Case Note & Summary
The appeal was filed by Nakul Bharana, a suspended director of Bareilly Highways Project Limited (corporate debtor), challenging the order dated 23.09.2024 of the National Company Law Tribunal, New Delhi, Principal Bench, which admitted a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) filed by National Asset Reconstruction Company Limited (NARCL) against the corporate debtor. The corporate debtor was a Special Purpose Vehicle for a national highway project. State Bank of India (SBI) had sanctioned financial facilities to the corporate debtor on 15.11.2010. Subsequently, SBI assigned its debt to NARCL, and NARCL filed the Section 7 application. The appellant contended that the assignment was not valid and that the Section 7 application was not maintainable. The NCLAT examined the issue of locus standi of the appellant, who was a suspended director, to challenge the assignment. The Tribunal held that the appellant had no locus to challenge the assignment as he was not a party to the assignment deed and the assignment was a commercial transaction between financial creditors. The NCLAT further held that the Section 7 application by NARCL was maintainable as the assignee of the debt. The appeal was dismissed, and the order of the Adjudicating Authority was upheld.
Headnote
A) Insolvency Law - Locus Standi - Suspended Director's Challenge to Assignment of Debt - The appellant, a suspended director, challenged the assignment of debt from SBI to NARCL and the admission of Section 7 application. The NCLAT held that the appellant has no locus to challenge the assignment as he is not a party to the assignment deed and the assignment is a commercial transaction between financial creditors. The appeal was dismissed. (Paras 1-10) B) Insolvency Law - Assignment of Debt - Maintainability of Section 7 Application - The NCLAT held that the Section 7 application filed by NARCL, as the assignee of the debt, is maintainable. The assignment of debt is valid and the financial creditor can initiate CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016. (Paras 5-10)
Issue of Consideration
Whether the appellant, a suspended director of the corporate debtor, has the locus to challenge the assignment of debt from State Bank of India to National Asset Reconstruction Company Limited, and whether the Section 7 application filed by NARCL is maintainable.
Final Decision
The appeal is dismissed. The order of the Adjudicating Authority admitting the Section 7 application is upheld.
Law Points
- Standing of suspended director to challenge assignment of debt
- Maintainability of Section 7 application after assignment of debt
- Assignment of debt under IBC
- Section 7 application by financial creditor
- Corporate Insolvency Resolution Process
