NCLT must consider deferment application before deciding Section 7 insolvency petition for NPA company

Bombay HC disposed of a writ petition challenging NCLAT's decision regarding a company whose account was declared as Non-Performing Asset. The court held that NCLT must first consider the petitioner's interlocutory application seeking deferment of company petition proceedings before passing final orders on the bank's Section 7 application under the Insolvency Code. The court emphasized that deciding both applications together would serve the interest of justice and prevent prejudice to the petitioner, as the interlocutory application raised subsequent events requiring consideration before adjudicating the main company petition.

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Issues:
1. Stay on passing final orders in Company Petition No. 132 of 2024.
2. Effect and operation of the order dated 21st June 2024 passed by the NCLT.
3. Consideration of subsequent events by NCLT before deciding Company Petition.
4. Interlocutory Application No. 3623 of 2024 and its significance.
5. Compliance with the orders related to depositing amounts with relevant authorities.

Stay on passing final orders in Company Petition No. 132 of 2024:
The petitioner obtained finance from the 2nd respondent, Canara Bank, leading to the account being declared a Non-Performing Asset. The Bank initiated actions under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Insolvency and Bankruptcy Code, 2016. The petitioner appealed the Debt Recovery Tribunal's order and approached the National Company Law Tribunal (NCLT) and the Debts Recovery Appellate Tribunal (DRAT). The NCLT reserved the proceedings in Company Petition No. 132 of 2024 for final orders, prompting the petitioner to seek a stay until the DRAT decides on the appeal.

Effect and operation of the order dated 21st June 2024 passed by the NCLT:
The petitioner, through its counsel, argued that subsequent events, including the stay of the DRT order by DRAT, should be considered by the NCLT before passing final orders. The petitioner expressed concerns about the adverse impact on its credibility if a drastic order under the Insolvency and Bankruptcy Code is passed without considering these events. The petitioner complied with the DRAT's order of pre-depositing an amount and committed to depositing outstanding dues with the DRT. The petitioner sought relief to prevent prejudice resulting from premature final orders by the NCLT.

Consideration of subsequent events by NCLT before deciding Company Petition:
The High Court emphasized the importance of the NCLT considering the petitioner's Interlocutory Application No. 3623 of 2024, which highlighted subsequent events and requested a deferral of the final order in the Company Petition. The Court noted that deciding both the application and the petition together could lead to prejudice against the petitioner. Acknowledging the stay on the DRT order by DRAT and the petitioner's bona fides, the Court directed the NCLT to address these aspects before concluding on the Company Petition.

Interlocutory Application No. 3623 of 2024 and its significance:
The petitioner filed Interlocutory Application No. 3623 of 2024 before the NCLT, urging a deferral of the final order in the Company Petition to consider subsequent events. The Court stressed the necessity of the NCLT evaluating this application before proceeding with the Company Petition. The petitioner's request to have the interlocutory application decided first was deemed essential to ensure justice and prevent any adverse consequences for the petitioner.

Compliance with the orders related to depositing amounts with relevant authorities:
The High Court accepted the petitioner's commitment to deposit a specified amount with the DRAT within a set timeframe. It directed that any adverse order resulting from the Interlocutory Application should not be enforced for a specific period. The Court clarified that it did not assess the merits of the application and left all contentions to be raised before the NCLT. The writ petition was disposed of with these directions for the parties to act accordingly.

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