NCLAT rules against recording 'default' findings

NCLAT rules against recording 'default' findings

The adjudicating authority need not document at the time of the application by the creditor to initiate the insolvency resolution process

The Delhi Bench of National Company Law Appellate Tribunal (NCLAT) has held that the adjudicating authority (AA) need not record findings regarding any 'default' at the time of the application by the creditor to initiate the insolvency resolution process.

The appellants, personal guarantors Kanchan Nanubhai Desai, Nanubhai Nichhabhai Desai and Tusharkumar Nanubhai Desai had filed the appeals against the judgment and the order passed by the NCLAT.

The petition was filed under the Insolvency and Bankruptcy Code (IBC), 2016, through a resolution professional (RP) Sudha Bhushan, against the three appellants. Thereafter, the AA passed the order directing the RP to exercise the powers as enumerated under the IBC.

The appellants contended that as per the IBC, even though the application was filed, the AA ought to have asked for confirmation of the RP from the Board as required under IBC. Since, until then the report had not come from the RP, there was no need to record the findings regarding the default.

It was submitted that the findings regarding the default were uncalled for. Therefore, the RP would be handicapped to submit any negative report.

The Coram headed by the Chairperson, Justice Ashok Bhushan and Justice Jarat Kumar Jain and Dr. Alok Srivastava partly allowed the appeal against the order of the AA. It directed that the observation regarding the 'default' be deleted from the judgment.