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NCALT New Delhi: Matter getting protracted, defeating the purpose of IBC

While disposing of an appeal, the Coram of Judicial A.I.S. Cheema (officiating Chairperson) and Dr. Alok Srivastava (Technical Member) directed NCLT to decide the case ‘one way or the other,' hoping that it would take up the application with ‘all earnestness.'

In this case, an appeal was filed against an impugned order of the NCLT, Kolkata Bench, Kolkata, which stated that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 has been pending before it since 30 December 2019 and that the Admission Order has not yet been passed one way or another. The attorney argued that the matter was dragging on before the Adjudicating Authority, defeating the purpose of the IBC's requirement that the application is admitted within 14 days.

In light of the foregoing facts and circumstances, the Tribunal said that they understand the Appellant's anguish as a result of the ongoing application under Section 7 of the IBC, which has been pending since 30 December 2019. On 29 January 2021, they spoke everything they could. They trust that the Adjudicating Authority will consider the Application with earnestness and make a decision one way or the other.

In the case of The South Indian Bank Ltd. v. Gold View Vyapaar Private Limited, REED 2021 NCLAT Del 08558, the Hon'ble NCLAT remarked that bringing the issue before the NCLT for a final hearing was based on a "false premise" because no final hearing was proposed at the pre-admission stage. The only argument addressed before NCLAT was that NCLT was violating the requirement of Section 7(4) of the Code by delaying the order of admission on the application submitted under Section 7 of the ‘I&B Code.' The Appellant argued that an application under Section 7 was submitted in December 2019 and that the issue has now been scheduled for a “final hearing” on 18 February 2021.

According to NCLAT, during the pre-admission stage, a hearing with limited notice to the Corporate Debtor was granted in order to merely get satisfaction in relation to the existence of the debt, the incidence of default, and the completeness of the application. After being satisfied, the Adjudicating Authority must issue an order of admission, and it may be confidently claimed that no final hearing was scheduled during the pre-admission stage.

NCLAT New Delhi remarked that:

"The Adjudicating Authority will be well advised to be alive to the phraseology/ terminology to be employed at different stages of the CIRP proceedings and not give impression of a final hearing at the pre-admission stage."

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