2023 (5) TMI 140 - AT - Insolvency and Bankruptcy

Initiation of CIRP - NCLT admitted the application - Non-performing assets - Financial Creditors - despite valid service of notice on corporate debtor, the corporate debtor preferred not to appear before the NCLT - HELD THAT - The fact remains that the appellant despite service of notice preferred not to participate before the NCLT and as such the order impugned was passed ex-parte. It is also reflected from the material on record that on the date of filing of the application under Section 7 there was total debt of an aggregate amount of Rs. 15,81,63,867/-. The loan was sanctioned to the appellant since the month of August, 2015 and said facility continued up to 31.03.2018. However, since the account of the appellant was irregular in the month of May 2019, the account was declared NPA and within the prescribed period of limitation the application under Section 7 of the Code was filed - The financial creditor in view of none clearance of the debt amount was constrained to file application under Section 7 of the Code in which notice was issued to the Corporate Debtor. However, despite valid service of notice, the appellant preferred not to participate in the proceeding before the NCLT. In such view of the matter the NCLT was left with no option but to pass order on the basis of materials available on record. Before the NCLT, the debt was not disputed and the application was filed within the period of limitation and as such the Ld. NCLT has rightly passed the order for initiation of the CIRP - There are no apparent error in the impugned order warranting interference, however since the appellant is making submission that they are still ready to settle the dispute, liberty can be granted to the appellant to approach the financial creditor for settling the dispute. The appeal stands disposed of.

Summary

Issues involved:
The judgment involves an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 against an order admitting an application for Corporate Insolvency Resolution Process (CIRP) by a Financial Creditor due to default in payment of a significant financial debt.

Details of the Judgment:

1. The appellant, a Suspended Director of the corporate debtor, failed to clear a financial debt of Rs. 15,81,63,867, leading to the initiation of CIRP by the Financial Creditor. Despite valid notice, the corporate debtor did not participate in the proceedings before the NCLT, resulting in an ex-parte order initiating CIRP.

2. The appellant argued that a substantial amount had been paid in a proceeding before the Debt Recovery Tribunal, but these details were not reflected in the impugned order. The appellant also claimed to have taken steps to regularize the loan account with the financial creditor.

3. The appellant presented evidence to show efforts made to settle the debt and requested the court to issue a notice to the Respondent for resolving the dispute. The appellant highlighted that a portion of the financial debt had been paid and sought intervention for settling the matter.

4. Despite the absence of the corporate debtor in the proceedings, the NCLT admitted the application for CIRP based on the outstanding financial debt and the lack of participation from the appellant. The NCLT's decision was upheld, as the debt was not disputed, and the application was filed within the limitation period.

5. The Appellate Tribunal found no apparent error in the impugned order but granted liberty to the appellant to approach the financial creditor for settling the dispute. It was suggested that if the appellant proposes a reasonable settlement to Karnataka Bank, the financial creditor may consider resolving the matter in accordance with the law.

6. The appeal was disposed of with the above observations, emphasizing the importance of potential settlement discussions between the appellant and the financial creditor to bring the dispute to a resolution.