The Appellate Tribunal while analysing the Section 7 of the Insolvency & Bankruptcy Code, 2016 (I&B Code) and the observations made by the Hon'ble Apex Court, held that I&B Code does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the Financial Creditor, Corporate Debtor or any financial institution.
Whether the Adjudicating Authority was justified in ignoring the time frame prescribed under Section 7 of the I&B Code and embarking upon an enquiry to determine whether the applications filed under Section 7 contained false information when the matters were at the very threshold stage?
The Adjudicating Authority can also determine this from the Financial Creditor's additional evidence, which must be provided within 14 days of the application's receipt. The I&B Code stipulates a 180-day deadline for the completion of the Corporate Insolvency Resolution Process, with a 270-day extension available. With the most recent change, a term of judicial intervention has been included, bringing the total extended duration to 330 days. A quick glance at the legal structure governing the Corporate Insolvency Resolution Process reveals that speed is the key, and all authorities subject to the I&B Code must stick to the deadlines set forth.
“In the case of a corporate debtor who commits a default of financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due,” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."
Hence, The Appellate Tribunal considered the Adjudicating Authority's scope in light of the object and Section 7 of the I&B Code. In light of the code's purpose, the Appellate Tribunal determined that the Adjudicating Authority could not conduct a lengthy and drawn-out pre-admission process that would negate the I&B Code's purpose. The Appellate Tribunal noted that Section 75 is a criminal law that mandates an investigation and recording of findings in regard to the Applicant's responsibility in the commission of an offence. The same cannot be used to prevent the start of the Corporate Insolvency Resolution Process unless the forgery or falsification of papers is obvious and prima facie.