The Dhar Textile Mills Ltd vs Asset Reconstruction Company (India) ...

The Dhar Textile Mills Ltd. ...Appellant

Versus

Asset Reconstruction Company (India) Ltd. ...Respondent

Present:

For Appellant : Mr. Pratik Tripathi, Company Secretary

For Respondent : Mr. Bishwajit Dubey, Ms. Radhika Dubey and Mr. Aditya Marwah, Advocates

ORDER

07.01.2019 This appeal has been preferred by the 'corporate debtor'

against order dated 19th November, 2018 passed by the Adjudicating Authority

whereby and whereunder the Adjudicating Authority adjourn the matter

granting seven days' time to the 'financial creditor' to submit its clarification or

removal of the defects as pointed out therein.

2. Mr. Pratik Tripathi, Company Secretary appearing on behalf of the

'corporate debtor' submits that the matter is pending for about one year and the

Adjudicating Authority has not passed any order either admitting or rejecting

the application filed under Section 7 of the 'I&B Code'. Ms. Radhika Dubey,

learned counsel appearing on behalf of the 'financial creditor' submits that the

Adjudicating Authority has merely asked for clarification. She has brought to

our notice the order dated 3rd October, 2018 passed by this Appellate Tribunal 2

with regard to the present case in "Asset Reconstruction Company (India) Ltd.

vs. The Dhar Textile Mills Ltd. - Company Appeal (AT)(Insolvency) No. 618

of 2018", which reads as follows:

"The grievance of the Appellant is that in the application

preferred by the Appellant under Section 7 of I&B Code,

on 23rd November, 2017 the matter was heard by the

Adjudicating Authority (National Company Law

Tribunal), Ahmedabad Bench, Ahmedabad and order

was reserved, but even after eleven months of filing, no

order has been passed by the Adjudicating Authority

Ahmedabad Bench.

2. Taking into consideration the facts and

circumstances, while we do not intend to express any

opinion, we direct the Adjudicating Authority (National

Company Law Tribunal), Ahmedabad Bench to pass

appropriate order in the petition filed under Section 7

by the Appellant being C.P.(IB)No.191/7/

NCLT/AHM/2017 on an early date, preferable within

two weeks. The appeal stands disposed of with

aforesaid observations and direction.

3. Let a copy of this order be communicated to

Hon'ble President, NCLT, 6th Floor, ITBP Building,

Block-3, CGO Complex, New Delhi"

Company Appeal (AT) (Insolvency) No. 11 of 2019 3

3. This issue has already been settled by the Hon'ble Supreme Court in

"Innoventive Industries Ltd. v. ICICI Bank, (2018) - 1 SCC 407 (2018) 1 SCC

407] (Civil Appeals Nos. 8337-38 of 2017)" wherein the Hon'ble Supreme Court

has observed :

"28. When it comes to a financial creditor triggering the

process, Section 7 becomes relevant. Under the

Explanation to Section 7(1), a default is in respect of

a financial debt owed to any financial creditor of the

corporate debtor -- it need not be a debt owed to the

applicant financial creditor. Under Section 7(2), an

application is to be made under sub-section (1) in

such form and manner as is prescribed, which takes

us to the Insolvency and Bankruptcy (Application to

Adjudicating Authority) Rules, 2016. Under Rule 4,

the application is made by a financial creditor in

Form 1 accompanied by documents and records

required therein. Form 1 is a detailed form in 5 parts,

which requires particulars of the applicant in Part I,

particulars of the corporate debtor in Part II,

particulars of the proposed interim resolution

professional in Part III, particulars of the financial

debt in Part IV and documents, records and

evidence of default in Part V. Under Rule 4(3), the

applicant is to dispatch a copy of the application

filed with the adjudicating authority by registered

Company Appeal (AT) (Insolvency) No. 11 of 2019 4

post or speed post to the registered office of the

corporate debtor. The speed, within which the

adjudicating authority is to ascertain the

existence of a default from the records of the

information utility or on the basis of evidence

furnished by the financial creditor, is

important. This it must do within 14 days of

the receipt of the application. It is at the stage

of Section 7(5), where the adjudicating

authority is to be satisfied that a default has

occurred, that the corporate debtor is entitled

to point out that a default has not occurred in

the sense that the "debt", which may also

include a disputed claim, is not due. A debt

may not be due if it is not payable in law or in

fact. The moment the adjudicating authority is

satisfied that a default has occurred, the

application must be admitted unless it is

incomplete, in which case it may give notice to

the applicant to rectify the defect within 7

days of receipt of a notice from the

adjudicating authority. Under sub-section (7), the

adjudicating authority shall then communicate the

order passed to the financial creditor and corporate

Company Appeal (AT) (Insolvency) No. 11 of 2019 5

debtor within 7 days of admission or rejection of

such application, as the case may be."

4. From the decision aforesaid, it is clear that the Adjudicating Authority is

not required to decide mis-match of 'debt' occurred in one place or the other

place and the mis-match of 'debt' cannot be a ground to reject the claim if the

amount is due more than Rupees One Lakh and there is a 'default'. Under

Section 7(5), the Adjudicating Authority is to be satisfied that a 'default' has

been occurred. If the 'debt' is more than Rupees One lakh, then the

Adjudicating Authority is required to admit the application, except where there

is defect, which can be removed within seven days from the date of receipt of

the notice from the Adjudicating Authority. The 'corporate debtor' may only

take plea that the 'default' has not occurred in the sense that 'debt' which

has also includes 'disputed claim' is not due, a 'debt' may not be due, if it is

not payable in law or in fact. The issue having already settled and decided by

the Hon'ble Supreme Court in 'Innoventive Industries Ltd. (Supra) as back as

in the year 2017, we do not understand as to why the Adjudicating Authority

is adjourning the case on the one or other grounds and the matter is pending

for admission since 2017. The Insolvency Code provides specific time frame to

complete the process and the Adjudicating Authority should take it seriously

and cannot adjourn the matter on the one or the other ground, which we have

already noticed in the order passed on 3rd October, 2018. In spite of the same,

there is no reason explained as to why the matter is adjourned.

5. From the plain reading of the impugned order, we find that the

Adjudicating Authority has not pointed out any defect in the sense the record

Company Appeal (AT) (Insolvency) No. 11 of 2019 6

is not complete. For the reasons aforesaid, we direct the Adjudicating Authority

to pass appropriate order under Section 7 of the I&B Code on merit after

hearing the appeal on the next date without adjourning the matter, failing

which this Appellate Tribunal will decide whether the application filed under

Section 7 of the I&B Code is to be admitted or not.

5. The appeal stands disposed of with the aforesaid observations and

directions.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice Bansi Lal Bhat ] Member (Judicial)

/ns/sk/

Company Appeal (AT) (Insolvency) No. 11 of 2019