Case Note & Summary
The case involves an appeal by SREI Equipment Finance Limited (the financial creditor) against an order of the National Company Law Appellate Tribunal (NCLAT) that set aside the admission of its application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the National Company Law Tribunal (NCLT). The dispute arose from loans given to the corporate debtor, Rajeev Anand & Ors., in 2008, which were restructured in 2016 into two loans of Rs.18.86 crores and Rs.16.80 crores. The financial creditor filed a Section 7 application on 16.03.2017, which was withdrawn with liberty to file a fresh application after the corporate debtor claimed the application was premature. A fresh application was filed on 04.08.2017, claiming an outstanding amount of Rs.21.41 crores. The corporate debtor denied this, stating that Rs.65.60 crores had been repaid. The financial creditor filed a supplementary affidavit on 03.08.2018, explaining that the corporate debtor had paid Rs.35,66,62,000/- towards previous outstanding, but a sum of Rs.18,86,00,000/- disbursed on 01.04.2016 remained due. The NCLT admitted the application, relying on the supplementary affidavit and the corporate debtor's admission in a counter affidavit from the earlier proceeding. The NCLAT set aside the NCLT order, holding that the NCLT relied on documents from a withdrawn petition and that there was no evidence of further disbursement. The Supreme Court reversed the NCLAT's decision, holding that the NCLAT erred in its findings. The Court noted that the NCLT had perused the documents, pleadings, and supplementary affidavit, and the corporate debtor's admission in the counter affidavit from the first proceeding was not a 'document' filed by the financial creditor but an admission by the corporate debtor, which could be relied upon. The Court restored the NCLT order and directed that resolution proceedings continue from the stage they were interrupted.
Headnote
A) Insolvency Law - Section 7 Application - Admission of Application - Insolvency and Bankruptcy Code, 2016, Section 7 - The NCLT admitted a section 7 application based on a supplementary affidavit and a counter affidavit from a prior proceeding where the corporate debtor admitted the debt. The NCLAT set aside the order, holding that documents from a withdrawn petition could not be relied upon. The Supreme Court held that the NCLAT erred; the counter affidavit was an admission by the corporate debtor, not a document filed by the financial creditor, and could be relied upon. The NCLT's finding of outstanding debt was supported by evidence. (Paras 7-8) B) Insolvency Law - Withdrawal of Petition - Effect on Documents - Insolvency and Bankruptcy Code, 2016, Section 7 - The NCLAT held that documents filed in an earlier petition that was dismissed as withdrawn could not be relied upon. The Supreme Court clarified that this principle does not apply to admissions made by the opposing party in a counter affidavit filed in the earlier proceeding. Such admissions are independent evidence and can be considered. (Para 7) C) Evidence Law - Admission - Estoppel - Indian Evidence Act, 1872, Section 17, 115 - The corporate debtor's admission of debt in a counter affidavit in the first round of litigation was held to be binding and could be used against it. The principle of estoppel applies to prevent the corporate debtor from taking a contrary stand. (Paras 5, 7)
Issue of Consideration
Whether the NCLAT was correct in setting aside the NCLT order admitting a section 7 application under the Insolvency and Bankruptcy Code, 2016, on the ground that the NCLT relied on documents from a previously withdrawn petition and that there was no evidence of outstanding debt.
Final Decision
The Supreme Court set aside the NCLAT order and restored the NCLT order admitting the Section 7 application. The resolution proceedings will continue from the stage at which they were interrupted. Civil Appeal No. 9425 of 2019 disposed of. Civil Appeal No. 1911 of 2020 and Civil Appeal No. 3112 of 2020 also disposed of in view of this judgment.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Section 7
- Admission of application
- Reliance on documents from withdrawn petition
- Estoppel
- Admission of debt
