A Financial Creditor's statutory right to initiate Insolvency Resolution Process overrides internal disputes among a Corporate Debtor's Directors.

1. Appellant - 'Jagmohan Bajaj', one of the shareholders of Respondent No. 1 - 'Shivam Fragnances Pvt. Ltd.' (Corporate Debtor) is aggrieved of admission of petition filed by Respondent No.2 - 'Amiga Informatics Pvt. Ltd.' (Financial Creditor) under S.7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code') by virtue whereof Corporate Insolvency Resolution Process was triggered, moratorium slapped, Interim Resolution Professional appointed and the necessary directions were given.

2. The facts leading to filing of petition for initiation of Corporate Insolvency Resolution Process at the hands of 'Financial Creditor' are not in controversy. The 'Financial Creditor' granted financial assistance of Rs.1.02 Crores in the form of a loan to the 'Corporate Debtor' in the year 2016. The said amount was repayable with interest calculated @1.5% per month w.e.f. December, 2016. Upon failure of Corporate Debtor to abide by the repayment schedule, the loan amount was recalled by the Financial Creditor together with interest accrued thereon. Since the Corporate Debtor was in default, the Financial Creditor took recourse to arbitration in terms of agreement executed inter - se the Financial Creditor and the Corporate Debtor on 24.09.2016. The arbitral proceedings culminated in passing of award dated 14.08.2017 favouring the Financial Creditor. As the Corporate Debtor failed to comply with the award, it undertook to transfer its immovable assets in favour of the Financial Creditor in accordance with the terms of the award. However, there was no compliance with the terms of arbitral award and the Corporate Debtor continued with the default, resulting in initiation of Corporate Insolvency Resolution Process at the instance of the Financial Creditor.

3. The impugned order has been assailed on the ground that a serious dispute of oppression and mismanagement of the Corporate Debtor is pending adjudication under S.241 and S.242 of the Companies Act, 2013 before National Company Law Tribunal (for short 'NCLT'), New Delhi and since the pre - existing dispute regarding oppression and mismanagement of the Corporate Debtor is subjudice, initiation of Corporate Insolvency Resolution Process was not just and equitable. Learned counsel for the Appellant vehemently contended that the Corporate Debtor failed to comply with the arbitral award and was prevented from transferring its property to discharge the liability as there were serious disputes inter - se the Directors which are under adjudication before the Tribunal. Wherein, the Tribunal has directed maintenance of status quo as regards by constitution of Board of Directors and the Shareholding pattern. Per contra it is argued on behalf of the Financial Creditor that dispute inter - se the Directors was irrelevant for initiation of Corporate Insolvency Resolution Process as there was a debt and default and the application under S.7 of I&B Code was complete.

4. Initiation of Corporate Insolvency Resolution Process by Financial Creditor is regulated by the provision engrafted in S.7 of I&B Code, which reads as under:

7. Initiation of corporate insolvency resolution process by financial creditor. - (1) A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

Explanation. - For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.

(2) The financial creditor shall make an application und