2024 (4) TMI 119 - AT - Insolvency and Bankruptcy

Assignee of Bank rights can file restoration application under Rule 48 NCLT Rules 2016

The NCLAT allowed an appeal challenging dismissal of a restoration application. The appellant, who had acquired rights from Bank of Baroda through ... Seeking restoration of petition, which was dismissed for non prosecution - seeking substitution of the Appellant in place of the Bank of Baroda in the main company petition, after dismissal of the main company petition - whether the Appellant had taken appropriate steps to substitute itself in place of the original applicant, Bank of Baroda? - HELD THAT:- It is the case of the Appellant that their counsel was present during the hearing of the main company petition who informed the Adjudicating Authority that pursuant to the assignment agreement they had already filed an I.A. with the NCLT Registry seeking substitution of the Appellant in place of Bank of Baroda in the main company petition but the said IA was yet to be numbered and notified for hearing. The Appellant was diligent and vigilant in pursuing the main company application and had taken steps to file the substitution application. Want of diligence or wilful inaction is attributable only when something that is required to be done is not done at all or not done in a timely manner - there are no delay or negligence on the part of the Appellant to deprive him of his statutory and legitimate right to prosecute the main company petition. The Adjudicating Authority in the impugned order, on the one hand, has held that the Appellant had stepped into the shoes of the Bank of Baroda and had the same right against the Corporate Debtor as that of Bank of Baroda including all rights exercisable under the IBC - Appellant cannot be treated as the original applicant of the main company petition and hence the said petition cannot be restored by the Appellant. The Adjudicating Authority further held that in terms of Rule 48 of NCLT rules, 2016, only the original applicant can approach or file an application before the Adjudicating Authority for restoration of the application. The original application has been dismissed on ground of non-appearance of the Bank of Baroda and since in this application, the Appellant was not a party, it could not have filed the restoration application. Coming to the definition of the word “applicant” in the NCLT Rules, 2016 we find that Rule 2(4) defines “applicant” to mean a petitioner or an appellant or any other person or entity capable of making an application including an interlocutory application or a petition or an appeal under the IBC. Tested against this definition of an “applicant”, let us now see whether the Appellant fits into this definition of an “applicant” - The Adjudicating Authority has also expressly acknowledged this position by stating that following the assignment agreement, the Appellant had stepped into the shoes of the original applicant, Bank of Baroda. The Adjudicating Authority has further opined in the impugned order that the Appellant enjoyed the same right against the Corporate Debtor as that of Bank of Baroda. It also held that the Appellant as an assignee was entitled to all rights exercisable under the IBC. That being the case, the Appellant clearly qualifies to be an “applicant” under the NCLT Rules and therefore enjoys the locus to file the restoration application before the Adjudicating Authority. When an application which is dismissed for non-appearance of the petitioner can be restored on satisfying the Tribunal that he was prevented by some sufficient cause from appearing before the Tribunal, likewise, in the present facts of the case, opportunity ought not to be denied to the Appellant from seeking restoration of the main company petition which has been dismissed for non-prosecution by the original applicant. It is not in the interest of justice to deny a person the opportunity to file an application for restoration for no ostensible lapses. The Adjudicating Authority was not correct in dismissing the application for restoration - the impugned order is set aside - Appeal allowed. Issues Involved:1. Eligibility of the Appellant to file a restoration application.2. Diligence and steps taken by the Appellant for substitution.3. Interpretation of Rule 48 of NCLT Rules, 2016.4. Rights of the assignee under the assignment agreement.Summary:Eligibility of the Appellant to File a Restoration Application:The appeal arises from the order dated 10.10.2022 by the Adjudicating Authority (NCLT, Ahmedabad Bench) which rejected I.A. No. 660/2020 filed by the Appellant to restore CP(IB) No. 574/2018, initially filed by Bank of Baroda and dismissed for non-prosecution. The Appellant, Raj Radhe Finance Limited, had been assigned the loan by Bank of Baroda through an assignment agreement dated 30.09.2019. The main contention is whether the Appellant, as an assignee, has the right to seek restoration of the main company petition.Diligence and Steps Taken by the Appellant for Substitution:The Appellant had filed I.A. No. 779/2019 in the main company petition and another I.A. for substitution, which was numbered as I.A. No. 887/2020 after the main petition was dismissed. The Appellant argued that it had been diligent in pursuing its interests and had taken necessary steps to substitute itself in place of Bank of Baroda. The Adjudicating Authority dismissed the main petition for non-prosecution and the substitution I.A. as infructuous. The Appellant also filed I.A. No. 660/2020 seeking restoration of the main company petition, which was rejected by the Adjudicating Authority.Interpretation of Rule 48 of NCLT Rules, 2016:The Respondent argued that the Appellant was not eligible to file the restoration application u/s Rule 48 of the NCLT Rules, 2016, as it was not a party to the main company petition. The Adjudicating Authority held that only the original applicant could file for restoration. However, the Tribunal noted that the assignment agreement assigned all rights, including legal rights to file suits, to the Appellant. The Tribunal found it absurd to deny the Appellant the right to file the restoration application when its status as an assignee was undisputed.Rights of the Assignee under the Assignment Agreement:The Tribunal observed that the assignment agreement between Bank of Baroda and the Appellant assigned the entire debt with all rights, title, and interest to the Appellant. The Tribunal held that the Appellant, having stepped into the shoes of the original petitioner, qualified as an 'applicant' under the NCLT Rules and had the locus to file the restoration application.Conclusion:The Tribunal concluded that the Adjudicating Authority was incorrect in dismissing the restoration application. The impugned order was set aside, and the matter was remitted to the Adjudicating Authority to restore the main company petition and decide it on merits expeditiously. The appeal was allowed with no costs.