Corporate Debtor’s Willful Non-Appearance and Undisputed Default Justify Admission into CIRP: NCLAT Dismisses Appeal
- REEDLAW
- Feb 7
- 3 min read
NCLAT dismissed the appeal, holding that the Corporate Debtor’s willful non-appearance and undisputed default justified its admission into CIRP.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member), reviewed an appeal and upheld the admission of the Corporate Debtor into CIRP. The Tribunal ruled that the Financial Creditor had duly served notice through Speed Post, Email, and newspaper publications. It found that the Corporate Debtor willfully abstained from proceedings and failed to dispute its debt and default, as recorded in NeSL and evidenced before the Tribunal, thereby rendering the appeal meritless.
The Appeal was filed by Mr. Gurushankar Raman, Suspended Director and shareholder of M/s. Amritpur Tea Company Ltd., against the order dated 27.09.2023, passed by the National Company Law Tribunal, Division Bench (Special) Court No. I, Kolkata, in C.P.(IB) No. 329(KB)2022. The application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by City Union Bank Ltd., the Financial Creditor, was allowed, admitting the Corporate Debtor into the corporate insolvency resolution process (CIRP). The Corporate Debtor, incorporated on January 10, 1913, had availed of a loan from the Financial Creditor, with an outstanding amount of Rs.12,60,90,830/- as of September 1, 2022. The Corporate Debtor was declared a non-performing asset (NPA) on December 31, 2019, as per the record of default maintained by the National e-Governance Services Ltd. (NeSL). The learned NCLT admitted the Corporate Debtor into CIRP and appointed Mr. Soumitra Lahiri as the Interim Resolution Professional.
The learned Counsel for the Appellant contended that no notice for the hearing was served on the Corporate Debtor, and it was wrongly set ex parte. The learned NCLT, through an order dated 13th June 2023, had directed the service of notice through newspaper publications—one in a vernacular language and one in English, widely circulated in West Bengal. However, it was argued that the newspapers were published from Kolkata and not from Siliguri, where the Corporate Debtor’s registered office was situated. The learned Counsel referred to Rule 35 of the NCLT Rules, 2016, asserting that substituted service through publication was not proper. Additionally, it was argued that the loan was disbursed in three tranches, with the third tranche of Rs.1,50,00,000/- being sanctioned on December 30, 2019, while the loan was declared an NPA the very next day, which appeared inconsistent.
The learned Counsel for the Financial Creditor submitted that the Corporate Debtor owed Rs.12,60,90,830/- as of 01.09.2022 towards loans disbursed between 27.07.2015 and 30.12.2019. The Corporate Debtor had repeatedly defaulted, and instead of regularizing the loan, it utilized the third facility to make partial payments of earlier dues. The Financial Creditor had initiated proceedings under the SARFAESI Act, 2002, for taking symbolic possession of the secured assets, and no dispute had been raised by the Corporate Debtor during these proceedings. The default was reflected in the records of NeSL, which had repeatedly sent intimation emails to the Corporate Debtor, which were authenticated but not disputed.
The learned NCLT had issued notice through Speed Post and Email, and the service was recorded. When the Corporate Debtor failed to appear, an application was filed by the Financial Creditor seeking permission for service through newspaper publications, which was granted on June 13, 2023. The publications were made in “The Statesman” and “Aajkal,” widely circulated in West Bengal. Since the Corporate Debtor remained absent, it was set ex parte by order dated 09.08.2023. The Appellate Tribunal found that notice was duly served through Speed Post, Email, and publication, and the Corporate Debtor deliberately chose not to participate in the proceedings. The debt and default were recorded in NeSL, and evidence submitted before the Tribunal confirmed repeated email intimations. As the Corporate Debtor failed to deny its liability at any stage, the appeal lacked merit and was dismissed.
Mr. Gaurav Mitra, Mr. Shantanu Singh, Mr. Ravi Sehgal and Ms. Lavanya Pathak, Advocates represented the Appellant.
Mr. Sumesh Dhawan, Ms. Vatsala Kak, Mr. Shaurya Shyam and Mr. Sagar Thakkar, Advocates appeared for Respondent No. 1.
Mr. Vikram Wadehra, Advocate appeared for Respondent No. 2.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines, Press Releases and more.
Click on the Citation/Link to access these resources
Comments