2023 (1) TMI 511 - AT - Insolvency and Bankruptcy

Seeking to withdraw the Section 7 application - default in execution of the Deed of Assignment between the Respondent and one Abhinandan Holdings Pvt. Ltd. (intending assignee) - HELD THAT - The settlement has failed since March 2020 and the Agreement is also only till March 2020. Hence, no case for setting aside the order dated 02.02.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) in RST. A. No. 842/KB/2020 in CP (IB) No. 04/KB/2019 is made out as the Section 7 Application bearing CP (IB) No. 04/KB/2019 filed by the Respondent No. 1 was directed to be listed for hearing on 16.03.2021 by the Adjudicating Authority, therefore, there is no ground for interference. The instant Appeal is disposed off with request to the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) to hear all the parties i.e. Appellant, Respondent No. 1 Respondent No. 2 and after hearing the parties, the Adjudicating Authority may pass appropriate orders in CP (IB) No. 04/KB/2019 in accordance with law expeditiously. Keeping in view that the matter is pending before the Adjudicating Authority since 2019, the parties are at liberty to raise all the relevant issues both in fact and in law before the Adjudicating Authority.

Issues Involved:
1. Restoration of the main petition CP (IB) No. 04/KB/2019.
2. Non-joinder of necessary parties.
3. Alleged suppression of material facts by the Respondent.
4. Prima facie satisfaction of default by the assignee.
5. Impact of injunction order by the Civil Court on the restoration application.
6. Agreement terms and obligations under the Agreement dated 15th January 2020.
7. Applicability of Section 238 of the IBC.
8. Willingness of the assignee to settle the balance debt.
9. Jurisdictional issues and inherent powers of the Adjudicating Authority.

Detailed Analysis:

1. Restoration of the Main Petition CP (IB) No. 04/KB/2019:
The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the order dated 02.02.2021 by the National Company Law Tribunal (NCLT), Kolkata Bench, which allowed the restoration of the main petition CP (IB) No. 04/KB/2019. The original Section 7 application was withdrawn with liberty to revive in case of default in the execution of the Deed of Assignment.

2. Non-joinder of Necessary Parties:
The appellant argued that Abhinandan Holdings Pvt. Ltd. (AHPL) was a necessary party but was not included in the proceedings, which violated principles of natural justice. The appellant contended that the third-party rights would be affected without AHPL being heard.

3. Alleged Suppression of Material Facts by the Respondent:
The appellant claimed that the respondent suppressed material facts and did not disclose the true and correct facts, thus polluting the stream of justice. The appellant cited several Supreme Court judgments to support the argument that a party who does not disclose all material facts has no right to be heard on the merits.

4. Prima Facie Satisfaction of Default by the Assignee:
The appellant argued that the Adjudicating Authority passed the impugned order based on prima facie satisfaction of default by the assignee, without considering that the rejection letter dated 2nd March 2020 was under challenge in a Civil Suit. The appellant contended that the restoration application was non-est and could not have been entertained.

5. Impact of Injunction Order by the Civil Court on the Restoration Application:
The appellant highlighted that the Civil Court had passed an order of injunction restraining the defendants from giving effect to the revocation letter dated 2nd March 2020. The appellant argued that the restoration of the insolvency proceedings was unwarranted in light of the injunction order.

6. Agreement Terms and Obligations Under the Agreement Dated 15th January 2020:
The appellant emphasized that under Clause 7.4.5 of the Agreement dated 15th January 2020, the respondent agreed to keep in abeyance all legal proceedings upon receipt of 25% of the consideration. The appellant argued that the respondent violated this clause by filing the revival application.

7. Applicability of Section 238 of the IBC:
The appellant contended that the embargo under Section 238 of the IBC could not have been made applicable due to the ongoing civil suit and the injunction order. The appellant argued that the restoration application was premature and liable to be set aside.

8. Willingness of the Assignee to Settle the Balance Debt:
The appellant and AHPL expressed willingness to settle the balance debt of Rs. 18.51 crores within 60 days. The appellant requested that the settlement be allowed, invoking inherent powers under Rule 11 of the NCLAT Rules, 2016.

9. Jurisdictional Issues and Inherent Powers of the Adjudicating Authority:
The respondent argued that the Adjudicating Authority has the inherent power under Rule 11 of the NCLT Rules, 2016, to revive applications if the settlement fails. The respondent cited several judgments to support this position. The respondent also contended that the Civil Court/Commercial Court had no jurisdiction to entertain the suits when the restoration application was pending before the Adjudicating Authority.

Conclusion:
The Appellate Tribunal concluded that no case for setting aside the order dated 02.02.2021 was made out. The Tribunal disposed of the appeal with a request to the Adjudicating Authority to hear all parties and pass appropriate orders in CP (IB) No. 04/KB/2019 expeditiously. The Tribunal did not express any view on the merits of the matter and directed the Adjudicating Authority to hear the matter afresh, uninfluenced by any observations made in the judgment. The Registry was directed to upload the judgment on the website and send a copy to the Adjudicating Authority.

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