COMPETENCY OF A POWER OF ATTORNEY HOLDER TO FILE AN APPLICATION UNDER INSOLVENCY & BANKRUPTCY CODE, 2016

In general all the Banks are in a practice of authorising its officers under a power of attorney document to initiate or defend any legal proceedings by or against the Bank in any court of law. In M/s. Palogix Infrastructure Pvt Ltd. Vs. ICICI Bank a question was raised before the NCLAT as to whether a Constituted Attorney authorised, prior to the enactment of Insolvency and Bankruptcy Code 2016, to file suits and/or proceedings against the company for recovery of the amount can file application for initiation of corporate insolvency process under Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016 without having specifically authorized to lodge Application/Petition under IBC 2016.

Rule 23 (1) of NCLT Rules permits an ‘authorised representative’, to present an application or petition before the Tribunal. The issue which was debated in the case in hand was whether a power of attorney holder who was given power of attorney prior to the enactment of IBC 2016 can be treated as an ‘authorised representative’ under the NCLT Rules.

It was argued by the Corporate Debtor that a Power of Attorney is an authorization by a 'principal' to its 'agent' to do an act and that 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 IBC sets in motion a very serious and irreversible process, therefore, according to the Corporate Debtor, the procedural pre-requisites under the IBC must be strictly construed.

The NCLAT, while determining the question of competency of a Power of Attorney holder, observed that as per Section 7 of the IBC, an application for initiation of 'Corporate Insolvency Resolution Process' requires to be filed by 'Financial Creditor' itself and that the IBC and the Adjudicating Authority Rules recognize that a 'Financial Creditor' being a juristic person can only act through an "Authorised Representative".

To understand the issue in full NCLAT had made a reference to the provisions of the Power of Attorney Act, 1882 related to the execution of a power of attorney and the decision of Hon’ble Supreme Court in  T C Mathai & Anr v District and Sessions Judge, Thiruvananthapuram, [(1999) 3 SCC 614]. In this case the Hon'ble Supreme Court had held that "Section 2 of the Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a particular act should be done by a party in person.” In the light of this dicta and the view of the Apex Court expressed in  M/s Innoventive Industries Ltd v ICICI Bank & Anr  that the Insolvency and Bankruptcy Code 2016 is an exhaustive code on the subject matter of insolvency in relation to corporate entities, it was held by NCLAT that a 'Power of Attorney Holder' is not competent to file an application under Section 7 or Section 9 or Section 10 of IBC on behalf of a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant'.

However NCLAT made it unambiguously clear that this general view cannot be adopted in the case of an officer of a ‘Financial Creditor’ Bank who has been delegated powers under a power of Attorney by the Board of Directors of the Bank. It was pointed out by NCLAT that if general authorisation is made by any 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant' in favour of its officers to do needful in legal proceedings by and against the 'Financial Creditor'/'Operational Creditor'/'Corporate Applicant', mere use of word 'Power of Attorney' while delegating such power will not take away the authority of such officer and for all purposes it is to be treated as an 'authorization' by the 'Financial Creditor'/'Operational Creditor'/'Corporate Applicant' in favour of its officer, which can be delegated even by designation. In such case, officer delegated with power can claim to be the 'Authorized Representative' for the purpose of filing any application under section 7 or Section 9 or Section 10 of IBC.

Further as it was clarified by NCLAT that while computing the 7 days period stipulated therein under Section 7 (5) of the IBC for rectifying the defects in the Application, 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.