The National Company Law Appellate Tribunal (NCLAT) has set aside an order passed by the National Company Law Tribunal (NCLT), Mumbai bench which had dismissed an application for the initiation of corporate insolvency resolution process (CIRP) against Mittal Corp Limited (Corporate Debtor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) .
The three member bench comprising of Justices Jarat Kumar Jain, Member (Judicial), Mr. Balvinder Singh. Member (Technical), Ms. Shreesha Merla Member (Technical) directed the NCLT to reconsider the application and held-
"For the reasons aforesaid, we set aside the impugned order dated 20th December, 2019 and remit the case to the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, with a direction to decide the admission of the application on merits as expeditiously as practicable."
Punjab National Bank (PNB), the financial creditor had approached the Appellate tribunal to recover a total outstanding debt and to the tune of over Rs 244.85 crores. Earlier in 2015, a consortium of lenders, Joint Lenders Forum (JLF) had decided to classify the accounts of the Corporate Debtor as 'Special Mention Account' (SMA) following the Reserve Bank of India (RBI) guidelines. A restructuring package had then been sanctioned pursuant to which a master restructuring agreement was entered into between PNB and the Corporate Debtor. However, the Corporate Debtor failed to adhere to the financial norms which resulted in the invocation of the Strategic Debt Restructuring Scheme (SDR).
The implementation of the SDR was also unsuccessful and the Appellant classified the Corporate Debtor's account as NPA with effect from June 30, 2016. The Appellant then moved an application under Section 7 of IBC before the NCLT which was dismissed in December last year.
The Appellants had contended that the Adjudicating Authority wrongly relied on the decision of the Supreme Court in Dharani Sugars and Chemical Ltd. V/s. Union of India and Ors. (2019) 5 SCC 480 (Dharani Sugars) and had held that the Appellant's petition under Section 7 of the IBC was the consequence of the impugned RBI circular. They further argued that there was nothing suggestive in the Minutes of the JLF Meeting, which would show that the application was preferred pursuant to the said RBI Circular.
Quashing the RBI circular in April 2019, the Supreme Court in Dharani Sugars (Supra) had held that the 'Circular dated 12.02.2018' issued by the RBI was ultra vires to Section 35AA of the Banking Regulation Act, 1949 and held that the subject matter of the circular was debts with an aggregate exposure of INR 2000 crore over on or after 01.03.2018. The Apex court had stated that with respect to such debts, if default persists for 180 days from 01.03.2018, or if the date of first default is after 01.03.2018, then 180 days will be calculated with effect from that date, and the lenders shall file applications singly or jointly under the Insolvency Code within 15 days from the expiry of the aforesaid 180 days.
The Principal bench directed the Adjudicating authority to decide on the admission of the application by the Appellants on merits in an expeditious manner and noted that it was an admitted fact that the Appellants had filed the application on March 20, 2018, much before the 180 days and stated -
"To reiterate, in the absence of any cogent evidence to show that the Appellant has filed the Application only pursuant to the 'Circular' issued by Reserve Bank of India, which we hold at the outset, was not applicable to the facts of the instant case, it was not open to the Adjudicating Authority to reject the Application on this ground. The Petition under Section 7 of the I&B Code is to be considered by the Adjudicating Authority on its own merits taking into consideration the records."
Mr. Piyush Beriwal and Mr. Ankit Raj Advocates, appeared for the PNB
Ms. Anju Jain and Mr. Hitesh Sachar, Advocates, appeared for Corporate Debtor
Company Appeal (AT) (Insolvency) No. 260 of 2020