Oct 01, 2017

Ability of a Power of Attorney Holder to Initiate Insolvency Proceedings

ICICI Bank Limited (‘ICICI’) filed an application before the NCLT through a representative, holding a power of attorney (‘PoA’), on behalf of ICICI to commence CIRP for Palogix Infrastructure Private Limited (‘Palogix’). Under the PoA in question, ICICI gave a general authority to the representative to appoint pleaders, advocates and solicitors to appear and act on behalf of ICICI before any NCLT bench and/or before other forums and to attend meetings of creditors in insolvency or bankruptcy or winding up matters and to vote at such meetings and to accept composition and to take such proceedings as he may think proper. Palogix objected that the person authorised by ICICI did not have adequate authority under the PoA to initiate bankruptcy proceedings before the NCLT. The National Company Law Appellate Tribunal (‘NCLAT’), in this case, took the view that IBC being a specialized law creating new rights and obligations, requires that a PoA be interpreted strictly so that the powers given to the agents are not abused and the actions are restricted only to the extent the power is indicated or given. It further stated that an authorization, in case of a company, means a specific authorization by the board of directors of the company by way of passing a resolution. Any application under Section 7 of the IBC, if signed and filed by a ‘general PoA holder’ without specific authorization under the IBC, will not be maintainable.

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