NCLAT New Delhi: Jurisdiction Of NCLT Under IBC Is Summary In Nature, Not Extensive As A Civil Court To Enquire Into Disputes

The National Company Law Appellate Tribunal (‘NCLAT’), Principal Bench, New Delhi comprising of Mr. Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) dismissed an appeal filed by Vistra ITCL (India) Ltd. (Respondent). It held that the scope and jurisdiction of National Company Law Tribunal (‘NCLT’) under the Insolvency and Bankruptcy Code, 2016 (‘IBC’) being summary in nature is distinctly not as extensive as that of a civil court to enquire into disputes arising out of MoUs and related specific performance. Background Facts: The Appeal was filed against the NCLT Mumbai’s Order dated 19.05.2023. NCLT Mumbai had admitted the Corporate Insolvency Resolution Process (‘CIRP’) application under Section 7 of the IBC filed by the Respondent against Evirant Developers Pvt. Ltd. (‘Corporate Debtor’). The Appeal was filed by Sanjay Pandurang Kalate (‘Appellant’) who is the Suspended Director of the Corporate Debtor. NCLAT Verdict: The NCLAT Principal Bench held that it cannot allow the Appellant's attempt to take undue benefit of the law by seeking the invocation of Section 65 of the IBC. Allowing such unscrupulous litigation would logically entail derailing the CIRP and is against the twin objectives of the IBC of maximization of the value of assets and time-bound insolvency resolution. It observed that CIRP may be triggered by the Financial Creditor when there is a default on a debt i.e. due or payable, in law and in fact, in full or part thereof, given that the defaulted amount is above the threshold limit. Further, it is well accepted that debt means the liability in respect of a claim and a claim means a right to payment even if it is disputed. Moreover, it is settled that the degree of proof and evidence is to be unimpeachable in nature and beyond a reasonable doubt to prove any transaction as collusive and fraudulent. Presently, the Corporate Debtor has prayed for revival as it was seriously endeavoring to settle the matter by getting in some investors. This testifies to its admission of being financially incapacitated to repay the outstanding debt on its own steam and that it was trying to mobilize resources to liquidate its debt. Thus, the NCLT Mumbai’s decision in admitting the CIRP application is correct. Further, NCLT Mumbai correctly observed that admitting the CIRP application without the Board’s approval would suffer from impropriety and be dismissed as frivolous and vexatious considering the seriousness of the matter where an imputation of fraud is being made by the Appellant on behalf of the Corporate Debtor against the Respondents. In conclusion, NCLAT observed that internal disputes amongst the Respondents cannot be a cogent and reasonable ground for denying the Financial Creditor their right to claim payment towards the debt owed to them by the Corporate Debtor. Case Title: Sanjay Pandurang Kalate vs. Vistra ITCL (India) Ltd. Case No.: Company Appeal (AT)(Insolvency) No. 742 of 2023 Counsel for Appellant: Mr. Abhinav Vashisht, Sr. Advocate with Mr. Kushal Bansal, Ms. Nidhi Yadav, and Ms. Sonal Sarda, Advocates. Counsel for Respondents: Mr. Arvind Nayyar, Sr. Advocate with Mr. Mohd. Shahan Ulla, Mr. Akshay Joshi, Mr. Shubham Pandey, Advocates for R-1 Mr. Dhaval Deshpande and Mr. Amir Arsiwala, Advocates for R-5. Click Here To Read/Download Order

NCLAT New Delhi: Jurisdiction Of NCLT Under IBC Is Summary In Nature, Not Extensive As A Civil Court To Enquire Into Disputes

Sachika Vij

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