[IBC] Pendency Of Civil Suit Doesn't Preclude Admission Of S. 7 Application When Debt & Default Are Proven: NCLAT

Background Facts:

The Financial Creditor (Respondent) initially filed a winding-up Petition, which was transferred to the Adjudicating Authority (National Company Law Tribunal, Ahmedabad). The Adjudicating Authority admitted the Section 7 Application. The Adjudicating Authority in the Impugned order found that the debt and default were proved. The Company Petition was filed at the time when the limit was only Rs. 1 Lakh. The Corporate Debtor committed a default exceeding Rs. 1 Lakh.

The Appellant filed the Appeal against the impugned order dated 09.09.2024 passed by the Adjudicating Authority by which the Section 7 Application filed by the Financial Creditor was admitted.

Contentions of the Parties:

The Corporate Debtor argued that a Civil Suit filed by the Corporate Debtor was considered and the Adjudicating Authority had held that the pendency of the Suit shall not be a reason to not admit the Section 7 Application.

The Appellant argued that the dispute was pending in the Civil Suit and the Section 7 Application ought not to have been admitted.

Observations:

The Tribunal noted that the civil suit was filed after the initiation of the winding-up proceedings in the High Court, which were later transferred to the NCLT.

The Tribunal held that the pendency of the Civil Suit was no reason for not proceeding to admit the Section 7 Application when the debt and default were proved. The NCLAT found no error in the order of the NCLT, which admitted the Section 7 Application. Thus, it dismissed the appeal.

Case Title: Navin Chandra Mishra (Suspended Director of CMR Lifesciences Pvt. Ltd.) vs. Nand Kishore Palaha & Ors.

Case Number: Company Appeal (AT) (Insolvency) No. 1851 of 2024

Date of Order: 27.09.2024