Bank has initiated recovery proceedings against the Corporate Debtor under the provisions of Section 13 (4) SARFAESI Act, the Corporate Debtor trying to seek benefits of moratorium under Section 14 of the IBC – Shree Ambica Rice Mill Vs. M/s Kaneri Agro Industries Limited – NCLAT New Delhi
NCLAT observed that when the Adjudicating Authority sent a notice of Section 7 Application to the Corporate Debtor then Corporate Debtor appeared before Adjudicating Authority through Ld. Counsel and did not controvert the claim of the Financial Creditor and default in repayment of the debt, not only this, the Corporate Debtor filed an Affidavit before the Adjudicating Authority that they have no objection, if the Adjudicating Authority admits the Application and initiate the CIRP. Nobody will believe that the Corporate Debtor Company having paid up capital of Rs. 7 Crores 30 lacs and Bank of Baroda has sanctioned cash credit limit for the amount of Rs. 24 Crores, is not able to make a payment of Rs. 10 lacs and they have no objection, if the CIRP is initiated against the Company. In this case when the Corporate Debtor has admitted the default in repayment then they should have make the prayer that they are ready to settle the matter with Financial Creditor instead of submitting that they have no objection in admitting the application. In the circumstances, Ld. Adjudicating Authority held that it is a case of collusive Application.
NCLAT upheld decision of the adjudicating authority and held that it is the duty of the Adjudicating Authority to investigate the real nature of the transaction in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. The Hon’ble Supreme Court in the case of Swiss ribbons (P) Ltd v Union of India [2019] ibclaw.in 03 SC held that even if the Application filed under Section 7 meets all the requirements, then also the Adjudicating Authority has exercised discretion carefully to prevent and protect the Corporate Debtor from being dragged into the Corporate Insolvency Resolution Process malafide.
