Insolvency & BankruptcyLegal UpdatesNCLATTribunal & AppellateUncategorized

NCLAT states that NCLT does not have jurisdiction to reject the petition u/s 7 of I&B Code, allows SBI appeal

State Bank of India vs. Rohit Ferro Tech Limited

NCLAT allows the appeal filed by the State Bank of India against the judgement of the Adjudicating Authority which dismissed the application filed by Bank for initiating CIRP against the Corporate Debtor. Further NCLAT states that a case for initiation of CIRP of the Corporate Debtor is made on account of the default committed by  the Corporate Debtor and default in payment.

In the present matter, The State Bank of India – Appellant filed application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( ‘I&B Code’) for initiation of ‘Corporate Insolvency Resolution Process’ against M/s Rohit Ferro Tech Limited (‘Corporate Debtor’).  The Adjudicating Authority noted that there is debt payable by ‘Corporate Debtor’ and there is a default, but dismissed the application under Section 7 of the I&B code on the ground that the ‘Circular’ issued by the Reserve Bank of India dated 12th February, 2018 to file ‘Corporate Insolvency Resolution Process’ has been declared to be ultra vires and illegal by Hon’ble Supreme Court in Dharani Sugars and Chemicals Ltd. vs. Union of India and Ors. [Transfer Case (Civil) 66 of 2018]

The Adjudicating Authority has accepted that there is no dispute that debt is payable by the ‘Corporate Debtor’ and the ‘Corporate Debtor’ has defaulted. Appellant submits that the application under Section 7 was not filed pursuant to Reserve Bank of India ‘Circular’ dated 12th February, 2018 and the said application was filed much before the deadline of 180 days as prescribed under the ‘Circular’ which prescribes a revised framework for resolution of stressed assets .

NCLAT finds that the application under Section 7 of the I&B Code was not filed by the State Bank of India pursuant to ‘Circular’ dated 12th February, 2018 issued by the Reserve Bank of India. NCLAT observes that the ‘Corporate Debtor’ has not made any request for ‘Restructuring’ of its loan as per the guidelines of the Reserve Bank of India ‘Circular’. NCLAT further observes that the application under Section 7 for ‘Resolution’ was filed as the ‘Restructuring’ was not permissible. NCLAT observes that the application has been filed by an authorized Officer of the State Bank of India and thus rejects the objection of the ‘Corporate Debtor’ that application was not filed by the Authorised person.

NCLAT places reliance on the decision of SC in “Innoventive Industries Ltd. Vs. ICICI Bank and Anr. – (2018) 1 SCC 407” and observes that there is a debt payable by the ‘Corporate Debtor’ and has committed default and holds that the Appellant has made out a case for initiation of ‘Corporate Insolvency Resolution Process’ against the ‘Corporate Debtor’.  

NCLAT holds that, “Petition under Section 7 of the I&B Code is to be considered by the Adjudicating Authority on its own merits taking into consideration the records and in absence of any evidence to show that the State Bank of India filed the application only because of the ‘Circular’ issued by Reserve Bank of India, it was not open to the Adjudicating Authority to reject the application. 

NCLAT thus sets-aside the impugned order dated 28th June, 2019 and remits the case to the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata with direction to admit the application under Section 7 after notice to the ‘Corporate Debtor’.

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