2022 (2) TMI 146 - AT - Insolvency and Bankruptcy

Supreme Court Upholds Decision on Insolvency Petition Appeal

The Supreme Court upheld the decision of the Appellate Tribunal, dismissing the appeal against the order admitting the petition under Section 7 of the ... Admissibility of Section 7 petition despite pending challenge to assignment - effect of interim order restraining coercive action on validity of assignment - finality of limitation once affirmed by appellate orders including the Supreme Court - scope for settlement and filing of an application under Section 12A of the CodeAdmissibility of Section 7 petition despite pending challenge to assignment - effect of interim order restraining coercive action on validity of assignment - Whether an assignee could be prevented from filing an application under Section 7 of the Code by a pending writ petition challenging the assignment and the interim order passed by the High Court. - HELD THAT: - The Adjudicating Authority's order quoting the High Court's interim order shows the relief granted was limited to consideration of a settlement proposal and a direction that no coercive action be taken until the next listing. That interim order did not stay or suspend the assignment in favour of the respondent-assignee. Consequently, the existence of the writ petition and the limited interim direction did not render the respondent's filing of a Section 7 application impermissible. The Tribunal found no illegality in admission of the Section 7 application on this basis and rejected the appellant's contention that the pendency of the writ petition precluded the filing of the insolvency petition. [Paras 5, 6]Filing of the Section 7 application by the assignee was not barred by the pendency of the writ petition or by the interim order which only restrained coercive action and did not stay the assignment.Finality of limitation once affirmed by appellate orders including the Supreme Court - Whether the appellant could re-agitate the question of limitation before the Adjudicating Authority after this Tribunal had held the Section 7 application was not time-barred and that view was affirmed by the Supreme Court. - HELD THAT: - This Tribunal had earlier held that the Section 7 application was not barred by limitation. The Supreme Court dismissed the appellant's appeal and while granting liberty to raise permissible objections, did not disturb the Tribunal's conclusion on limitation. The appellate process thereby affirmed the view that the application was not time-barred; the liberty granted could not be read as permission to re-open the settled question of limitation before the Adjudicating Authority. The Adjudicating Authority was not required to re-decide limitation once the appellate conclusion had become final between the parties. [Paras 7, 8]The objection on limitation could not be re-agitated before the Adjudicating Authority; the question of limitation was final between the parties after affirmation by the Supreme Court.Scope for settlement and filing of an application under Section 12A of the Code - Whether the appellant's prior efforts to settle with the bank affected the proceedings and what remedy, if any, remained available. - HELD THAT: - The Court observed that efforts to settle do not preclude the appellant from pursuing settlement subsequently. If a settlement is reached, the appellant may place it before the Adjudicating Authority by making the appropriate application under Section 12A of the Code; the Adjudicating Authority, upon being satisfied, may consider and pass such orders as are permissible under law. This observation is advisory and procedural, leaving any consideration of a concrete settlement application to the Adjudicating Authority. [Paras 9]Settlement remains open to the appellant and can be placed before the Adjudicating Authority by filing an application under Section 12A, which the Authority may consider if satisfied.Final Conclusion: The appeal is without merit and is dismissed; the admission of the Section 7 petition stands, the limitation issue is final as affirmed on appeal, and the appellant remains free to pursue settlement by an appropriate Section 12A application before the Adjudicating Authority. Issues:- Appeal against the order admitting the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.- Challenge regarding the assignment basis of the application.- Objections raised by the Appellant on the question of limitation.- Efforts made by the Appellant for settlement with the Bank.Analysis:The judgment revolves around an appeal filed against the order admitting a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellant challenged the basis of the application, arguing that the assignment in favor of the Respondent was under challenge in a High Court writ petition. However, the High Court's interim order did not stay the assignment, allowing the Respondent to file the application under Section 7. The submission regarding the challenge to the assignment was deemed unsubstantiated.Regarding the objections raised by the Appellant on the question of limitation, it was noted that the Appellate Tribunal had previously allowed the Respondent's application, ruling that it was not time-barred. The Honorable Supreme Court affirmed this decision, dismissing the appeal and upholding the view that the application was not barred by time. The finality of this decision precluded the Appellant from re-agitating the question of limitation before the Adjudicating Authority.Furthermore, the Appellant's efforts to settle the matter with the Bank were acknowledged, with the Tribunal highlighting that the Appellant could still pursue settlement by filing an appropriate application under Section 12A before the Adjudicating Authority. The Tribunal found no merit in the appeal and subsequently dismissed it, affirming the decision to admit the petition under Section 7.