Liberty Granted to File Fresh Application does not Permit Alteration of Default Date in Application u/s 7 of IBC: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT) in New Delhi has ruled that the appellant's failure to file the first appeal against the order dated 10.04.2023, which dismissed the first application under section 7 of the Code, and the fact that the NCLAT granted the appellant liberty do not give the appellant the right to change the date of default at its whim.

The appellant, Rolta Pvt. Ltd., distributed out a loan of Rs. 1.5 Cr. to the corporate debtor/respondent on July 11, 2019, July 15, 2019, and July 30, 2019, in three installments of Rs. 50 Lac each. In a CP (IB) No. 270/MB/2023 filed on March 6, 2023, the appellant claimed Rs. 1.50 Cr. plus interest of Rs. 1,34,73,905; as of February 20, 2023, the total amount owed was Rs. 2,84,73,905. Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (collectively, the "Rules") was followed in filing the aforementioned application.

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By its order dated 10.04.2023, the Tribunal dismissed this case on the grounds that the petition was not maintainable because the date of default, which was 04.02.2021 in part IV, fell within the time frame specified in Section 10A.

According to the Respondent, the Section 7 application could not be upheld under Section 10A of the Code. According to the appellant's previous application, CP (IB) No. 270/MB/2023, non-payment within five days of the recall notice dated 30.01.2021 was the reason for the alleged default on 04.02.2021. However, the appeal against this ruling was abandoned after the application was rejected by an order dated 10.04.2023. The order became final between the parties because it was not overturned.

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The appellant argued that in Part IV of both applications, the appellant unintentionally stated the date of default as 04.02.2021. By order dated 10.04.2023, the Tribunal rejected CP (IB) No. 270/MB/2023. Through appeal CA (AT) (Ins) No. 773 of 2023, the appellant contested this order; all arguments were left open, and the appeal was withdrawn with authorization to file a new petition. CP (IB) No. 883/MB/2023 was subsequently filed, but the Tribunal unlawfully rejected it.

Furthermore, it was argued that the Appellate Tribunal should not have rejected the application on the grounds that it was prohibited by res judicata and order 2 rule 2 of the Civil Procedure Code (CPC) since it had granted the right to file a new petition through a decision dated 12.07.2023.

Last but not least, it was argued that the Tribunal had rejected the first petition not on the basis of merit but rather because it was forbidden by Section 10A of the Code, meaning that the res judicata principle would not be applicable.

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The bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) held that merely the fact that the liberty was given to the Appellant by the court and he failed to pursue the first appeal filed against the order dated 10.04.2023 does not mean that the Appellant can change the date of default at its convenience alleging that after default occurred on 04.02.2021, the Appellant had served reminder to the Respondent.

While dismissing the appeal, the bench concluded that the appellant never tried to change the pleadings before the Tribunal, in contrast to the Streamcast case, which was also submitted by the appellant. They continued to use the original application, citing 04.02.2021 as the date of default, even though they knew it was within the Section 10A cut-off period, making the Section 7 application unmaintainable.

To Read the full text of the Order CLICK HERE

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