The right to file a Section 10 application under the IBC is not negated by prior creditor actions, and malicious intent must be substantiated with evidence beyond mere timing.

ASHOK BHUSHAN, J. This Appeal has been filed by a Corporate Applicant, challenging order dated 30.09.2024 passed by National Company Law Tribunal, New Delhi Court III rejecting application filed by the Appellant under Section 10 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “ IBC ”) and allowing application under Section 65 of the IBC being IA No.1955 of 2024 filed by the State Bank of India (“ SBI ”). By the impugned order, a penalty of Rs.1,00,000/- was also imposed on the Applicant/ Appellant.

2. Brief facts of the case necessary to be noticed for deciding the Appeal are:

(i) M/s Shivpriya Cables Pvt. Ltd. (Principal Borrower) availed fund based and non-fund-based loan facilities to the tune of Rs.19,77,00,000/- from the SBI, wherein the Appellant executed a Corporate Guarantee in favour of the SBI. A credit facility of Rs.1,64,59,163/- was also availed by the Principal Borrower from M/s Northern ARC Capital Ltd. A Corporate Guarantee was also executed by the Appellant in favour of Northern ARC Capital Ltd. (“ Northern ARC ”) on 30.07.2019.

The Principal Borrower also availed enhancement facilities from SBI and as on 16.10.2015, the sanctioned facilities was Rs.42,58,00,000/-.

(ii) On 04.08.2022, the loan account of Shivpriya Cables Pvt. Ltd. (“ Shivpriya Cables ”) was classified as Non-Performing Asset ( “ NPA ”) by the SBI. Northern ARC issued notice invoking Corporate Guarantee on 23.01.2023 and demanded payment of outstanding amount of Rs.1,64,59,163/-.

(iii) The SBI initiated proceedings under Section 13, sub-section (2) of the SARFAESI Act, 2002 against Applicant/ Appellant, demanding in capacity of Corporate Guarantor to repay the outstanding due of Rs.52,94,32,352.10 paisa along with interest.

(iv) On 22.06.2023, SBI issued possession notice, conveying the Principal Borrower and the Applicant about taking possession of the immovable mortgaged property.

(v) A Section 10 application being CP(IB) No.749/ND/2023 was filed by the Applicant on 02.11.2023 before the Adjudicating Authority. An order under Section 14 of the SARFAESI Act was also passed by the District Magistrate, Tijara, State of Rajasthan on 05.12.2023, directing the SBI to take physical possession of the immovable assets bearing Plot No.E-448, RIICO, Industrial Area, Chopanki, City Bhiwadi, Rajasthan.

(vi) On an application filed by Northern ARC under Section 7, Corporate Insolvency Resolution Process (“ CIRP ”) against the Principal Borrower commenced on 07.12.2023.

(vii) In application filed under Section 10, an IA No.1955 of 2024 was filed by the SBI under Section 65 of the IBC, praying for dismissal of Section 10 petition. The Adjudicating Authority heard petition under Section 10 as well as Section 65 application filed by the SBI and by the impugned order, held that Section 10 petition has been filed by the Applicant/ Appellant with malicious and fraudulent intent to delay and halt the recovery proceedings initiated by the Respondent Bank. The Adjudicating Authority also imposed penalty of Rs.1,00,000/- on the Applicant/ Appellant. Aggrieved by the impugned order dated 30.09.2024, this Appeal has been filed.

3. We have heard Shri Krishnendu Datta, learned Senior Counsel appearing for the Appellant and Shri Harshit Khare, learned Counsel appearing for SBI.

4. Learned Senior Counsel for the Appellant challenging the impugned order submits that Adjudicating Authority committed error in holding that application under Section 10 was filed by the Appellant with malicious and fraudulent intent within the meaning of Section 65 of the IBC only on the ground that proceedings under Section 13, sub-section (2) of the SARFAESI Act was initiated by the SBI against the Appellant prior to filing of Section 10 Application. It is submitted that mere initiation of proceedings under SARFAESI Act by the SBI cannot be the basis for coming to a finding that Section 10 application is filed with malicious and fraudulent intent. It is submitted t