed by the NCLAT New Delhi (principle bench), in its decision in   Tek Travels Private Limited vs Altius Travels Private Limited (Company Appeal (AT) (Insolvency) No. 172 of 2020)   by Hon’ble Shri  Justice Anant Bijay Singh.

The facts of the case were such that – Appellant filed an application under Section 9 of the I&B Code 2016 which was rejected on the ground of maintainability for want of proper Authorisation, which is of the year 2013 when I&B Code 2016 was not in existence.

It was contended by the counsel on behalf of the appellant that there is no particular arrangement neither in the Code nor under the Rules and Regulations made thereunder, which commands approval post-establishment of the I&B Code 2016. Rather than choosing the Section 9 Application on merit, the Learned Adjudicating Authority dismissed the application as not viable for the need of appropriate Authorisation, which turns out to be of 2013 when the I&B Code was not in presence.

The Respondent submits that the Application documented by the Operational Creditor under Section 9 of the Code depends on a Board The resolution passed by the Appellant Company in the year 2013, which restricts itself to recuperation procedures for the Appellant. The Authorisation thought about under the I&B Code must be of the post-establishment of the Code. It was expressed that the Appellant was not under any condition qualified to be allowed seven days under the stipulation to Section 9(5) (ii) (a) of the Code to correct the defects in the Application concerning the issue of Authorisation. Since Authorisation goes to the foundation of the matter, the equivalent can’t be treated as a curable defect that can be redressed inside seven days.

Board had two issues in front of them to be discussed:

Whether Authorisation for filing a petition under Section 9 of the Code before the commencement of the Code can be treated as a valid authorization

Whether Adjudicating Authority instead of dismissal of the Petition should have given the opportunity to rectify the defects as per proviso to Section 9 (5) (ii)(a) of the Code

In the case of Ramesh Murji Patel v, Aramex India Pvt the Tribunal held that – ‘authorization letter, even if, issued prior to the enactment of I&B Code can be looked into for the purpose of entertaining an Application under Section 7 or 9 of the Code’

Also, on account of Ramesh Murji Patel(supra) and Rajendra Narottamdas Sheth, this Appellate Tribunal has effectively taken the view that assuming Authorisation is before the sanctioning of the Code, it can not be treated as a defect in the Application and ‘ authorization letter, regardless of whether given preceding the institution of the I&B Code can be investigated to engage an Application under Section 7 or 9 of the Code.

Supreme Court in context to the second issue held, in the judgment of Trading Co. v. Juggilal Kamlapat Jute Mills Co. Ltd., that the time provided for rectifying the defection application under Section 9 (5) of the Code is a directory in nature and in the given circumstances the tribunal can provide time more than 7 days to rectify the defect.

Thus the tribunal held that – we are of the considered assessment that the Adjudicating Authority has blundered in excusing the Application for the need of Authorisation, without giving a chance to amend the defects in consistence with Section 9(5)(ii)(a) of the Code. give time over 7 days to redress the defect.

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