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2024 (1) TMI 531 - SCH - Insolvency and BankruptcyMaintainability of application under Section 7 of IBC - dismissal on the ground that the debt was barred by limitation - HELD THAT - When the order of the NCLT was questioned in appeal, the NCLAT set aside the order of the NCLT as being patently illegal . Once the order of the NCLT was set aside, the order would cease to exist. The observations in regard to whether there was a debt due and payable would also not exist with the setting aside of the order. The order of the NCLAT, properly construed, dealt with the issue as to whether the debt was barred by limitation. A passing reference in the order of the NCLAT to whether the debt was in dispute must be read in the context of the nature of the appeal which arose from an order of the NCLT that the debt was barred by limitation. Hence, it would be inappropriate to read the order of the NCLAT as concluding the issue in regard to whether the application under Section 7 was or was not liable to be admitted. A stray observation in the order of the NCLAT cannot be regarded as a conclusive determination on merits - it was inappropriate for the NCLAT to direct the NCLT to admit the application under Section 7 straightaway without an evaluation of the rival contentions on merits. The application under Section 7 has already been restored to the file of the NCLT. The NCLT shall, after hearing the parties, determine as to whether the application under Section 7 is liable to be admitted - Appeal allowed.
Issues involved: Appeal under Section 62 of the Insolvency and Bankruptcy Code 2016 arising from a National Company Law Appellate Tribunal order, challenge of NCLT order dismissing application under Section 7 on limitation grounds, restoration application before NCLT for initiation of Corporate Insolvency Resolution Process, appeal against NCLT order declining to adjourn proceedings.
Issue 1: NCLT's dismissal of application under Section 7 on limitation grounds The National Company Law Tribunal (NCLT) dismissed the first respondent's application under Section 7 of the Insolvency and Bankruptcy Code 2016 on the basis that the debt was time-barred. However, the NCLT also acknowledged the existence of a debt and default under the IBC. The National Company Law Appellate Tribunal (NCLAT) set aside the NCLT's order, deeming the finding of the debt being barred by limitation as "patently illegal." The NCLAT highlighted the undisputed liability of the Corporate Debtor towards the Financial Creditors and the guarantee by the Respondent. Issue 2: Restoration application before NCLT for initiation of Corporate Insolvency Resolution Process Following the dismissal of the application under Section 7 by the NCLT and subsequent overturning of the decision by the NCLAT, the respondents filed an application seeking restoration of the Section 7 application and the initiation of the Corporate Insolvency Resolution Process. The NCLT allowed the restoration application, leading to a review petition before the Supreme Court challenging the order passed on 4 July 2023. Issue 3: Appeal against NCLT order declining to adjourn proceedings The NCLT declined to adjourn the proceedings despite the pendency of a review petition and the appellant's request for time to file a further affidavit. The NCLAT directed the NCLT to admit the application under Section 7, prompting an appeal before the Supreme Court. The Court, after hearing both parties, set aside the NCLAT's order and directed the NCLT to determine the admissibility of the application under Section 7 after evaluating the merits of the case. In conclusion, the Supreme Court allowed the appeal, emphasizing the need for a thorough evaluation of the merits before admitting the application under Section 7. The Court directed the NCLT to expedite the proceedings and make a determination by 31 January 2024, while clarifying that no opinion on the merits had been expressed. The appellant assured the Court of no asset disposal to prejudice the respondents until the final decision by the NCLT.
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