NCLAT Rejected The Appeal Filed By HDIL Against The Order Admiting The Application Filed By BOI

The appeal was filed by Housing Development & Infrastructure Limited (“Corporate Debtor”) against the impugned order dated 20.08.2020, passed by the National Company Law Tribunal, Mumbai (“Adjudicating Authority”) accepting the application in terms of Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”), filed by the Financial Creditor, i.e. Bank of India (“Petitioner”), for the initiation of corporate insolvency resolution process (“CIRP”).

Facts of the Case:

· Bank of India had filed an application for initiation of CIRP, under Section 7 of the IBC, 2016, on the ground that the Corporate Debtor has committed a default on December 04, 2018 in the repayment of the facilities granted to it, to the extent of INR 522,29,06,768/-.

· The petitioner had earlier, filed a similar application under Section 7 of the IBC, 2016, for the initiation of CIRP. However, during the pendency of that petition, the Corporate Debtor proposed to settle the matter, by submitting One Time Settlement (“OTS”) on August 31, 2018. For this reason, the petitioner had withdrawn its earlier petition.

· After that, the Corporate Debtor again committed default in making the payment as per the terms of the OTS and thereafter it issued post-dated cheques, which were all

dishonored. Therefore, the petitioner vide its letter dated 04.12.2018, revoked the OTS and called upon the Corporate Debtor to pay off its debt.

· After that, the petitioner filed the second Petition, which was admitted by the Adjudicating Authority and moratorium in terms of Section 14 of IBC, 2016, was imposed.

· The Corporate Debtor preferred the appeal before the National Company Law Appellate Tribunal (“NCLAT”), mainly on the ground that the Principles of Natural Justice were violated, by not affording it the reasonable opportunity to submit its reply.

Submissions made by the Corporate Debtor (i.e. Appellant)

· The counsels for the Appellant claimed that the Adjudicating Authority has failed to appreciate that the Application under Section 7 of the IBC, 2016 is not complete.

· Further, the counsels for the Appellant alleged that the common Loan Agreement dated October 13, 2006, was made and executed by the Petitioner Bank and 17 other banks. However, the Petitioner Bank alone has initiated the CIRP proceedings, without taking the prior consent of the other banks.

· The counsels for the Appellant further submitted that there was a violation of the Principles of Natural Justice, as no opportunity was afforded by the Adjudicating Authority, to the Corporate Debtor, to file its reply.

Order of the NCLAT

· The National Company Law Appellate Tribunal, noted that the prior to the filing of present petition, the Petitioner had filed another petition under section 7 of IBC, 2016, wherein the Corporate Debtor instead of opposing the petition, offered a One Time Settlement (OTS), for which reason, the Petitioner withdrew that petition. However, in the compliance of the OTS, the Corporate Debtor issued post-dated cheques, which were all dishonored.

· This forced the petitioner to file a subsequent petition under Section 7 of IBC, 2016, in 2019, in which the Corporate Debtor appeared, and again expressed the desire to make payments, for which reason, the Adjudicating Authority again granted time to the Corporate Debtor to make payments vide its Order dated 28.02.2019.

· Therefore, the NCLAT observed that the contention of the appellant that his Principles of Natural Justice have been violated, cannot be sustained. Instead, the NCLAT noted that the Appellant was given plenty of time to file his reply, but it chose not to.

The relevant excerpts from the Order passed by the NCLAT, are reproduced below:

“It is pertinent to mention that statutory provision under the Insolvency and Bankruptcy Code, 2016 does not permit to provide several opportunities to the Corporate Debtor in hope of the settlement. However, the Adjudicating Authority has tried his best to afford ample opportunity to both the parties to settle the matter amicably. But despite that, the Corporate Debtor has failed to make the payment or arrive at a settlement. In this case, the debt is of more than Rupees One Lac; default in repayment of such debt is admitted and the application in Form-1 is also complete. Therefore the Adjudicating Authority has admitted the Petition by the impugned Order.”

With the above mentioned findings, the NCLAT, expressed no desire to interfere with the Order passed by the Adjudicating Authority, and consequently dismissed the appeal.