Proceedings Under Section 13 Of Companies Act, 2013 Can’t Be Questioned In Proceedings Under Section 7 Of IBC: NCLAT Delhi

The Bench further ruled that relevancy of a document is to be examined by the Adjudicating Authority after taking the concerned document on record and hearing the contentions of the parties.

Background Facts

Mr. Ishan Singh (“Financial Creditor/Appellant”) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Spaze Towers Pvt. Ltd. (“Corporate Debtor”).

The Corporate Debtor had filed an application under Section 13(4) of the Companies Act, 2013 read with Rule 30 of Company (Incorporation) Rules, 2014 before Regional Director, Ministry of Corporate Affairs, for shifting its registered office from NCT of Delhi to State of Haryana.

Section 13(4) of the Companies Act, 2013 provides that changes in Memorandum of a company relating to the place of the registered office from one State to another shall not have any effect unless it is approved by the Central Government.

The Financial Creditor filed an application in the Section 7 petition, praying to take on record application filed by the Corporate Debtor under Section 13(4) of the Companies Act, 2013. The NCLT dismissed the application. Consequently, the Financial Creditor filed an appeal before the NCLAT.

The Financial Creditor argued that under Section 7 of IBC, orders passed in the proceedings under Section 13 of the Companies Act, 2013 cannot be questioned. However, the documents may be relevant and has to be looked into by the Adjudicating Authority (NCLT).

The Corporate Debtor contended that under Section 7 of IBC only debt, default and territorial jurisdiction of the Adjudicating Authority has to be looked into and the Section 13(4) application is irrelevant.

NCLAT Verdict

The Bench held that orders passed in the proceedings under Section 13 of the Companies Act, 2013 cannot be questioned in proceedings under Section 7 of IBC. However, the relevancy of documents to the Section 7 proceedings is to be determined by the Adjudicating Authority.

“We accept the submission of the Appellant that in proceeding under Section 7 orders passed in the proceedings under Section 13 of the Companies Act, 2013 cannot be questioned. Whether the documents have any relevance or not has to be considered by the Adjudicating Authority after the document is seen. The Respondent has full liberty to raise objection with regard to relevance of the document and to support its submission that it does not improve the case of the Appellant in any manner.”

It was observed that the Adjudicating Authority ought to have taken the application on record and after hearing the parties could have examined the relevance of the document.

“We, thus, are of the view that the Adjudicating Authority ought to have taken the document on record and thereafter examine the relevance of the document, if any, after hearing the parties. We are satisfied that the Adjudicating Authority erred in rejecting the application filed by the Appellant to take on record documents which was a document filed by the Corporate Debtor itself.”

The Bench has directed that the Financial Creditor’s application be allowed and the document be taken on record.

Case title: Ishan Singh v Spaze Towers Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No.226 of 2023

Counsel For Appellant: Mr. Arjun Syal, Mr. Shreyan Das and Mr. Rohit Kumar, Advocates.

Counsel For Respondent: Mr. Sumesh Dhawan, Ms. Vatsala Kak and Mr. Yash Srivastava, Advocates.

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