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The ‘Adjudicating Authority’ is not a ‘Court of Law’ and that ‘CIRP’ is not a litigation


The Bench of the National Company Law Appellate Tribunal, Chennai comprising Justice M. Venugopal, the Judicial Member and Kanthi Narahari, the Technical Member held on Monday in a case [REED 2021 NCLAT Chen 11501] that the ‘Adjudicating Authority’ is not a ‘Court of Law’ and that ‘CIRP’ is not litigation. As a matter of fact, if the ‘Adjudicating Authority' is subjectively satisfied as to the existence of default and arrive at a conclusion that the application is a complete one and further that no disciplinary proceedings are pending against the proposed ‘Resolution Professional’ it is incumbent upon it to admit the application. In reality, no other ‘yardstick’ is required to look into any other requirement for admission of the application.


It cannot be gainsaid that initiation of CIRP does not amount to recovery proceedings and that the ‘Adjudicating Authority’ at the time of determination as to whether to admit or reject an application u/s 7 of the ‘I&B’ Code is not to take into account the reasons for the Corporate Debtor’s default.


The Adjudicating Authority in the impugned order had observed that the Respondent was not an Insolvent Company and that it was of the considered view that Respondent should be given some more time to repay the debt etc. had directed the Respondent / Corporate Debtor to repay the balance debt or the amount as settled with the Appellant within a period of six months failing which the Appellant / Petitioner would be at liberty to file a fresh petition for admission, which in the considered opinion of the Appellate Tribunal was in the negation of the principles laid down at paragraph 30 of the judgement of the Supreme Court in Innoventive Industries Ltd. v. ICICI Bank and Another, REED 2017 SC 08563. Therefore, the Appellate Tribunal held that the Adjudicating Authority had exceeded its jurisdiction by taking the defence of the Corporate Debtor, especially in the absence of any ‘Reply’ or objections projected by the Corporate Debtor.


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