Palogix Infrastructure Private Limited Appellant Vs. ICICI Bank Limited - 'Power of Attorney Holder' is not competent to file an application on behalf of a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant'.

NCLAT (20.09.2017) in Palogix Infrastructure Private Limited Appellant Vs. ICICI Bank Limited  [CP (Company Appeal) (AT) (InsoL) No. 30, 37 & 54 of 2017] held that;

• that a 'Financial Creditor' being a juristic person can only act through an "Authorised Representative". Entry 5 & 6 (Part I) of Form No.1 mandates the 'Financial Creditor' to submit "name and address of the person authorised to submit application on its behalf (Enclose Authorisation)".

• This apart, we accept the stand taken by the 'Financial Creditor' that for the purpose of counting the period of seven days, apart from the date of receipt of the order for removal of defects, the holidays such as Saturdays, Sundays and other holidays of the Tribunal to be excluded.

• Therefore, we hold that a 'Power of Attorney Holder' is not competent to file an application on behalf of a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant'.

• if an officer, such as senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a  proceeding for 'Corporate Insolvency Resolution Process' against the  person who have taken loan, in such case the 'Corporate Debtor' cannot plead that the officer has power to sanction loan, but such officer has no power to recover the loan amount or to initiate 'Corporate Insolvency Resolution Process', in spite of default of debt.

• If a plea is taken by the authorised officer that he was authorised to sanction loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the 'Financial Creditor' in favour of such officer designate.

Excerpts of the Order;

ICICI Bank Limited (Financial Creditor) filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "I&B Code") for initiation of 'Corporate Insolvency Resolution Process' against 'Palogix Infrastructure Private Limited'- (Corporate Debtor). 

# 2. The case was heard by a Division Bench of the Adjudicating Authority which having noticed that the 'Financial Creditor' preferred the application under section 7 through Power of Attorney Holder, passed two separate orders, one holding the application through Power of Attorney is not maintainable (Member Judicial) and the other (Member Technical) held that the application was maintainable as the Power of Attorney was given in favour of the Legal Manager to initiate proceedings before the National Company Law Tribunal which is the Adjudicating Authority under 'I&B Code'.

# 3. The case was referred to the Hon'ble President, National Company Law Tribunal exercising power under sub Section (5) of Section 419 of the Companies Act, 2013 for constituting a larger Bench for decision on the following questions: -

• "Whether The Constituted Attorney authorised on 20/10/2014 to file suits and/or proceedings against the company for recovery of the amount and also to affirms plaints cum affidavits and other pleadings in any court of India including NCLT can file application for initiation of corporate insolvency process under Section 7 of the Insolvency and Bankruptcy Code 2016 without having specifically authorized to lodge Application/Petitionunder IBC 2016 ?"

# 4. By majority judgment, the Adjudicating Authority held that for initiation of 'Corporate Insolvency Resolution Process', there should be specific authorization to the Power of Attorney Holder to initiate the 'Corporate Insolvency Resolution Process'. The 'Financial Creditor'- ICICI Bank having not filed specific authorization to initiate 'Corporate Insolvency Resolution Process', was directed by the order dated 12th April, 2017 to rectify the defects. The said order has been challenged by the 'Corporate Debtor' in Company Appeal (AT) (Insolvency) No. 30 of 2017.

# 5. The 'Financial Creditor' has also challenged the said order dated 12th April, 2017 in Company Appeal (AT) (Insolvency) No. 37 of 2017 on the ground that no specific authorisation required for initiation of 'Corporate Insolvency Resolution Process'.

# 6. By subsequent order dated 16th May, 2017, the Adjudicating Authority admitted the application on removal of defects; ordered Moratorium and appointed 'Interim Resolution Professional' who has been directed to convene a meeting of the Committee of Creditors in accordance with 'I&B Code'. The said order has been challenged by 'Corporate Debtor'- Palogix Infrastructure Private Limited in Company Appeal (AT) (Insolvency) No.54 of 2017.

The stand of the 'Financial Creditor'- ICICI Bank

# 7. According to 'Financial Creditor', the 'Corporate Debtor' has not disputed the existence of the debt and default on their part. They are opposing the matter on technical ground, which is incorrect and in any case if there was a defect it has been removed.

# 8. Learned Counsel appearing on behalf of the 'Financial Creditor'- ICICI Bank referred to Section 7 of the 'I&B Code' and Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as "Adjudicating Authority Rules") and submitted that 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-1' of 'Adjudicating Authority Rules'.

# 9. Upon perusal of the Adjudicating Authority Rules and Form-1, it may be duly noted that the 'I&B Code' and the 'Adjudicating Authority Rules' recognize that a 'Financial Creditor' being a juristic person can only act through an "Authorised Representative". Entry 5 & 6 (Part I) of Form No.1 mandates the 'Financial Creditor' to submit "name and address of the person authorised to submit application on its behalf (Enclose Authorisation)".

# 10. The signature block of the aforementioned Form-1 also provides for the authorised person's detail is to be inserted and also includes inter alia the position of the authorised person in relation to the 'Financial Creditor'. Thus, it is clear that an authorised person of the 'Financial Creditor' can make an application under Section 7 of the 'I&B Code'.

# 14. Learned Counsel for the appellant relied on Order III of the Code of Civil Procedure, 1908 which provides for recognized agents and pleaders, but such submission cannot be accepted as the Code of Civil Procedure is not applicable for filing application under 'I&B Code'.

# 15. Section 179 of Companies Act, 2013 empowers the Board of Directors to do all such acts that a company is authorised to do. A company being a juristic person is capable of initiating and defending legal proceedings and, therefore, the Board of Directors is empowered to exercise such rights on behalf of the Company or may duly empower 'Authorised Representative' to do so on its behalf.

# 16. Thereby the person authorised by the Board of Directors is duly empowered to initiate or defend any legal proceedings by or against the 'Financial Creditor'! Corporate Debtor' in any Court of law including the matters relating to Insolvency and Bankruptcy proceedings. Thereby, the Board of Directors of a Bank are empowered to delegate powers to any of its officer.

# 17. The question arises whether the 'Power of Attorney Holder' given power of attorney prior to enactment of 'I&B Code', is entitled to file an application under Section 7 or 9 or 10 of the 'I&B Code'?

# 19. Reliance has been placed on Hon'ble Supreme Court's decision in "A. C. Narayanan vs. State of Maharashtra (2014) 11 SCC 790" wherein the Hon'ble Supreme Court held:

• "28. The power:of attorney holder is the agent of the grantor. When the grantor ,authorises the attorney holder to initiate legal proceedings and the attorney holder accordingly initiates such legal proceedings, he does so as the agent of the grantor and the initiation is by the grantor represented by his attorney holder in his personal capacity..."

# 20. According to Learned Counsel for the 'Corporate Debtor', the application under Section 7 of the 'I&B Code' if signed and filed by a 'General Power of Attorney Holder' without specific authorization is not maintainable. According to him, the procedure prescribed requires specific authorization such as:

• (i) The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (Rules 4 & 10) incorporate by reference procedure prescribed under Rule 23 and 26 of the National Company Law Tribunal Rules 2016.

• (ii) Rule 23 read with Rule 26 of the National Company LawTribunal Rules, 2016 requires petition/ application to be signed and verified by 'Authorized Representative' of the petitioner.

# 21. According to the 'Corporate Debtor' the 'Authorization' in the case of a company would mean a specific authorization by the Board of Directors of the company by passing a resolution. The reliance has been placed on the Hon'ble Supreme Court's decision in "State Bank of Travancore vs. Kingston Computers India Fyi. Ltd. (2011) 11 SCC 524".

# 22. Therefore, according to the 'Corporate Debtor', an application under section 7 of the 'I&B Code' in absence of any supporting affidavit verifying the petition is not maintainable. It was also contended that  prerequisites under the 'I&B Code' are mandatory and it should be strictly construed and barring specific Power of Attorney, no application can be entertained.

# 23. Learned counsel for the 'Corporate Debtor' submitted that a Power of Attorney is an authorization by a 'principal' to its 'agent' to do an act. A fortiori, such authorisation can only be of acts which are in the contemplation and knowledge of the 'principal' as on the date when such authorisation is given. If the 'principal' itself is unaware of an eventuality, it cannot authorize its agent for such eventuality. This is more so when 'I&B Code' sets in motion a very serious and irreversible process, therefore, according to the 'Corporate Debtor', the procedural prerequisites under the 'I&B Code' must be strictly construed.

# 27. The seven days for rectification of defects is to be counted not from the date of the order passed by the Adjudicating Authority but from the date of "receipt of such notice from the Adjudicating Authority to rectify the defects in the application." The 'Corporate Debtor', though raised objection that the defects were not removed within seven days, but not given the date on which the notice for correction of defect was served by the Adjudicating Authority on the 'Financial Creditor'-ICICI Bank. In absence of such specific pleadings stand taken by the 'Corporate Debtor' that objection that defect was not removed within seven days cannot be accepted. This apart, we accept the stand taken by the 'Financial Creditor' that for the purpose of counting the period of seven days, apart from the date of receipt of the order for removal of defects, the holidays such as Saturdays, Sundays and other holidays of the Tribunal to be excluded.

# 31. As per Section 7 of the 'I&B Code' an application for initiation of 'Corporate Insolvency Resolution Process' requires to be filed by 'Financial Creditor' itself. 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-1' of the Adjudicating Authority Rules. Upon perusal of the Adjudicating Authority Rules and Form-1, it may be duly noted that the 'I&B Code' and the Adjudicating Authority Rules recognize that a 'Financial Creditor' being a juristic person can only act through an "Authorised Representative". Entry 5 & 6 (Part I) of Form No.1 mandates the 'Financial Creditor' to submit "name and address of the person authorised to submit application on its behalf. The authorization letter is to be enclosed. The signature block of the aforementioned Form 1 also provides for the authorised person's detail is to be inserted and also includes inter alia the position of the authorised person in relation to the 'Financial Creditor'. Thus, it is clear that only an "authorised person" as distinct from "Power of Attorney Holder" can make an application under section 7 and required to state his position in relation to "Financial Creditor".

# 33. Therefore, we hold that a 'Power of Attorney Holder' is not competent to file an application on behalf of a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant'.

# 38. This apart, if an officer, such as senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a  proceeding for 'Corporate Insolvency Resolution Process' against the  person who have taken loan, in such case the 'Corporate Debtor' cannot plead that the officer has power to sanction loan, but such officer has no power to recover the loan amount or to initiate 'Corporate Insolvency Resolution Process', in spite of default of debt.

# 39. If a plea is taken by the authorised officer that he was authorised to sanction loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the 'Financial Creditor' in favour of such officer designate.

# 40. In view of reasons as recorded above, while we hold that a 'Power of Attorney Holder' is not empowered to file application under section 7 of the 'I&B Code', we further hold that an authorised person has power to do so.

# 41. For the reasons aforesaid, we find no ground to interfere with the impugned order(s). All the appeals are dismissed, the order of admission of application under section 7 is affirmed.

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