Adjudicating Authority Cannot Invoke S.60(5) IBC When Ingredients U/S 66 Are Not Made Out: NCLAT New Delhi
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra), has held that the adjudicating authority cannot invoke section 60(5) of the IBC when ingredients of section 66 are not made out. Background of the Case The adjudicating authority by its order dated 22.01.2025, while acknowledging that...
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra), has held that the adjudicating authority cannot invoke section 60(5) of the IBC when ingredients of section 66 are not made out.
Background of the Case
The adjudicating authority by its order dated 22.01.2025, while acknowledging that the requirements of section 66 of the IBC were not satisfied, allowed the application by exercising its powers u/s 60(5), citing fraudulent conduct by the respondent. Aggrieved by the order, the present appeal is before the NCLAT.
Contention of the Parties
The appellant contended that the ingredients of section 60 of the IBC were not met; therefore, the adjudicating authority has erred in allowing the application by exercising its power under section 66 of the IBC. It also highlighted that prayers (b) to (d) in the application before the adjudicating authority were against the financial creditor, not the appellant.
It submitted that the corporate debtor took the loan from the financial creditor in the year 1998 and later assigned it to the Stressed Assets Stabilisation Fund (SASF), raising issues of delay and irrelevance under the IBC proceedings that began in 2019.
The respondent argued that the fraudulent conduct had already been judicially determined in prior applications, which had not been appealed by the appellant. Therefore, by exercising its power under section 60(5) of the IBC, the adjudicating authority rightly passed the impugned order.
Observations of the NCLAT
The NCLAT observed that there is no justification for allowing the application, especially when the adjudicating authority has itself observed that the ingredients of section 66 had not been made.
The bench also noted that the relief sought was either not related to the appellant or pertained to the financial creditors and hence, was not sustainable.
The tribunal agreed that the impugned order applies only to I.A. No. 1305/2020 and does not impact other cases. And, since the order is not legally justified, it is set aside, and the appeal is allowed.
Case Name: Sudhir Dinanath Chatutvedi vs. True IPE LLP & Ors.
Case No.: Company Appeal (AT) (Insolvency) No. 540 of 2025
For Appellant: Mr. Chirag Mody, Mr. Minesh K. Shah, Advocates
For Respondent: Mr. Ravi Raghunath, Advocate
Order Date: 08.09.2025