Liberty Granted By NCLAT To File Fresh Application Does Not Permit Appellant To Alter Date Of Default In Application U/S 7 Of IBC: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member) and Mr. Indevar Pandey (Technical Member) has held that the mere fact that the NCLAT granted the Appellant liberty, and the Appellant subsequently failed to pursue the first appeal against the order dated 10.04.2023 by which the first application under section 7 of the Code was dismissed, does not entitle the Appellant to change the date of default at its convenience by alleging that a reminder was served to the Respondent after the default occurred on 04.02.2021. Brief Facts: Rolta Pvt. Ltd. (Appellant) disbursed a loan of Rs. 1.5 Cr. to the Corporate Debtor / Respondent in three tranches of Rs. 50 Lac each on 11.07.2019, 15.07.2019 and 30.07.2019 respectively. The Appellant filed CP (IB) No. 270/MB/2023 against the Respondent on 06.03.2023 claiming the amount of Rs. 1.50 Cr.with interest of Rs. 1,34,73,905/-, total outstanding amount of Rs. 2,84,73,905 as on 20.02.2023. The said application was filed in terms of Rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (in short 'Rules') This application was dismissed by the Tribunal, vide its order dated 10.04.2023, on the ground that since the date of default mentioned as 04.02.2021 in part IV falls within the cut off period provided under Section 10A, therefore, the petition was not maintainable. In L.A. No. 5367 of 2023, the Respondent argued that the Section 7 application was not maintainable under Section 10A of the Code. The Appellant's earlier application, CP (IB) No. 270/MB/2023, alleged default on 04.02.2021 due to non-payment within five days of the recall notice dated 30.01.2021. However, that application was dismissed by order dated 10.04.2023, and the appeal against this order was withdrawn. Since the order was not set aside, it attained finality between the parties. The Tribunal has allowed the application bearing L.A. No. 5367 of 2023 and held that the date of default once mentioned by the Appellant as 04.02.2021 in the first round cannot be shifted or changed and has made a reference to the law laid down by this Court in the case of Ramdas Datta (Suspended Director of Saraju Flour Mill Pvt. Ltd. Vs. IDBI Bank and Anr., 2023. Contentions: The Appellant submitted that Inadvertently, the Appellant mentioned the date of default as 04.02.2021 in Part IV of both applications. The Tribunal dismissed CP (IB) No. 270/MB/2023 by order dated 10.04.2023. The Appellant challenged this order through appeal CA (AT) (Ins) No. 773 of 2023, which was withdrawn with permission to file a fresh petition, keeping all contentions open. Subsequently, CP (IB) No. 883/MB/2023 was filed but was illegally dismissed by the Tribunal. It was further submitted that once the liberty was granted by the Appellate Tribunal vide order dated 12.07.2023 to file a fresh petition, the Tribunal should not have dismissed the application on the ground that it is barred by res judicata and order 2 rule 2 of the Civil Procedure Code (CPC). Lastly, it was submitted that the first petition was not dismissed by the Tribunal on merit rather it was dismissed on the ground that itis barred in view of Section 10A of the Code, therefore, the principle of res judicata will not apply. Per contra, the Respondent submitted that in the appeal against the order dated 10.04.2023, the Appellant's counsel stated he did not intend to contest the merits and sought withdrawal of the appeal, leaving the order unchallenged. It was further submitted that the liberty granted to the Appellant vide order dated 12.07.2023 to file a fresh application does not mean that the order dated 10.04.2023 was set aside because the said order was not challenged on merits and was even not set aside by the Appellate Tribunal as the appeal was withdrawn. It was further submitted that the Appellant made no effort to amend the date of default in the appeal, despite the Supreme Court's judgment in Dena Bank vs. C. Shivakumar Reddy & Anr. (2021) that amendments and additional documents are allowed under Section 7. Instead, the Appellant withdrew the appeal without contesting on merits and filed a fresh petition at their own risk. This does not constitute the Appellate Tribunal granting an opportunity to file a petition with a new date of default in Part IV. Observations: The Tribunal in Small Industries Development Bank of India Vs. Sambandh Finserve Pvt. Ltd held that each default of the corporate debtor in non-payment of installment and interest thereon amounts to a fresh cause of default as per the General Conditions of the loan agreement and it could be a sufficient ground to file fresh application. The Tribunal further observed that it is well settled that each case must be decided on its own facts. The case of ...

Liberty Granted By NCLAT To File Fresh Application Does Not Permit Appellant To Alter Date Of Default In Application U/S 7 Of IBC: NCLAT

Mohd Malik Chauhan

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