Tribunal Confirms Authority's Discretion in Handling Corporate Debtor's Debt Repayment Proposal to Avoid Section 7 Admission.

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, addressed the Corporate Debtor's request for clarification on a prior order concerning the timeframe for paying a defaulted amount to a Financial Creditor. The Tribunal confirmed that the Adjudicating Authority has the discretion to consider the Corporate Debtor's proposal to fully repay the debt to an Operational Creditor. If the debt is fully paid, the necessity to admit the Section 7 application may be negated. The Tribunal upheld the original directions, allowing flexibility in handling the debt repayment while disposing of the application.

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Issues involved:
The issues involved in the judgment are the clarification of a previous order regarding the time period for a Corporate Debtor to tender the defaulted amount to a Financial Creditor, and the authority of the Adjudicating Authority to consider the Corporate Debtor's offer to liquidate the entire debt to an Operational Creditor.

Issue 1: Clarification of Time Period for Defaulted Amount

The Corporate Debtor filed an application seeking clarification of a previous judgment to extend the time period of 30 days mentioned in the order dated 11.09.2023 until the decision of the present application. The Corporate Debtor prayed for the order to be clarified so that it does not prevent them from tendering the entire defaulted amount to the Financial Creditor or hinder the Adjudicating Authority from passing appropriate orders if the defaulted amount is tendered.

The Tribunal, in its judgment dated 11.09.2023, had allowed the Company Appeal and directed the Adjudicating Authority to admit the Section 7 application within 30 days from the pronouncement of the order. However, the Corporate Debtor requested clarification on the scope of the order to ensure flexibility in dealing with the defaulted amount.

Issue 2: Authority of Adjudicating Authority to Consider Debt Liquidation Offer

The Corporate Debtor, in a separate application, stated their readiness to liquidate the entire debt owed to the Operational Creditor and offered to make the payment by Bank Draft, which was not accepted. The Corporate Debtor requested the Tribunal to issue a clarification regarding the previous order, emphasizing that if the entire debt is paid, there might not be a need to admit the Section 7 application.

The Tribunal clarified that its previous order did not prevent the Adjudicating Authority from considering the Corporate Debtor's offer to pay the entire debt along with interest to the Operational Creditor. The Adjudicating Authority retained the discretion to evaluate such offers, and if the debt is fully liquidated, there might be no requirement to proceed with admitting the Section 7 application.

In conclusion, the National Company Law Appellate Tribunal, Principal Bench, New Delhi, addressed the Corporate Debtor's application for clarification regarding the time period for tendering the defaulted amount and the Adjudicating Authority's discretion in considering offers to liquidate debts. The Tribunal clarified the scope of its previous order and upheld the Adjudicating Authority's authority to assess debt repayment offers, ultimately disposing of the application while maintaining the original directions issued in paragraph 33 of the judgment.

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