Considering the provision of Section 65 of the IBC, it is necessary for the Adjudicating Authority if such an allegation is raised to go into the same. In case, such an objection is raised or an application is filed before the Adjudicating Authority it has to be dealt with in accordance with the law.
In the instant case titled Beacon Trusteeship Limited Vs Earthcon Infracon Private Limited & Anr issue was raised before the Supreme Court for clarification:
Whether the proceedings been initiated in a collusive manner?
The Supreme Court looked into allegations made under Section 65 of the IBC, and the Apex Court felt it was important for the Adjudicating Authority to examine the merits of the case because an allegation of conspiracy between the parties was made. The Court also pointed out that this claim could not have been made directly in the appellate forums. The Apex Court went on to say that raising such an objection would need filing an application to that effect with the Adjudicating Authority, which would then be dealt with in accordance with the law.
The court categorically held that:
“Allegations under Section 65 of the IBC was looked into by the Supreme Court and the Apex Court felt it necessary for the Adjudicating Authority to go into the merits of the same as an allegation related to the collusion of the parties is being raised. The Court also observed that that this plea could not have been raised in the appellate forums directly. The Apex Court further observed that such an objection raised would have to result in an application to the said extent filed before the Adjudicating Authority itself and the same would have to be dealt with in accordance with law”.
The Court assigned the case to the Adjudicating Authority, stating that the Adjudicating Authority must investigate the proceedings to see if they were started in conformity with the law and issue appropriate orders, taking into account the facts and circumstances of the case. Without addressing the merits of the NCLAT Order, the Court set it aside and dismissed the appeal in compliance with the aforementioned direction.