The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi held that when a matter is reserved for orders, there is no scope for entertaining application from parties to re-hear the matter. The Tribunal stated that "it is a well settled proposition of law that the two stages of reserving of judgment and pronouncement of judgment are in a continuum with no hiatus or gap as such in the two stages."
Brief facts
The factual matrix of the case is that the Corporate Debtor-Maa Durga Commotrade Pvt. Ltd. had obtained credit facility from the Karnataka Bank Limited (“KBL”) for an amount of Rs.1 crore. Furthermore, the loan account was declared NPA due to the non-repayment of loans. Thereafter, the demand notice under the SARFAESI Act was served to the Corporate Debtor. By means of an Assignment Deed, the KBL then assigned the debt to JM Financial Asset Reconstruction Company Ltd., the current Respondent No. 1. The OTS proposal was submitted by the corporate debtor to the Respondent No.1 for an amount of Rs.7.50 crore which was approved by the Financial Creditor. Also, the Respondent no.1 filed the petition under Section 7 for the initiation of CIRP of the corporate debtors. The matters were heard and the order were pronounced. Aggrieved by the said impugned orders, the appeal has been preferred by the suspended director of the Corporate Debtor.
Contentions of the Appellant
The Appellant contended that the Appellant filed an IA for a rehearing of the main company petition on legal questions; however, it was rejected on the grounds that the main petition was reserved for orders, while the Section 7 main company petition was incomplete on its own. Instead, the Adjudicating Authority should have heard the appeal. It was furthermore contended that the loan was taken by the KBL not from the Respondent no.1, therefore, the Respondent No.1 did not have the locus to file the Section 7 application against the Appellant. Also, the assignment deed was insufficiently stamped and therefore not admissible in evidence and the said deed not having been placed on record violated Rule 4(2) of the Insolvency and Bankruptcy Code (Application to Adjudicating Authority) Rules, 2016.
Contentions of the Respondent
The Respondent no. 1 contended that the present case is the fit case for an application under Section 7. It was furthermore contended that the Corporate Debtor was fully aware that Respondent No. 1 had filed a Section 7 application in its position as a trustee. Furthermore, the Original Financial Creditor's assignment of the obligation was known to the Corporate Debtor as well. The Appellant recognised and accepted the debt assignment made by the original Financial Creditor to Respondent No. 1 by forwarding their OTS proposal to the assignee. Furthermore, neither at the main petition hearing nor at any point before reserving the case for orders did the Corporate Debtor bring up the issue of the assignment deed not being lawfully stamped and duly registered.
Observations of the Court
The Tribunal observed that the fact that the Appellant opted to submit the OTS proposal to Respondent No. 1 rather than the original Financial Creditor indicates that they were fully aware of the debt assignment made by the original Financial Creditor to Respondent No. 1. Thus, it is evident that the Appellant/Corporate Debtor recognised and acknowledged the fact that the debt had been assigned by forwarding the OTS proposal to the assigned party. Furthermore, neither throughout the main petition hearing nor at any point until the matter was reserved for orders did the appellant bring up the assignment deed problem.
It was furthermore observed that it is a well-established legal principle that the two stages of reserving judgment and announcing judgment occur simultaneously and do not differ in any way. Due to procedural propriety concerns, it is customary in court proceedings to not hear further pleadings submitted through an I.A. after the decision has been reserved. This is a well-established and tried and true practise. When dismissing the I.A., the Adjudicating Authority followed the established legal precedent that states that a case reserved for orders does not allow for the consideration of applications from parties to rehear the issue.
It was noted that there is no logical explanation for why the concerns expressed in the I.A. could not have been included in the main company appeal. Raising such technical concerns, especially after the main petition's thorough hearing was completed, makes it abundantly evident that the appellant was just attempting to use the I.A. to establish weak grounds in an attempt to stall and obstruct CIRP's admission.
Based on these considerations, the court was of the view that the adjudicating authority had rightly rejected the I.A.
The Decision of the Court
The Tribunal affirmed the findings of the Adjudicating Authority and with the above directions, dismissed the appeal.
Case Title: Loramitra Rath vs. JM Financial Asset Reconstruction Company Ltd
Coram: Hon’ble Justice Ashok Bhushan, Mr. Member (Technical) Barun Mitra, and Mr. Member (Technical) Arun Baroka
Case No.: Company Appeal (AT)(Insolvency) No. 1359 & 1360 of 2023
Advocate for the Appellant: Mr. Saswat K. Acharya, Mr. Dhananjay Bhaskar Ray, Advocates.
Advocate for the Respondent: Mr. Utsav Mukherjee, Mr. Vikalp Wange, Advocates
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