2023 (4) TMI 1027 - AT - Insolvency and Bankruptcy

Tribunal revokes Section 7 order, grants Corporate Debtor time to respond, case to be reheard

Sachin Gosar Versus Piramal Capital & Housing Finance Ltd., Navkar Groups Private Limited, Mr. Ravindra Chaturvedi The Resolution Professional of the Corporate Debtor

The Tribunal set aside the order admitting the Section 7 application and granted the Corporate Debtor three working days to file a reply. The case was ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of default - time limitation to ascertain the existence of default - whether Appellant has made out any cause to grant one more opportunity to file its reply before the Adjudicating Authority? - HELD THAT:- The Corporate Debtor does not deny that it had appeared with his counsel on 02.12.2022 before the Adjudicating Authority and prayed for time for filing reply. Appellant has also stated in Additional Affidavit dated 06.04.2023 filed in this Tribunal that counsel was given instructions to file reply, however, same could not be prepared and filed on 03.01.2023. This Tribunal in Ashok Tiwari’s Case [[2022 (7) TMI 1371 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI.]] has laid down that the Adjudicating Authority is fully empowered to proceed and pass appropriate order if it is satisfied that the Corporate Debtor is delaying the proceeding. The loan was taken by the Corporate Debtor from DHFL against which insolvency resolution process was initiated and under the Resolution Plan the DHFL was taken over by the Piramal Capital & Housing Finance Limited. In CIRP proceedings of DHFL, an I.A. was filed by the Corporate Debtor bringing subsequent facts after disbursement of Rs.10 Crores by DHFL. The Corporate Debtor’s case and grievances regarding non-disbursement of balance amount and its adverse effect on the Corporate Debtor was highlighted in the application filed in the CIRP process of DHFL, which application is also part of the record in the present case. Admittedly, order passed by the Adjudicating Authority is exparte and Appellant could not get an opportunity to place its say and the facts and subsequent event after disbursement of loan of Rs.10 Crores could not be brought before the Adjudicating Authority for consideration. The ends of justice be served in allowing three days’ time to the Corporate Debtor to file reply before the Adjudicating Authority subject to payment of cost of Rs.1,00,000/- to the Financial Creditor - application disposed off. Issues Involved:1. Admission of Section 7 application.2. Ex-parte proceedings due to non-filing of reply by the Corporate Debtor.3. Request for additional time to file a reply.4. Adjudicating Authority's jurisdiction and procedural fairness.Summary:1. Admission of Section 7 application:The appeal was filed by a suspended Director of the Corporate Debtor against the order dated 02.03.2023 by the Adjudicating Authority (NCLT), Mumbai Bench, admitting Section 7 application filed by Piramal Capital & Housing Finance Limited. The Corporate Debtor had received a loan of Rs.20 Crores, of which Rs.10 Crores were disbursed. Insolvency proceedings were initiated against Dewan Housing Finance Corporation Limited (DHFL), which was later taken over by Piramal Capital.2. Ex-parte proceedings due to non-filing of reply by the Corporate Debtor:Piramal Capital filed an application on 28.09.2022 to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, claiming Rs.16,37,29,496/-. Notices were issued by the Adjudicating Authority on 01.11.2022, and on 02.12.2022, the Corporate Debtor appeared and sought time to file a reply. However, on 03.01.2023, none appeared on behalf of the Corporate Debtor, and the Adjudicating Authority proceeded ex-parte and reserved the order, which was pronounced on 02.03.2023.3. Request for additional time to file a reply:The Appellant contended that the non-filing of the reply was not intentional and requested three days to file it, arguing that the Adjudicating Authority should have provided another opportunity. The Respondent argued that sufficient time was given, and the Appellant failed to utilize it, justifying the ex-parte proceedings.4. Adjudicating Authority's jurisdiction and procedural fairness:The Tribunal considered whether the Adjudicating Authority acted within its jurisdiction and adhered to principles of natural justice. The Tribunal noted that the Adjudicating Authority had the jurisdiction to proceed ex-parte when the Corporate Debtor failed to appear on the given date. However, considering the facts, the Tribunal found that the ends of justice would be served by allowing the Corporate Debtor three days to file a reply, subject to a cost of Rs.1,00,000/- to the Financial Creditor.Conclusion:The Tribunal set aside the order dated 02.03.2023 and granted three working days for the Corporate Debtor to file a reply before the Adjudicating Authority, reviving Company Petition CP (IB) No. 1136(MB)2022 to be heard afresh. The Adjudicating Authority was directed to dispose of the application within three months.