New Delhi: The Calcutta High Court has struck down the National Company Law Tribunal (NCLT) order directing all financial creditors to mandatorily file default record from Information Utility along with a plea under Section 7 of Insolvency & Bankruptcy Code.
The judgment was passed by a bench of Justice Shekhar B. Saraf in petitions challenging the order passed by the NCLT on May 12, 2020 in respect of filing of record from Information Utility.
The order passed by the NCLT had imposed a mandatory prescription on all financial creditors under IBC to submit financial information from the Information Utility as a condition precedent for filing an application under Section 7 IBC.
The petitioners, represented by Advocates Ujjaini Chatterjee, Meenakshi Manot, Arjun Asthana, Manju Bhuteria, Rajesh Upadhyay, argued that the NCLT did not possess the statutory or regulatory backing to issue the order. Section 424 of the Companies Act, 2013, conferred no powers to NCLT/NCLAT to make such rules of such procedure that alter the statutory provisions of Companies Act, the IBC or the regulations framed by IBC.
The respondents, represented by advocates Vipul Kundalia and Avinash Kankania, contradicted that Section 424 of the Companies Act vests NCLT/NCLAT with the powers to regulate their own procedures. The order was nothing but the implementation of the mandatory and necessary requirements and compliance of various provisions of IBC.
The Court, after hearing the arguments from both sides, stated: “..while both the NCLT and NCLAT have been conferred with powers to regulate their own procedure, such use of its power is circumscribed and subject to inter alia, the principles of natural justice as well as the provisions of CA, 2013 or the IBC, 2016, inclusive of any rules/ regulations made under the IBC, 2016 by the regulatory body, IBBI.”
The Calcutta High Court further said: “The three categories of evidence that can be provided are as follows: (a) record of the default recorded with the information utility; (b) such other record; (c) evidence of default as may be specified. The disjunctive use of the above makes it clear that either of the three may be provided by the financial creditor to the adjudicating authority.”
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The order also said: “In conclusion, on a plain reading of the above provision, it is immanent that three different categories of documents are available to a financial creditor to prove proof of default by a corporate debtor.”
Read the order here;
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