National Company Law Appellant Tribunal, Chennai: In an appeal filed by Suspended Director of Deccan Charters (P) Ltd., against the order of Adjudicating Authority admitting Corporate Insolvency Resolution Process (CIRP) petition against the appellant company, a 3-member bench comprising of M. Venugopal, Sharad Kumar Sharma, JJ., and Jatindranath Swain (Technical Member), stayed the CIRP against the appellant company till next date of hearing.
Factual Matrix
In the instant matter, the respondent, a Non-Banking Finance Company, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules 2016 (Rules), against the appellant company, seeking initiation of CIRP. The appellant company had disbursed a loan of Rs. 5,00,00,000/- to the petitioner company as per a Loan Agreement dated 31-07-2018. The appellant company allegedly defaulted on loan repayment obligations. The respondent claimed that its liabilities, including loan repayment, were transferred to GMDAPL (GSEC Monarch Deccan Aviation Private Limited) through a Business Transfer Agreement (BTA). The appellant company argued lack of jurisdiction for the NCLT to hear contractual disputes unrelated to insolvency under Section 60(5)(c) of the IBC. The respondent countered that the loan agreement expressly prohibited assignment without written approval as per Clause 7.1 of the Loan Agreement.
NCLT’s Decision
A division bench comprising of Mr. K. Biswal (Judicial Member) and Mr. Manoj Kumar Dubey (Technical Member), admitted the petition, declared a moratorium, and appointed an Interim Resolution Professional and directed the petitioner to deposit funds for issuing public notice and inviting claims. The Adjudicating Authority held that NCLT has jurisdiction under Section 7 of the IBC as the matter concerned debt and default, not contractual disputes. It was observed that the loan agreement’s clause prohibiting assignment without written approval was applicable, rendering the BTA potentially void. The Adjudicating Authority stated that the existence of an arbitration clause did not bar admission of the case under Section 7 of the IBC. The Adjudicating Authority referred to precedents emphasizing that Section 7 does not require the absence of disputes for admission.
NCLAT’s Decision
The NCLAT instructed the Interim Resolution Professional not to proceed further until the next hearing scheduled for 26-04-2024. The NCLAT directed the Financial Creditor to file a Reply/Response/Counter before the Office of the Registry through e-filing within 4 days from date of this order, to be served to the other party before the next hearing. Upon receipt of the Financial Creditor’s Reply/Response/Counter, the appellant may file a Rejoinder, if necessary, before the Office of the Registry through e-filing, with a copy served to the other party before the next hearing. The NCLAT ordered the Office of the Registry to list the matter on 26-04-2024.
[Sanjay Saihgal v. Krone Finstock (P) Ltd., Company Appeal (AT) (CH) (Ins) No.123/2024, order dated 11-04-2024]
Advocates who appeared in this case :
Mr. P.H. Arvindh Pandian, Sr. Advocate, Mr. Pawan Jhabakh, Mr. Jerin Asher Sojan, Mr. K.M. Ashif, Counsel for the Appellant
Mr. R. Murari, Sr. Advocate, Counsel for the Respondent 1
Mr. Anshuman, Counsel for the Respondent 2