NCLT Has Power u/s 65 to Close CIRP & Issue Consequential Orders | Sec. 7 Plea Admission Doesn’t Alter Its Authority

Case Details: Ashmeet Singh Bhatia v. Pragati Impex India (P.) Ltd. - [2024] 159 taxmann.com 314 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
  • Gaurav Mitra, Shashwat Tripathi, Ms Ridhima Verma, Ishan Roy Chowdhury & Madhu Ayachit, Advs. for the Appellant.
  • Abhijeet Sinha, Shohit Chaudhry, Pankaj Agarwal & Shashwat Srivastava, Advs. for the Respondent.
  • Ridhima Verma, Shaswat Tripathi, Varsha Bhushan & Abhishek Anand Advs. for the Applicant.
  • P. Nagesh, Sr. Adv. Pankaj Agarwal, Shashwat Srivastava, Anil Agarwal & Shohit Choudhary for the Respondent.

Facts of the Case

In the instant case, Respondent No.1 (i.e. financial creditor) filed an application u/s 7 of the IBC for initiation of the CIRP against Respondent No. 2 (i.e. the corporate debtor), which was admitted by the Adjudicating Authority (NCLT) and the CIRP was initiated.

The appellant, one of the home-buyer in a sister company of the corporate debtor filed an application before the NCLT making serious allegations of collusion and fraud against the financial creditor and corporate debtor and further sought direction to conduct an enquiry and impose a heavy penalty upon the financial creditor and corporate debtor.

The NCLT vide the impugned order rejected the said application on the ground that the appellant had no transaction with the corporate debtor and he had no locus to oppose the order admitting the CIRP application when the order admitting the CIRP was affirmed by the NCLAT.

Aggrieved by the NCLT’s order, the appellant filed an instant appeal before the NCLAT.

It was noted from the Bank Transaction of the group company i.e., ‘OS’ of the financial Creditor transferred an amount of INR 1.75 lakhs on which date the financial creditor transferred the same amount to the corporate Debtor and on the same day corporate debtor transferred back the same amount to ‘O.S’, who had initially transferred amount to the financial creditor.

NCLAT Held

The NCLAT observed that there was round tripping of the amount, which was initiated by ‘O.S’ and after routing through the financial creditor and corporate debtor, the same was returned to ‘O.S’ on the same day.

The NCLAT, further observed that the sister company of the corporate debtor was also in CIRP, in which the appellant was a home-buyer who had to receive an amount from the corporate debtor which chance would also be adversely affected due to the commencement of CIRP of the corporate debtor. Thus, the appellant had the locus to file an application.

The NCLAT held that the NCLT committed an error in rejecting an application without considering the application on its merit. Therefore, the impugned order was to be set aside and the appellant’s application was revived before the NCLT to be duly considered and decided in accordance with the law.

List of Cases Reviewed

• • Pragati Impex India (P.) Ltd. v. Vistar construction (P.) Ltd. [2024] 159 taxmann.com (NCLT -New Delhi) (para 21) reversed see Annex