2020 (9) TMI 843 - AT - Insolvency and Bankruptcy

Appellate Tribunal Upholds Section 7 Application Despite Winding-Up Petition

Action Barter Private Limited Versus SREI Equipment Finance Limited, Shree Ram Urban Infrastructure Ltd. (in Prov. Liqn.),

The Appellate Tribunal dismissed the Company Appeal challenging the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code. ... Winding up of Corporate Debtor - application under Section 7 of the I&B Code - HELD THAT:- Rule 11 is merely declaratory in the sense that this Tribunal is armed with inherent powers to pass orders or give directions necessa ry for advancing the cause of justice or prevent abuse of the Appellate Tribunal's process. Even in absence of Rule 11 this Appellate Tribunal, being essentially a judicial forum determining and deciding rights of parties concerned and granting appropriate relief, has no limitations in exercise of its powers to meet ends of justice or prevent abuse of its process. Such Powers being inherent in the constitution of the Appellate Tribunal, Rule 11 can merely be said to be declaring the same to avoid ambiguit y and confusion. Having said that, the Rule cannot be invoked to revisit the findings retuned as regards the assertion of facts and pleas raised in the appeal and it is not open to reexamine the findings on questions of fact, how-so-ever erroneous they may be. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error. An application under Section 7 of the I&B Code admitted by the Adjudicating Authority being an independent proceeding has to be decided in t erms of the provisions of I&B Code and the insolvency resolution process has to proceed unhindered and notwithstanding pendency of any other proceedings. The bar only operates against the Corporate Debtor against whom a liquidation order has been made and not to a Financial Creditor or an Operational Creditor. The effect of this would clearly be that in terms of law laid down in 'Forech India Ltd.' application filed by 'SREI Equipment Finance Ltd. (Financial Creditor) under Section 7 of I&B Code would be maintainable. Therefore, there should be no difficulty in arriving at the conclusion that in para 5 of the judgment of this Appellate Tribunal an error has crept in as regards maintainability of application under Section 7 of the I&B Code filed by 'SREI Equipment Finance Ltd.' (Financial Creditor). The error has to be rectified. Appeal dismissed. Issues:1. Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Interpretation of the judgment in 'Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd.'3. Rectification/clarification/modification sought by different applicants.4. Scope and limitations of Rule 11 of the National Company Law Appellate Tribunal Rules, 2016.Issue 1: Maintainability of the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016The judgment pertains to the dismissal of the Company Appeal against the order admitting the application under Section 7 of the Insolvency and Bankruptcy Code. The Appellate Tribunal held that the application filed by the Financial Creditor was not maintainable based on the decision in 'Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd.' The Appellant argued that the winding-up petition against the Corporate Debtor was already admitted by the Bombay High Court, questioning the maintainability of the Section 7 application. The Tribunal clarified that the application was maintainable, and the appeal was dismissed, directing the Appellant to approach the Bombay High Court for further proceedings.Issue 2: Interpretation of the judgment in 'Forech India Ltd. vs. Edelweiss Assets Reconstruction Co. Ltd.'The judgment extensively refers to the 'Forech India Ltd.' case, which dealt with the scope of Section 11 of the I&B Code. The Appellate Tribunal emphasized that until a liquidation order is made, an insolvency petition can be filed. The Tribunal clarified that the Financial Creditor's application under Section 7 was an independent proceeding to be decided under the I&B Code provisions. The Tribunal highlighted that the bar on filing petitions only applies after a liquidation order is made against the Corporate Debtor, not against the Financial Creditor or Operational Creditor.Issue 3: Rectification/clarification/modification sought by different applicantsMultiple applications were filed seeking rectification, clarification, or modification of the judgment. These applications included requests to rectify errors regarding the maintainability of the petition, continuation of the Corporate Insolvency Resolution Process, and the status of the Official Liquidator. The Tribunal addressed each application individually, rectifying errors where necessary and providing clarifications on the interpretation of the judgment.Issue 4: Scope and limitations of Rule 11 of the National Company Law Appellate Tribunal Rules, 2016The Tribunal discussed the inherent powers vested in it under Rule 11 to make orders necessary for justice and to prevent abuse of the process. It clarified that Rule 11 does not allow revisiting findings on merit or revising judgments. The Tribunal emphasized that inherent powers are essential for meeting the ends of justice and preventing abuse of the process, but they do not extend to reexamining findings on factual questions. The judgment highlighted the limited scope of Rule 11 and its application in ensuring justice without revisiting factual determinations.In conclusion, the judgment addressed the maintainability of the petition under the I&B Code, the interpretation of relevant legal precedents, rectification requests from various parties, and the scope of inherent powers under Rule 11. The Tribunal clarified the errors, provided necessary modifications, and emphasized the limitations of its powers in revisiting factual findings.