AA Not Required To Assess The Correct Amount Of Debt At Admission Stage: NCLAT Delhi
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Manmohan Gupta v MDS Digital Media Pvt. Ltd. & Anr., has held that the Adjudicating Authority is not required to express any opinion on the correctness of debt amount at the...
The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Manmohan Gupta v MDS Digital Media Pvt. Ltd. & Anr., has held that the Adjudicating Authority is not required to express any opinion on the correctness of debt amount at the admission stage of petition. Rather, it is the Resolution Professional who would subsequently assess the correct debt amount at the time of collation of the claims.
Background Facts
MDS Digital Media Pvt. Ltd. & Anr. (“Operational Creditor”) filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Planet 41 Mobi Venture Ltd. (“Corporate Debtor”). On 16.12.2022, the Adjudicating Authority admitted the petition under Section 9 of IBC.
The suspended Director of the Corporate Debtor filed an appeal before the NCLAT against the order of admission. It was contended that there was no debt amount in actual and even the balance sheet of the Operational Creditor did not show any debt. Further, the amount claimed by the Operational Creditor was not the correct amount.
NCLAT Verdict
The NCLAT Bench observed that the Section 9 petition was admitted on the basis of admission made by the Corporate Debtor, for an amount which was more than the threshold limit prescribed under IBC. Hence, the Adjudicating Authority did not commit any error in admitting Section 9 application.
“The question as to what is correct amount of debt was the question which was to be subsequently looked into at the time of collation of the claims by the Resolution Professional and at the stage of admission of section 9 application it was not necessary for the Adjudicating Authority to express any opinion.”
The Bench opined that the ‘correct amount of debt’ is not to be ascertained by the Adjudicating Authority at the admission stage. Rather the Resolution Professional will subsequently assess the correct amount at the time of collation of claims. Accordingly, the appeal has been dismissed.
Case Title: Manmohan Gupta v MDS Digital Media Pvt. Ltd. & Anr.
Case No.: Company Appeal (AT) (Insolvency) No.202 of 2023
Counsel for Respondent: Mr. Shubham Paliwal, Mr. Parth Jain, Mr. Puru Jain and Ms. Nitya Prabhakar, Advocates.