The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar, Judicial Member and Dr. Alok Srivastava, Technical Member was hearing an appeal filed by the Corporate Debtor and held the jurisdiction of NCLT Mumbai to initiate the Corporate Insolvency Resolution Process against the corporate debtor. The NCLAT upheld the NCLT Mumbai's jurisdiction to initiate the Corporate Insolvency Resolution Process against the corporate debtor, dismissing the appellant's appeal based on the loan facility agreements' governing law and jurisdiction clauses.
The present appeal was filed by the appellant under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging the Order dated 05.01.2023 (Impugned Order) passed by the Adjudicating Authority (NCLT, Mumbai Bench) in CP (IB) No. 271 of 2022. The Impugned Order allowed the application under section 7 filed by the financial creditor Punjab National Bank (International) Limited and initiated the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.
The appellant argued that the Loan Facility Agreements signed between the corporate debtor and the financial creditor stated that the agreements would be governed by English Law and that the Court of England would have jurisdiction over any disputes. The appellant further claimed that the corporate debtor was not insolvent but faced financial stress due to the Covid-19 pandemic and was unable to repay the loan amounts.
The appellant also mentioned that a loan restructuring plan was approved by the financial creditor, extending the repayment period. Therefore, the appellant argued that initiating CIRP for a solvent company was not appropriate.
The respondent, the financial creditor, stated that the loan accounts of the corporate debtor were declared non-performing assets (NPA) in 2016 but were restructured upon the request of the corporate debtor. However, the corporate debtor still defaulted on the restructured loan repayment schedule, leading to the filing of the Section 7 application.
The respondent argued that the Loan Facility Agreements allowed the lender to take proceedings in any jurisdiction and referred to the territorial jurisdiction of the NCLT, Mumbai, where the registered office of the corporate debtor was located.
The National Company Law Appellate Tribunal (NCLAT) examined the Loan Facility Agreements, which clearly stated that the lender could take proceedings in any court and jurisdiction, including courts outside of England. The NCLAT also noted that the registered office of the corporate debtor was in Mumbai, falling under the territorial jurisdiction of the NCLT, Mumbai.
Based on these considerations, the NCLAT concluded that the financial creditor had the right to initiate the section 7 application before the NCLT, Mumbai, and dismissed the appeal. The NCLAT also noted that the corporate debtor did not dispute its liability or default on repayment.
Therefore, the NCLAT upheld the Impugned Order, stating that the Adjudicating Authority had not made any errors, and dismissed the appeal.