Petition u/s 7 of IBC has to be admitted when Debt And Default are Satisfied: NCLAT allows appeal of Canara Bank [Read Order]
It was observed that the Application cannot be rejected merely on the ground that there are chances of the amount being recovered from other proceedings which will satisfy the entire debt of the creditors
NCLAT – NCLAT New Delhi – IBC – Insolvency Bankruptcy Code – Section 7 of IBC – Canara Bank – Taxscan
NCLAT – NCLAT New Delhi – IBC – Insolvency Bankruptcy Code – Section 7 of IBC – Canara Bank – Taxscan
In a ruling in favour of Canara Bank, the New Delhi bench of National Company Law Appellate Tribunal ( NCLAT ) held that a petition under section 7 of the Insolvency Bankruptcy Code ( IBC ), 2016 has to be admitted when debt and default are satisfied.
The Appellant filed appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 ( Code ) against the Impugned Order passed by National Company Law Tribunal Mumbai Bench-II ( Adjudicating Authority ) whereby the Adjudicating Authority has dismissed the application filed by the appellant under Section 7 of the Code.
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It was submitted that the Adjudicating Authority has erred in dismissing the Section 7 application vide the Impugned Order despite the clear binding precedent laid down by the Supreme Court in Innoventive Industries Ltd. v. ICICI Bank and Anr, (2018) ( which is an earlier decision of a coequal Branch of the Hon'ble Supreme Court ) and the Adjudicating Authority was duty-bound to admit the Section 7 application.
Per contra, the respondents submitted that the initiation of CIRP would not serve any purpose of resolution or value maximization under the Code as - recovery actions that had already been taken by the Lenders outside the Code, there was nothing left to "revive" per se and initiation of CIRP despite these circumstances, it would lead to significant loss in time and loss in value.
The court observed that in view of this scenario, the Hon'ble Supreme Court of India held that “it was discretion of the Adjudicating Authority, since the word “may” has been used in Section 7 and thus the Adjudicating Authority should have given a chance to the Corporate Debtor to continue rather than admitting Section 7 application”
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The Bench of Justices Mr. Rakesh Kumar Jain, Mr. Naresh Salecha and Mr. Indevar Pandey while answering in favour of the appellant observed that the Appellant has not agreed to assign its debts to NARCL along with few other lenders and not signed ICA, against which the Respondent had approached the Bombay High Court which was dismissed vide order dated 03.02.2020 .
It was held that the Appellant is not duty bound to agree with majority of the lenders to assign its debts to NARCL or sign the ICA which has been signed by majority (more than 90% by value) of the Lenders. The tribunal concluded that the Appeal is allowed and the Impugned Order is set aside and the case is remanded back to the Adjudicating Authority to hear the original petition of the Appellant a fresh, taking into consideration all the facts.
To Read the full text of the Order CLICK HERE
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