NCLAT Delhi Upholds Rejection Of ‘Discovery & Inspection’ Application Filed By Corporate Debtor In Section 9 Petition

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Judicial Member) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Baba Baidnath Spinners Pvt. Ltd. v Textile Solutions, has upheld the rejection of an application for discovery and inspection of documents field by the Corporate Debtor in a petition under Section 9 of IBC. The Bench held that the worth of document filed by the Operational Creditor is to be considered at the time of considering the Section 9 petition. Further, the embargo to file relevant documents in support of its case is on the Operational Creditor alone. Background Facts Textile Solutions (“Operational Creditor”) filed a petition under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Baba Baidnath Spinners Pvt. Ltd. (“Corporate Debtor”). During the pendency of the petition, the Corporate Debtor filed an application for discovery and inspection of documents before the Adjudicating Authority. The Corporate Debtor prayed to bring on record additional documents which are to be filed by the Operational Creditor and further sought direction to provide discovery and inspection of all those documents. The Operational Creditor opposed the application while stating that documents it would like to rely on have already been filed. Further, if any documents are not filed then the consequences will be faced by the Operational Creditor alone. Being satisfied by the Operational Creditor’s stand, the Adjudicating Authority dismissed the application. The Corporate Debtor filed an appeal before NCLAT against the Adjudicating Authority’s order. NCLAT VERDICT The Bench observed that the worth of document filed by the Operational Creditor is to be considered at the time of considering the Section 9 petition. Further, the embargo to file relevant documents in support of its case is on the Operational Creditor and not the Corporate Debtor. The Bench upheld the order of Adjudicating Authority to dismiss the application for discovery and inspection. “We are of the view that what is worth of the document has to be considered at the time of considering Section 9 Application and it is for the Operational Creditor to file relevant documents in support of his case and the Adjudicating Authority did not commit any error in rejecting the Application filed by the Appellant for discovery and inspection. Section 9 Application are application which has to be decided in timely manner and exercise of discretion by the Adjudicating Authority cannot be faulted.” The appeal has been dismissed. Case Title: Baba Baidnath Spinners Pvt. Ltd. v Textile Solutions Case No.: Company Appeal (AT) (Insolvency) No. 426 of 2023 Counsel For Appellant: Advocate Manu Aggarwal, Advocate Shubham Budhiraja. Counsel For Respondents: Advocate Tishampati Sen, Advocate Anurag Anand. Click Here To Read/Download Order

NCLAT Delhi Upholds Rejection Of ‘Discovery & Inspection’ Application Filed By Corporate Debtor In Section 9 Petition

Pallavi Mishra

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