Case Law Details
Shweta Sharma Vs SREI Equipment Finance Ltd. & Anr. (NCLAT Delhi)
The National Company Law Appellate Tribunal (NCLAT) in Delhi rendered a significant decision regarding the validity of a Section 7 application in the case of Shweta Sharma Vs SREI Equipment Finance Ltd. The dispute stemmed from a loan agreement between the Financial Creditor and the Corporate Debtor, ‘Shweta Housing & Hospitality Private Limited,’ wherein defaults led to arbitration and subsequent legal proceedings.
The core issue revolved around whether the Section 7 application, filed by the Financial Creditor, was valid, considering objections raised by the Corporate Debtor regarding the arbitral award’s legitimacy and the application’s timeliness. The Financial Creditor extended a loan of Rs. 18,09,00,000 to the Corporate Debtor, which defaulted on repayments, leading to the initiation of arbitration proceedings. Despite objections raised by the Corporate Debtor, including the claim of a void arbitral award and timeliness concerns, the NCLAT upheld the Section 7 application.
The NCLAT’s decision was based on several factors. Firstly, it analyzed the timeliness of the application, considering the date of default and the period for repayment outlined in the loan agreement. The Adjudicating Authority concluded that the application was filed within the prescribed timeframe, even excluding the period during the COVID-19 pandemic, as per a Supreme Court order.
Secondly, the validity of the arbitral award was debated. While the Corporate Debtor argued the award’s voidness, citing unilateral arbitrator appointment, the NCLAT refrained from adjudicating on this matter, as it was pending before the Delhi High Court. The NCLAT maintained focus on the debt and default issue, emphasizing that even without considering the arbitral award, there was sufficient evidence to establish default.
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