National Company Law Appellate Tribunal Admits Shapoorji Pallonji Application

National Company Law Appellate Tribunal Admits Shapoorji Pallonji Application

The Appellate Tribunal overruled the NCLT order and held that the application should not have been dismissed since it fulfilled all requirements U/s 9 of IBC

The National Company Law Appellate Tribunal (NCLAT) admitted an application u/S 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) since it fulfilled all the requirements/qualifications for it.

The Chennai Bench of the National Company Law Appellate Tribunal, comprising Justice M. Venugopal and Mr Kanthi Narahari, heard the matter titled M/s Shapoorji Pallonji and Company Private Limited v M/s Shore Dwellings Pvt Ltd.

The application of the Appellant – Operational Creditor u/S 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Respondent – Corporate Debtor was dismissed by the National Company Law Tribunal (NCLT) at Bengaluru on the ground that it was not fit for admission. Therefore, the present appeal had been preferred before this bench by the Appellant – Operation Creditor.

The Appellant – Operation Creditor submitted that there was non-payment of operational debt for the construction work completed by the Appellant for the Respondent – Corporate Debtor as per the Construction Contract. Virtual Completion Certificate certifying project work completion along with the payment schedule for payment of the acknowledged debt, signed by the Respondent – Corporate Debtor was placed in support of the arguments. However, no further communication or payments were made by the Respondent, despite several extensions. Therefore, the Appellant – Operation Creditor chose to initiate Corporate Insolvency Resolution Process (CIRP) against the Respondent – Corporate Debtor by issuing a statutory notice u/S 8 of the IBC.

The Respondent – Corporate Debtor, on the other hand, submitted that the National Company Law Tribunal had rightly dismissed the application on account that there was a settlement process opted in between the parties. It was further submitted that the rescheduled payments of installments were done due to the intervening COVID-19 pandemic, which resulted in the slowdown of economic condition and that only a small part of the amount was remaining to be paid.

The Appellate Tribunal took into account all the documents along with the payment schedule of the acknowledged liability of the Respondent – Corporate Debtor. It noted that the Corporate Debtor was willing to pay only the settled terms keeping in mind the present economic scenario.

The Appellate Tribunal found the view taken by the NCLT was illegal as the main object of the IBC is for the Resolution of the Corporate Debtor in a time-bound manner.

The Appellate Tribunal further noted that the present matter fulfilled the requirements for initiating the CIRP u/S 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), which are as follow:

• No Pre-Existence of Dispute

• Clear Admission of Existence Of Debt

• Defaulted In The Payments Of Debt

• Issuance of Demand Notice

The bench observed that the National Company Law Tribunal ought not to have dismissed the application by the Operational Creditor by holding that discussions and negotiations were pending between the parties and by allowing the Corporate Debtor to pay in accordance with the present economic scenario. It further pointed out the role of the NCLT, which is as follows:

"We are of the firm opinion that the Forum i.e., NCLT/Adjudicating Authority have been created under the Code is for Resolution of Insolvency, Liquidation and Bankruptcy. The Code separates commercial aspects of Insolvency and Bankruptcy proceedings from judicial aspects. Therefore, the Adjudicating Authority (NCLT) is not a court of equity but for Resolution of Insolvency in a time-bound manner."

The bench observed that the Appellant had rightly invoked the jurisdiction of the NCLT u/S 9 of the IBC considering the fact that the Respondent had admitted the debt on various occasions and no dispute had been raised prior to the issuance of the demand notice.

The Appellate Tribunal, therefore, allowed the appeal by admitting the application of the Appellant – Operational Creditor u/S 9 of the IBC.