The National Company Law Appellate Tribunal (“NCLAT”), New Delhi heard an appeal filed by the Corporate Debtor regarding the jurisdiction of NCLT Mumbai to initiate the Corporate Insolvency Resolution Process (“CIRP”). The NCLAT upheld NCLT Mumbai's jurisdiction and dismissed the Appellant's appeal, considering the governing law and jurisdiction clauses in the loan facility agreements.
Brief Facts:
The Appellant filed the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”), challenging the order vide which the NCLT Mumbai had allowed the application under Section 7 filed by the financial creditor, Punjab National Bank (International) Limited, initiating the Corporate Insolvency Resolution Process against the corporate debtor.
Contentions of the Appellant:
It was contended that the Loan Facility Agreements specified English Law and the jurisdiction of the Court of England for any disputes. It was further argued that the corporate debtor was not insolvent but faced financial stress due to the Covid-19 pandemic, resulting in an inability to repay the loan amounts.
Furthermore, it was mentioned that a loan restructuring plan was approved by the financial creditor, extending the repayment period. Hence, initiating CIRP for a solvent company was inappropriate.
Contentions of the Respondent:
It was stated that the loan accounts of the corporate debtor were declared non-performing assets (“NPA”) in 2016 but were restructured based on the corporate debtor's request. However, the corporate debtor still defaulted on the restructured loan repayment schedule, leading to the filing of the Section 7 application.
It was further argued that the Loan Facility Agreements allowed the lender to take proceedings in any jurisdiction and referred to the territorial jurisdiction of NCLT Mumbai, where the registered office of the corporate debtor was located.
Observations of the Tribunal:
After examining the Loan Facility Agreements, the NCLAT determined that the lender had the right to take legal action in any court and jurisdiction, including outside of England. The Tribunal also considered that the corporate debtor's registered office was in Mumbai, falling under the territorial jurisdiction of NCLT Mumbai.
Based on these factors, it was concluded that the financial creditor had the right to initiate the Section 7 application before NCLT Mumbai and dismissed the appeal. It was noted that the corporate debtor did not dispute its liability or default on repayment.
The decision of the Tribunal:
Based on the aforementioned reasoning, the NCLAT accordingly upheld the Impugned Order.
Case Title: Rajesh Kumar Modi v. Punjab National Bank (International) Limited and others
Coram: Justice Rakesh Kumar, Judicial Member and Dr. Alok Srivastava, Technical Member
Case No.: Company Appeal (AT) (Insolvency) No. 53 of 2023
Advocate of the Appellant: Adv. Mr. Diwakar Singh
Advocate of the Respondent: Adv. Mr. Mithilesh Kumar Pandey
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