Vekas Kumar Garg Vs DMI Finance Pvt. Ltd. & Anr. (NCLAT Delhi)
Summary: The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, held that third-party intervention is not permissible at the pre-admission stage of proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal dismissed an appeal filed by Vekas Kumar Garg, who sought impleadment in insolvency proceedings initiated by DMI Finance Pvt. Ltd. against another company. It held that only the financial creditor and corporate debtor are necessary parties at this stage, when the Adjudicating Authority must determine whether a financial debt and default exist and whether the application is complete.
The appellant was acting as Resolution Professional of Ninex Developers Limited (NDL) and Redtopaz Real Estate Pvt. Ltd., both undergoing corporate insolvency resolution proceedings. He sought to participate in CP IB-2115/ND/2019, contending that NDL held 46.59% equity shares in the corporate debtor against which DMI Finance had initiated proceedings. According to the appellant, commencement of CIRP against that company would adversely affect NDL and jeopardise the interests of numerous homebuyers. He also questioned the maintainability of the Section 7 application by relying upon the decision in Dr. Vishnu Kumar Agarwal vs. M/s. Piramal Enterprises Ltd.
The NCLAT rejected these submissions as grounds for impleadment. It explained that the Adjudicating Authority’s function at the pre-admission stage is confined to examining the existence of financial debt, default and completeness of the application under Section 7. The Tribunal emphasised that disputes concerning shareholding or inter se directorial issues cannot be entertained at this preliminary stage, nor is a lengthy hearing contemplated. Consequently, the appellant’s status as Resolution Professional of a shareholder company did not make him a necessary party to the proceedings.
The appellant relied upon this decision to challenge the maintainability of the pending Section 7 application. The NCLAT recorded the submission but rejected the appellant’s request for impleadment without undertaking a substantive examination of that precedent’s applicability to the underlying insolvency petition.
Cases Discussed
- Dr. Vishnu Kumar Agarwal vs. M/s. Piramal Enterprises Ltd. — Company Appeal (AT) (Insolvency) No. 346 of 2018, NCLAT, 8 January 2019.
FULL TEXT OF THE JUDGMENT/ORDER OF NCLAT DELHI
18.02.2021: Appellant- Mr. Vekas Kumar Garg seeking impleadment as a necessary party in CP IB-2115/ND/2019 pending before the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench, Court-VI, at the pre-admission stage under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) is aggrieved of the impugned order dated 10th December, 2020 by virtue whereof its application for impleadment came to be rejected on the ground that he was not necessary party to the proceedings. The impugned order is assailed on the ground that the Appellant is the Resolution Professional of two companies namely— ‘M/s. Ninex Developers Limited’ (“NDL” for short) which is facing the Corporate Insolvency Resolution Process (CIRP) before the Adjudicating Authority (NCLT), Principal Bench, New Delhi in C.P. No. (IB) 281(PB)/2019 and also in the CIRP of ‘M/s. Redtopaz Real Estate Pvt. Ltd.’ (“RREPL” for short), CIRP of which is also pending before the Adjudicating Authority (NCLT), Bench-II, New Delhi in CP No. (IB)-667(ND) of 2019.
2. It is submitted on behalf of the Appellant that the main Company Petition is pending adjudication in which Respondent No.1 is seeking triggering of CIRP against Respondent No.2. It is further submitted that if CIRP is commenced against Respondent No.2, NDL holding 46.59% equity shares would be the direct sufferer which is already undergoing a CIRP. Besides the interest of many homebuyers will be in jeopardy. It is further submitted that the application under Section 7 pending consideration before the Adjudicating Authority is not maintainable in view of the Judgment passed by this Appellate Tribunal in “Dr. Vishnu Kumar Agarwal vs. M/s. Piramal Enterprises Ltd.- Company Appeal (AT) (Insolvency) No. 346/2018”.
3. After hearing learned counsel for the Appellant and going through the record, we are of the view that the ground projected by the Appellant in his capacity as Resolution Professional of NDL for seeking impleadment in CP IB-2115/ND/2019 pending consideration before the Adjudicating Authority does not warrant impleadment of Appellant as party Respondent. In an application under Section 7, the Financial Creditor and the Corporate Debtor alone are the necessary party and the Adjudicating Authority is, at the pre-admission stage, only required to satisfy itself that there is a financial debt in respect whereof the Corporate Debtor has committed a default warranting triggering of CIRP. The Adjudicating Authority is required to satisfy itself in regard to there being a financial debt and default thereof on the part of the Corporate Debtor besides the application being complete as mandated under Section 7(5) of the ‘I&B Code’ and then pass an order of admission or rejection on merit as mandated under sub-section (4) of Section 7 within 14 days. No third party intervention is contemplated at that stage.
4. No lengthy hearing is warranted at the pre-admission stage nor can the dispute in regard to shareholding or inter se directorial issue be entertained.
5. Viewed from this perspective, we find no legal infirmity in the impugned order passed by the Adjudicating Authority. The course open to Appellant would be to apprise the IRP of the admission of the claim in CIRP of NDL if the application under Section 7 pending before the Adjudicating Authority is admitted and IRP is appointed. Such situation may not arise if the Adjudicating Authority is not satisfied about debt and default.
The appeal is accordingly dismissed. However, there shall be no order as to costs.
