NCLAT on Section 7 of the I&B Code No further consideration to dismissed applications
The National Company Law Appellate Tribunal has dismissed the Appeal, filed by the Appellant who is a shareholder of the 'Mirco Dynamics Pvt. Ltd.', seeking reversal of the order of dismissal of certain Miscellaneous Application in terms of impugned order dated 18th March, 2020 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench.
The facts of the case pertain to the directions passed by this Appellate Tribunal in the Company Appeal filed by Mr. Ishrat Ali against the admission order passed by the Adjudicating Authority in regard to application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Cosmos Co-operative Bank Limited which was held to be barred by limitation.
This Appellate Tribunal had dismissed the application preferred under Section 7 and directed the Adjudicating Authority to close the proceedings. The Adjudicating Authority, while closing the proceedings in the main Company Petition also closed all pending applications including the Miscellaneous Applications which related to complaint of perjury made by a Director of the Corporate Debtor. Aggrieved of the same the Appellant had preferred the instant appeal.
The Appellant strongly contended that notwithstanding dismissal of application under Section 7 by this Appellate Tribunal in appeal proceedings, the Adjudicating Authority ought to have decided these Miscellaneous Applications relating to complaint of perjury emanating from a Director of a Corporate Debtor independently. The setting aside of admission order of the application under Section 7 by this Appellate Tribunal in appeal does not affect the jurisdiction of the Adjudicating Authority who had to enquire into the matter which essentially pertained to fraudulent initiation of Section 7 of the I&B Code application.
The arguments of the Appellant have not been accepted by the Tribunal and it has been observed that the order impugned in this appeal was passed in compliance to the judgment of this Appellate Tribunal as a sequel to the dismissal of application under Section 7.
Once the main application under Section 7, which was the basic edifice for passing of order of admission at the hands of the Adjudicating Authority, was dismissed and proceedings emanating there from and consequential thereto were closed, the incidental and ancillary applications including the MAs in which the proceedings were closed in terms of the impugned order, did not survive for further consideration.
With the closing of case by the Adjudicating Authority in compliance to the orders passed by this Appellate Tribunal in appeal, inquiry in initiation of insolvency resolution process alleged to be fraudulent or with malicious intent would be preposterous when the closure of such proceedings is a consequence of allowing of appeal against the order of admission passed by the Adjudicating Authority on the ground of limitation.
Thus, without finding any flaw in the impugned order, the Tribunal has held that the insolvency resolution process, set in motion on the basis of a flawed order of admission stands set aside for being hit by limitation, stands terminated and all Miscellaneous Applications relating to this process stand dismissed on legally tenable grounds.