NCLAT Delhi: Refusal To Rehear A Matter After Reserving An Order In A Company Petition Does Not Result In A Miscarriage Of Justice

The National Company Law Appellate Tribunal (“NCLAT”), Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Mr Barun Mitra and Mr Arun Baroka (Technical Members) has dismissed an appeal and held that refusal to rehear a matter after reserving an order in a company petition does not result in a miscarriage of justice. Background Facts Maa Durga Commotrade Pvt. Ltd. (“Corporate Debtor”) obtained a credit facility from the Karnataka Bank Limited (“KBL”) in 2010 for an amount of Rs.1 crore. The loan account of the Corporate Debtor was classified as NPA by the KBL on 05.07.2013 since the Corporate Debtor failed to repay the loan. A demand notice under the SARFAESI Act was sent by KBL to the Corporate Debtor on 29.08.2013. The KBL subsequently assigned the debt to JM Financial Asset Reconstruction Company (“Respondent No.1”) on 15.12.2014 by way of an Assignment Deed. On 21.10.2016, the Corporate Debtor submitted an OTS proposal to Respondent No.1 for an amount of Rs.7.50 crore which was approved. The Corporate Debtor further, failed to pay back in terms of the OTS leading to the revocation of the same. Respondent No.1 filed a Section 7 petition for initiation of Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code (“IBC”) for initiation of CIRP of the Corporate Debtor. In the interregnum between the conclusion of the hearing and the pronouncement of the order on 25.09.2023 by the National Company Law Tribunal (“NCLT”), the Corporate Debtor filed an application for recall of the order and to rehear the matter based on additional objections contained in the application. The application was dismissed by NCLT on the ground that it had been filed after the final arguments in the main company petition and the matter was reserved for orders. Aggrieved by the said order, the Appellant filed an appeal before NCLAT. Contentions of Appellant The Appellant argued that when the Section 7 main company petition was by itself incomplete, the application for re-hearing the main company petition on questions of law should have been heard by NCLT rather than be rejected on the ground that the main petition stood reserved for orders. The Appellant argued further that the Appellant had taken a loan from KBL and not from Respondent No.1. Thus, Respondent No.1 did not have the locus to file the Section 7 application against the Appellant. Contentions of Respondents Respondent No.1 opposed the submissions of the Appellant and argued that in any application under Section 7, the key issue is whether there is a debt owed by the Corporate Debtor which is due and payable and if so whether any default has been committed in repayment of the debt. The Respondent pointed out that in this case there is both debt and default and NCLT has rightly held that this is a fit case for admission of Section 7 application. The Respondent further argued that the Corporate Debtor was fully aware of the fact that the Section 7 application was filed by the Respondent No.1 in its capacity as a trustee and the Corporate Debtor was also aware of the assignment of the debt by the Original Financial Creditor. NCLAT Verdict NCLAT rejected the appeal and observed that the Appellant was fully aware of the trustee capacity of Respondent No.1, as well as the assignment of debt by the original Financial Creditor to Respondent No.1. This is evident from the fact that the Appellant chose to send the OTS proposal to Respondent No. 1 instead of the original Financial Creditor. Therefore, the Appellant cannot file a fresh application in the main company petition. “We are of the considered opinion that since in the facts of the present case, a debt has arisen which is due and payable by the Corporate Debtor and a default has occurred, admission of Section 7 application cannot be obfuscated by raising technical pleas and that too after hearing in the main petition stood concluded and the matter was reserved for hearing.” Case Title: Loramitra Rath Vs JM Financial Asset Case No.: Company Appeal (AT)(Insolvency) No. 1359 & 1360 of 2023 Counsel For Appellant: Mr. Saswat K. Acharya, Mr. Dhananjay Bhaskar Ray, Advocates. Counsel For Respondents: Mr. Utsav Mukherjee, Mr. Vikalp Wange, Advocates Click Here To Read/Download Order

NCLAT Delhi: Refusal To Rehear A Matter After Reserving An Order In A Company Petition Does Not Result In A Miscarriage Of Justice

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