NCLAT Chennai: FC And OC Can’t Give Additional Facts Not Provided In Application Under Sections 7, 9 Or 10 Of IBC

The Appellate Tribunal held that a Petitioner (Financial/Operational Creditor) cannot set up a new case/additional factual altogether that has not been set up in the main application filed either u/s 7, 9, or 10 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) when National Company Law Tribunal (“NCLT”) allows the petitioner to file a rejoinder to the reply pertaining to additional facts stated by Respondent/Corporate Debtor.

Background Facts:

A petition to initiate a Corporate Insolvency Resolution Process (“CIRP”) was filed by the State Bank of India (“SBI”), a Financial Creditor under Section 7 of the IBC against India Power Corporation Ltd (Corporate Debtor).

The Corporate Debtor challenged the rejoinder filed by SBI on being taken on record and SBI under Rule 11 of NCLT, Rules, 2016 (“Rules”) filed an application seeking direction to take the rejoinder on record and to condone the delay, if any, to which reply was filed by the Corporate Debtor on 30.12.2022.

The said application was allowed by NCLT Hyderabad but subject to any additional factual assertions that were not pleaded in the main petition if found to have been introduced under the Rejoinder will not be taken into consideration and will be eschewed.

Contentions of the Parties:

The Corporate Debtor argued that the application per se is not maintainable after the closer of the opportunity to file the rejoinder and as per Rule 55 of the Rules no pleadings, subsequent to the reply, are permissible except by the leave of the Tribunal.

SBI contended that Rule 55 of the Rules provides for seeking leave of the Tribunal whereas in the present case, exercising powers under Rule 42 of the Rules, the NCLT Hyderabad vide order dated 03.12.2021 had already suo motu given leave to the Respondent to file the rejoinder.

NCLAT Verdict:

The NCLAT dismissed the appeal and held that when the Appellant/Petitioner sets up a case in the application filed either under Section 7, 9 or 10 of the IBC then as per Rule 41 of Rules, the Respondent shall specifically admit, deny or rebut the facts stated by the Applicant in his petition or application and state such additional facts as may be found necessary in his reply.

However, it is provided in Rule 42 of the Rules that where the Respondent states such additional facts as may be necessary for the just decision of the case, the Bench may allow the petitioner to file a rejoinder to the reply pertaining to those additional facts but it cannot set up a new case altogether which has not been set up by the Applicant in the main application as it would again require a reply by the Respondent and further rejoinder by the Applicant and the process will go and shall never come to end.

The Tribunal observed that in any case, the Petitioner cannot enlarge the scope of the petition by adding a new ground in the rejoinder, as the purpose of a rejoinder is not to fill in the gaps left by the petitioner in their pleadings.

Case Title: State Bank of India vs. India Power Corporation Limited

Case No.: Company Appeal (AT) (CH) (Ins) No.87/2023 (IA Nos.310 & 309/2023)

Counsel for Appellant: Mr. P.H. Arvind Pandiyan, Senior Advocate

Counsel For Respondent: Mr. R. Sankaranarayanan, Senior Advocate

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