Legal assignee of debt holds same rights as original FC in debt recovery proceedings

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Case Details: Siti Networks Ltd. v. Assets Care and Reconstruction Enterprises Ltd. - [2023] 147 taxmann.com 351 (NCLAT-New Delhi)

Judiciary and Counsel Details

• Justice Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
• Bharat Sood, Adv. for the Appellant.
• Huzefa S. Khokhawala & Ms Bhakti Jain, Advs. for the Applicant.
• Prathamesh Kamat & Ms Swati Chandan, Advs. for the Respondent.

Facts of the Case

In the instant case, the financial creditor sanctioned a loan to the corporate debtor, which was later classified as a non-performing asset. The financial creditor filed an application u/s 7 of IBC for initiation of the CIRP against the corporate debtor and the same was admitted by the Adjudicating Authority i.e., NCLT.

Subsequently, the financial creditor assigned the debt of the corporate debtor to the respondent i.e., assignee through a registered assignment deed. The corporate debtor was informed about the aforesaid assignment.

Thereafter, the assignee filed an application seeking substitution as financial creditor in place of the original financial creditor and was permitted by the NCLT to pursue the application filed by the original financial creditor.

The corporate debtor challenged this order by filing an instant appeal with the National Company Law Appellate Tribunal (NCLAT). The NCLAT observed that Section 5(7) of IBC, which defines a financial creditor, also includes a person to whom such debt has been legally assigned or transferred.

NCLAT Held

The NCLAT held that the assignee, by virtue of the assignment, became a financial creditor and had stepped into the shoes of the original financial creditor. Therefore, the assignee had every right to continue the proceeding, which was initiated by the original financial creditor. Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Housing Development Finance Corporation Ltd. v. Siti Networks Ltd. [2023] 147 taxmann.com 350 (NCLT – Mum.) (para 8) affirmed [See Annex].