On August 8, 2023, the National Company Law Appellate Tribunal, New Delhi gave its decision in the case of Jeevan Birje Parashram v. Kamal Metal Corporation, whereby it held that, if the corporate debtor was given several opportunities to appear and file a reply before the adjudicating authority and if it fails to do so, the National Company Law Appellate Tribunal (“NCLAT”) is not inclined to grant any indulgence or consider any submission on the facts of the case in the appeal. 

Brief Facts:

Jeevan Birje Parashram filed an appeal, [Company Appeal (AT) (Ins) No. 1007 of 2023 before the NCLAT against Kamal Metal Corporation (“Operational Creditor”), challenging the order dated June 6, 2023 passed by the National Company Law Tribunal, Mumbai (“Impugned Order”) whereby the Operational Creditor’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) seeking initiation of corporate insolvency resolution process was admitted against Shri Vaijanath Industries Private Limited (“Corporate Debtor”).

The Operational Creditor supplied carbon and alloy steel bars to the Corporate Debtor, in Pune. Accordingly, the Operational Creditor raised certain invoices upon the Corporate Debtor from May 8, 2019 to January 10 2020, for an aggregate amount of Rs.1,07,03,874/-. Out of the total outstanding amount, the Corporate Debtor paid Rs.5,00,000/- to the Operational Creditor and the Corporate Debtor was in default of the balance outstanding amount.

The Operational Creditor filed ledger accounts of the Corporate Debtor and the NeSL Report wherein an amount of Rs.1,21,73,639/- was reflecting as the default amount, which was “due and payable” to the Operational Creditor.

Observation:

The NCLAT observed that the Adjudicating Authority ordered court notice to be served upon the Corporate Debtor by the National Company Law Tribunal (“NCLT”) Registry, to appear and file its reply in the matter. No one appeared on behalf of the Corporate Debtor. Thereafter, the matter was again listed when again no one appeared on behalf of the Corporate Debtor. The Adjudicating Authority was informed by the Operational Creditor that it has received an email from the Corporate Debtor acknowledging the liability and offering to settle the outstanding debt.

The matter was thereafter again listed on September 20 2022 when the Adjudicating Authority again directed the NCLT Registry to serve the Court Notice, upon the Corporate Debtor to appear on November 14, 2022 and file its reply in the matter. The said court notice was delivered upon the Corporate Debtor on October 11, 2022. The matter was thereafter listed for hearing on two separate occasions and adjourned to February 21 2023 due to paucity of time, when the advocate on behalf of the Corporate Debtor appeared and undertook to file the reply and vakalatnama on behalf of the Corporate Debtor. The matter was thereafter again listed on April 17, 2023 for final hearing. However, none appeared on behalf of the Corporate Debtor, nor any reply was filed.

The NCLAT observed that the Corporate Debtor inspite of ample opportunities did not appear and file any defense and therefore it cannot be allowed to raise factual issues and question the findings recorded by the Adjudicating Authority. The NCLAT thus, disallowed the Corporate Debtor to raise factual issues and contend that the claim was less than rupees one crore.

Decision:

The NCLAT dismissed the Appeal while observing that the Appellant did not appear before the Adjudicating Authority inspite of several opportunities and specific directions to file its reply and held that on such conduct of the Corporate Debtor it is not inclined to grant any indulgence or consider any submission on facts.

Please find attached a copy of the order. 

This update has been contributed by Murtaza Kachwalla (Partner) and Aashdin Chivalwala (Principal Associate).

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