Award In Favour Of Financial Creditor Already In Execution, Section 7 Petition Must Be Rejected: NCLAT Delhi
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Judicial Member) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Shaikh Mohammed Tariq v Aegis Forging Ltd., has held that when an arbitral award has been passed in favour of Financial Creditor for the...
The National Company Law Appellate Tribunal ("NCLAT"), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Dr. Alok Srivastava (Judicial Member) and Mr. Barun Mitra (Technical Member), while adjudicating an appeal filed in Shaikh Mohammed Tariq v Aegis Forging Ltd., has held that when an arbitral award has been passed in favour of Financial Creditor for the alleged financial debt and the award has been put in execution, then the same is good enough reason to refuse admission of Section 7 application.
Background Facts
On the personal guarantee of Mr. Shaikh Mohammed Tariq ("Appellant/Financial Creditor") the Creditor's investors gave some funds to Aegis Forging Ltd. ("Respondent/Corporate Debtor"). The Financial Creditor had furnished cash security in furtherance of the personal guarantee. On the basis of the said guarantee, arbitration proceedings were initiated. On 11.11.2013 the Arbitral Tribunal had passed an Award in favour of the Financial Creditor and the award has already been put into execution. The Financial Creditor had also filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking to initiate Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor. The Financial Creditor argued that the guarantee given by him is fully covered by Section 5(8)(i) of the IBC and is a financial debt.
In view of the Award already being in execution, the Adjudicating Authority refused to admit Section 7 petition and dismissed it. The Appellant filed an appeal before the NCLAT against the order of dismissal.
Decision Of NCLAT
The Bench observed that there is already an Award to pay Cash Security of Rs. 3,64,58,785/- with interest to the Financial Creditor. The Award already been put in execution by the Financial Creditor, is a reason good enough to refuse admission of Section 7 petition. Reliance was placed on the Supreme Court judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited, wherein it has been held that admission of Section 7 application is not obligatory merely on proof of debt and default. The Bench upheld the Adjudicating Authority order and dismissed the appeal.
Case Title: Shaikh Mohammed Tariq v Aegis Forging Ltd.
Case No.: Company Appeal (AT) (Ins.) No. 1342 of 2022 & I.A. No. 4107, 4165 of 2022
Counsel For Appellant: Mr. Abhinav Raghuvanshi, Mr. Ashutosh Shukla, Advocates