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Discretion is vested with the Adjudicating Authority to admit or not admit the section 7 Application


The NCLAT Delhi dismissed the section 7 Application and held that the discretion is vested with the Adjudicating Authority to admit or not admit the section 7 Application.


The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was hearing an Appeal and held that the discretion is vested with the Adjudicating Authority to admit or not admit the section 7 Application. The Corporate Debtor has challenged the order of the Adjudicating Authority wherein the Adjudication Authority admitted the Section 7 Application.


The learned Senior Counsel appearing for the Appellant challenging the Order of the Adjudicating Authority contends that the findings recorded by the Adjudicating Authority that it was a loss-making company were not correct. He submitted that the Company has made payments to its creditors to the extent of Rs. 148.25 Crores in the last three financial years and in view of the Judgement of the Hon’ble Supreme Court in Vidharbha Industries Power Limited v. Axis Bank Limited, REED 2021 NCLAT Del 03509, the Adjudicating Authority ought to have exercised its discretion in not admitting the Application under Section 7 of the Code.


In the present case, it was clearly established that there was debt and default on the part of the Corporate Debtor. OTS which was given on 20th October 2018 could not be honoured and the OTS which has now been submitted on 25th November 2022 was not a fresh OTS Proposal but only a proposal to make the balance payment as per the 2018 OTS Proposal. In so far as the submission of Learned Counsel for the Appellant that Company was not a loss-making company, when debt and default were proved, on the arguments that company was not a loss-making company, debt and default cannot be ignored.


The judgement of the Hon’ble Supreme Court in the matter of Vidharbha Industries Power Limited v. Axis Bank Limited, REED 2021 NCLAT Del 03509, it is true that discretion is vested with the Adjudicating Authority to admit or not admit the application in view of the peculiar facts and circumstances of a particular case. The Adjudicating Authority has adverted to the submission of the Appellant that the Application is not admitted and has found that there are no such reasons due to which the Application be not admitted.


The Appellate Authority were satisfied that no error has been committed by the Adjudicating Authority by admitting the Section 7 Application. In so far as the last submission of the Appellant that the Appellant has submitted an OTS proposal to the Financial Creditors, in the event, OTS is accepted, it is always open for the Appellant to file an Application before the Adjudicating Authority for accepting the proposal under Section 12A of the Code on which the Adjudicating Authority may take appropriate decision in accordance with the law.


The Appeal was dismissed.


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