Merely because there is a debt and a default it cannot be construed that a Section 7 Application is required to be admitted – Ocean Deity Investment Holdings Ltd. Vs. Suraksha Asset Reconstruction Ltd. – NCLAT New Delhi
NCLAT held that merely because there is a ‘debt’ and a ‘default’ it cannot be construed that a Section 7 Application is required to be admitted. The Adjudicating Authority ought to have examined the ‘nature of these financial transactions’ having regard to the Investigation Reports which were filed by the Appellant herein, the violation of the Articles of Association and assessed whether the transactions were collusive in nature or not and used its discretion whether to admit such an Application or not, keeping in view the scope and objective of the Code. It is appropriate at this juncture, to rely on the Judgement of the Hon’ble Supreme Court in ‘Embassy Property Development Pvt. Ltd.’ Vs. ‘State of Karnataka’ (2020) 13 SCC 308, in which the Hon’ble Apex Court has clearly noted that the Adjudicating Authority has the jurisdiction to enquire into allegations of fraud when there is a prima facie case of fraudulent initiation of CIRP.
