NCLAT Reiterates: Application under Section 9 of IBC, Must Be Decided in Timely Manner

NCLAT Reiterates: Application under Section 9 of IBC, Must Be Decided in Timely Manner

The National Company Law Appellate Tribunal (‘NCLAT’), Principal Bench, comprising of Justice Ashok Bhushan (Judicial Member) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Baba Baidnath Spinners Pvt. Ltd. vs. Textile Solutions, upheld the rejection of an application for discovery and inspection of documents field by the Corporate Debtor in a petition under Section 9 of Insolvency and Bankruptcy Code, 2016.

The bench was of the view that the worth of the document has to be considered at the time of considering Section 9 Application and it is on the Operational Creditor to file relevant documents in support of its case, hence the Adjudicating Authority did not commit any error in rejecting the Application filed by the Appellant for discovery and inspection.

The brief facts of the case are that the Operational Creditor- Textile Solutions, filed a petition under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor- Baba Baidnath Spinners Pvt. Ltd.

During the pendency of the petition, the Corporate Debtor had filed an application for discovery and inspection of documents before the Adjudicating Authority. It was prayed by the Corporate Debtor to bring on record additional documents which were to be filed by the Operational Creditor and further sought direction to provide discovery and inspection of all those documents.

The Operational Creditor vehemently opposed to the application and contended that the relied documents were already filed before the Adjudicating Authority. Further, if any documents are not filed then the consequences will be faced by the Operational Creditor alone.

The Adjudicating Authority on being satisfied by the Operational Creditor’s stand dismissed the application.

Aggrieved by the same, the Corporate Debtor filed an appeal before the NCLAT against the Adjudicating Authority’s order.

The NCLAT observed that, the worth of document filed by the Operational Creditor is to be considered at the time of considering the Section 9 petition. Further, the embargo to file relevant documents in support of its case is on the Operational Creditor and not the Corporate Debtor.

“Section 9 Application are application which has to be decided in timely manner and exercise of discretion by the Adjudicating Authority cannot be faulted,” the NCLAT observed.

Accordingly, the Bench upheld the order of the Adjudicating Authority to dismiss the application for discovery and inspection and further dismissed the application.

The Appellant was represented by Advocate Manu Aggarwal, Advocate Shubham Budhiraja and the Respondents were represented by Advocate Tishampati Sen, Advocate Anurag Anand.