Section 94 IBC fresh application dismissed after earlier rejection without liberty to re-file

NCLAT Principal Bench dismissed appeals challenging adjudicating authority's order rejecting fresh application under Section 94 IBC. Appellant had filed Section 94 application in 2020, which was dismissed in February 2024 without liberty to re-file. Though appellant was later permitted to withdraw another petition with liberty to re-file, the adjudicating authority correctly held that no such liberty was granted in the original dismissal order. Bank opposed citing misuse of interim moratorium preventing recovery proceedings under SARFAESI/RDBFI Act for four years. NCLAT found no error in adjudicating authority's decision on maintainability of fresh application.

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Issues Involved
1. Maintainability of the fresh application under Section 94 of the Insolvency and Bankruptcy Code (IBC).
2. Compliance with the Adjudicating Authority's directions.
3. Misuse of the interim moratorium under Section 96 of the IBC.

Detailed Analysis

Maintainability of the Fresh Application Under Section 94 of the IBC
The primary issue was whether the fresh application filed by the Appellant under Section 94 of the IBC was maintainable. The Appellant contended that the liberty granted by the Adjudicating Authority on 28.02.2024 to refile the application should preclude the application from being rejected as non-maintainable. The Counsel for the Appellant argued that the liberty granted allowed them to file a fresh application under Section 94, and the earlier order dated 01.02.2024 dismissing the application for non-compliance should not impede this right.

The Adjudicating Authority, however, dismissed the fresh application, emphasizing that the earlier order dated 01.02.2024, which dismissed the initial application for non-compliance, had become final and was not challenged. The Authority further noted that the liberty to refile was granted on the specific request of the Appellant and was subject to compliance with the law. The Tribunal upheld the Adjudicating Authority's decision, stating that the dismissal of the initial application for non-compliance and the subsequent liberty to refile did not negate the finality of the initial dismissal.

Compliance with the Adjudicating Authority's Directions
The Appellant had initially filed an application under Section 94 of the IBC on 24.09.2020. The Adjudicating Authority had directed the Appellant to file compliance and eligibility affidavits on several occasions, including orders dated 06.05.2022 and 01.02.2023. Despite multiple opportunities, the Appellant failed to comply with these directions, leading to the dismissal of the application on 01.02.2024 for non-compliance.

The Tribunal noted that the Appellant's failure to comply with the Adjudicating Authority's directions was a significant factor in the dismissal of the initial application. The subsequent application filed on 29.02.2024 was also scrutinized for compliance, and the Tribunal found that the Appellant had not adhered to the required procedural norms, thereby justifying the dismissal of the fresh application.

Misuse of the Interim Moratorium Under Section 96 of the IBC
The Respondents, including the Financial Creditors (IDBI Bank and Punjab National Bank), argued that the Appellant had been misusing the interim moratorium under Section 96 of the IBC for an extended period, preventing the banks from initiating recovery proceedings under the SARFAESI Act or the RDBFI Act. The Adjudicating Authority noted that the Appellant had allowed the defective application to persist, thereby enjoying the benefits of the interim moratorium without curing the defects.

The Tribunal concurred with the Adjudicating Authority's observation that the Appellant's actions constituted a misuse of the interim moratorium provisions. The Tribunal highlighted that the Appellant's conduct had impeded the recovery process for the Financial Creditors, further justifying the dismissal of the fresh application.

Conclusion
The Tribunal concluded that the Adjudicating Authority did not err in dismissing the fresh application under Section 94 of the IBC. The initial dismissal for non-compliance was final and unchallenged, and the liberty to refile granted on 28.02.2024 was conditional and did not negate the finality of the initial dismissal. The Appellant's failure to comply with procedural directions and the misuse of the interim moratorium provisions further supported the decision to dismiss the fresh application. Consequently, both appeals were dismissed.

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