Power Of Attorney Having Authorization Of Financial Creditor Can File Application U/S 7 IBC

KEY TAKEAWAYS

• The Supreme Court stated that a financial creditor's power of attorney who has been given authorization can file an application on its behalf under Section 7 of the Insolvency and Bankruptcy Code.

BACKGROUND

• In the case, the Bank granted Praveen Kumar Gupta general authority over all of the Bank's operations and affairs, including the initiation of legal actions before any court or tribunal with respect to any demand and the filing of all appropriate and necessary applications in this regard.
• Praveen Kumar Gupta filed an application under Section 7 of the Insolvency and Bankruptcy Code on behalf of the Bank (financial Creditor), requesting the start of the corporate insolvency resolution process.
• The corporate debtor argued that the application under Section 7 of the Code was not maintainable since it was filed by a power of attorney holder.
• One of the major issues before the Apex court was about the maintainability of an application submitted by a power of attorney holder under Section 7 of the Code.
• The appellant depended on an NCLAT judgement wherein it was held that only an “authorised person”, distinct from “a power of attorney holder” can file an application under Section 7 of the Insolvency and Bankruptcy Code.
• It also held that a “power of attorney holder” is not competent to file an application on behalf of the Bank (Financial creditor).

WHAT IS SECTION 7 OF THE IBC

• Section 7 of the IBC states that - “A financial creditor either by itself or jointly withother financial creditors, or any other person on behalf of the financial creditor, as may be notifiedmay file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred”
• In simpler words a financial creditor may file an application for corporate insolvency resolution either alone or alongside other financial creditors.

COURT’S DECISION

• The court, keeping in mind the decision taken by NCLAT, observed that in the present case that according to a resolution passed by the Bank's board of directors, the authorization was granted by way of a power of attorney.
• The court observed thatMr. Gupta's authority to file an application under Section 7 of the Code is unaffected.As a result, it is evident that the application was filed on behalf of the Financial Creditor by an authorised person, and the appellants' argument to the application's maintainability on this basis is untenable.

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