24 June 2024


Supreme Court

Rajendra Narottamdas Sheth & Ors. Vs. Chandra Prakash Jain & Ors.




Power of attorney holder of a financial creditor who has been given authorisation can file an application under Section 7 of IBC on behalf of it

Respondent No. 2 filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) which was admitted by the National Company Law Tribunal, (‘NCLT’ or ‘Adjudicating Authority’). The Appellants, who are the suspended directors of the board of R.K. Infratel Ltd. (‘Corporate Debtor’), filed an appeal which was rejected by the National Company Law Appellate Tribunal, Delhi (‘NCLAT’). Therefore, present Appeal.

Essentially, there are two issues that arise for consideration in present Appeal. The first pertains to the maintainability of the application under Section 7 of the IBC filed by a power of attorney holder. The second relates to the question of limitation.

In the present case, Praveen Kumar Gupta has been given general authorisation by the Bank with respect to all the business and affairs of the Bank, including commencement of legal proceedings before any court or tribunal with respect to any demand and filing of all necessary applications. Such authorisation, having been granted by way of a power of attorney pursuant to a resolution passed by the Bank’s board of directors on does not impair Mr. Gupta’s authority to file an application under Section 7 of the IBC. It is therefore clear that the application has been filed by an authorised person on behalf of the Financial Creditor and the objection of the Appellants on the maintainability of the application on this ground is untenable.

The burden of prima facie proving occurrence of the default and that the application filed under Section 7 of the IBC is within the period of limitation, is entirely on the financial creditor. While the decision to admit an application under Section 7 of IBC is typically made on the basis of material furnished by the financial creditor, the Adjudicating Authority is not barred from examining the material that is placed on record by the corporate debtor to determine that such application is not beyond the period of limitation. Undoubtedly, there is sufficient material in the present case to justify enlargement of the extension period in accordance with Section 18 of the Limitation Act and such material has also been considered by the Adjudicating Authority before admitting the application under Section 7 of the Code. Appeal dismissed.

Tags : Authorisation Grant Legality

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