Highlights
- The National Company Law Appellate Tribunal has ruled that a party cannot be barred under Section 10A from filing proceedings under Section 7 if the liability to pay interest arose before the Section 10A period and continues during and after it.
- The Appellate Tribunal determined that the date of default, ascertained through the National e-Governance Services Limited portal, was established well before the Section 10A period, and the Respondent’s lack of challenge confirmed the default.
- The National Company Law Appellate Tribunal has overturned the National Company Law Tribunal’s decision to reject the Section 7 Application, instructing the Adjudicating Authority to admit the application within one month, while allowing for potential settlement discussions during that period.
The National Company Law Appellate Tribunal (NCLAT) has held that the Appellant cannot be barred under Section 10A to file proceedings under Section 7 when the liability to pay interest had occurred before the Section 10A period, continues in the 10A period, and also exists beyond the 10A period.
The issue before the NCLAT was whether the Adjudicating Authority could have calculated a date of default, and dehors the agreement between the parties especially when the Respondent chose not to challenge those notices or contest the Petition.
The Appellate Tribunal relied on the NeSL portal for ascertaining the date of default noting the same to be much before the Section 10A period.
“The default, which is much before the 10A period, becomes an admitted fact as it is not challenged by the Respondent, since they neither appeared before the Adjudicating Authority nor before this Appellate Tribunal,” the bench of Justice Ashok Bhushan (Chairperson), and Barun Mitra and Arun Baroka (Technical Member).
Further noting that no repayment has been made prior to the 10A period, and the default continues during and beyond the 10A period. The appellate tribunal observed that “It is a clear case of disbursement and default and, more particularly, it is not being denied either at the level of the Adjudicating Authority or at the Appellate level.”
The appellate tribunal has set aside the National Company Law Tribunal order rejecting the Section 7 Application directing the Adjudicating Authority to pass an order admitting the Section 7 Application within one month from the date on which a copy of this order is produced before the Adjudicating Authority.
During the aforesaid period of one month, it shall be open to the Corporate Debtor to enter into settlement, if any, with the Financial Creditor for the discharge of its debt. In the event of any settlement, the same may be brought before the Adjudicating Authority who may consider and pass an appropriate order in accordance with law.
