NCLAT rejects appeal against CIRP initiation after corporate debtor fails to challenge debt assignment during hearing

NCLAT dismissed the appeal challenging initiation of CIRP. The appellant sought recall of reserved order claiming new facts regarding debt assignment, which was rejected. NCLAT held that the corporate debtor was fully aware of debt assignment to respondent, evidenced by sending OTS proposal to assignee rather than original creditor. The assignment issue was never raised during main petition hearing. Court emphasized that stages between reserving and pronouncing judgment are continuous, making subsequent pleadings procedurally improper. Since debt remained unpaid with established default, and corporate debtor had acknowledged the assignment, technical pleas raised post-hearing could not prevent CIRP admission.

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Issues Involved:
1. Dismissal of IA No. 253/2023 by the Adjudicating Authority.
2. Admission of Section 7 application and initiation of Corporate Insolvency Resolution Process (CIRP).
3. Validity and acknowledgment of debt and the issue of limitation.

Summary:

Issue 1: Dismissal of IA No. 253/2023 by the Adjudicating Authority:
The appeal challenges the dismissal of IA No. 253/2023, which sought to recall the order reserved on 07.08.2023. The Adjudicating Authority dismissed the IA on the ground that it was filed after the final arguments were heard and the matter reserved for orders. The Tribunal upheld this decision, citing procedural propriety and established legal principles that do not entertain applications after a matter is reserved for orders. The Tribunal referenced the judgments of the Hon'ble Supreme Court in *Arjun Singh v. Mohindra Kumar* and the Hon'ble Rajasthan High Court in *Rajasthan Financial Corporation v. Pukhraj Jain* to support this position.

Issue 2: Admission of Section 7 application and initiation of CIRP:
The Section 7 application was filed by JM Financial Asset Reconstruction Company Limited, the Respondent No.1, for initiating CIRP against the Corporate Debtor, Maa Durga Commotrade Private Limited. The Adjudicating Authority admitted the application, establishing that there was a debt owed by the Corporate Debtor and a default in repayment. The Tribunal affirmed this decision, noting that the debt and default were evident and the Adjudicating Authority correctly admitted the Section 7 application.

Issue 3: Validity and acknowledgment of debt and the issue of limitation:
The Appellant argued that the Section 7 application was barred by limitation, as the date of default was 06.09.2013 and the OTS proposal was made on 21.10.2016, beyond the three-year limitation period. The Tribunal found that the debt was acknowledged by the Appellant in their reply to the SARFAESI notice and in the balance sheets for the years 2014-15, 2017-18, and 2018-19. The Tribunal concluded that the acknowledgment of debt was clear and unambiguous, and the Section 7 application was not barred by limitation. The Tribunal also dismissed the Appellant's arguments regarding the validity of the Assignment Deed and the non-attachment of the Trust Deed, noting that these issues were raised belatedly and lacked merit.

Conclusion:
The Tribunal upheld the Adjudicating Authority's dismissal of IA No. 253/2023 and the admission of the Section 7 application, affirming that there were no convincing reasons to interfere with the impugned orders. The appeals were dismissed with no costs.

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