Case Law Details

Case Name : Maneesh Pharmaceuticals Ltd Vs Export Import Bank of India and Ors (Supreme court of India)
Appeal Number : Civil Appeal No. 8135 of 2023
Date of Judgement/Order : 15/12/2023
Related Assessment Year :

Maneesh Pharmaceuticals Ltd Vs Export Import Bank of India and Ors (Supreme court of India)

Introduction: The recent Supreme Court judgment in the case of Maneesh Pharmaceuticals Ltd vs. Export Import Bank of India and Ors sheds light on the interplay between the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT), and the Insolvency and Bankruptcy Code (IBC) Section 7 petitions. The appeal arises from an order of the NCLAT, raising crucial questions about the evaluation of rival contentions on merits before admitting petitions under Section 7 of the IBC.

Detailed Analysis: The case began with the dismissal of the application under Section 7 of the IBC by the NCLT on the grounds of limitation. While dismissing the petition based on limitation, the NCLT made observations on merits. The NCLAT later set aside the NCLT’s order, stating that the finding of limitation was “patently illegal.” However, it also acknowledged the absence of dispute regarding the Corporate Debtor’s liability towards the Financial Creditors and the guarantee by the Respondent.

The appeal to the Supreme Court followed, leading to the dismissal of the appeal on July 4, 2023. Subsequently, the respondents sought restoration of the application under Section 7 before the NCLT, which was allowed on July 5, 2023. The NCLT’s order declining to adjourn proceedings and the subsequent appeal before the NCLAT, resulting in the direction to admit the application under Section 7, forms the crux of the current appeal.

The Supreme Court’s analysis emphasizes that the NCLAT’s direction to admit the application under Section 7 without evaluating rival contentions on merits was inappropriate. The court clarifies that the NCLAT’s earlier observations on the dispute were in the context of the limitation issue and should not be considered a conclusive determination on the admission of the petition. The judgment underscores the need for a comprehensive assessment of rival contentions before admitting a petition under Section 7.

Conclusion: In conclusion, the Supreme Court allows the appeal, setting aside the NCLAT’s judgment, and directs the NCLT to determine, after hearing the parties, whether the application under Section 7 is liable to be admitted. The court keeps all rights and contentions open, emphasizing an expeditious disposal of the application by January 31, 2024. Importantly, the Supreme Court refrains from expressing any opinion on the merits of the rival contentions, leaving them to be decided during the NCLT hearing.

The case highlights the importance of a thorough evaluation of rival contentions in insolvency proceedings and reinforces the principle that a passing reference in an order cannot be construed as a conclusive determination on merits.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. The appeal under Section 62 of the Insolvency and Bankruptcy Code 20161 arises from an order dated 6 December 2023 of the National Company Law Appellate Tribunal2.

2. The application filed by the first respondent under Section 7 of IBC was dismissed by the National Company Law Tribunal3 on 25 March 2022 on the ground that the debt was barred by limitation. However, while dismissing the petition on the ground of limitation, the NCLT also made the following observations on merits in paragraph 29 of its decision:

“29. It is clear to the Bench that there is a ‘debt’ in terms of section 3(11) and there is a ‘default’ in terms of Section 3(12) of the IBC. However, keeping in view that the date of NPA in respect of all the four loans are between 26.06.2011 to 31.07.2011 and the Petition has been filed only on 30th August, 2019, the limitation issue is very pertinent in the matter. The Bench has to take a call whether the debt is time-barred or not, in terms of provisions of the Limitation Act, 1963. The Bench before proceeding further would like to mention certain dates and events subsequent to the invocation of guarantee which will help in deciding the matter.”

3. The order of the NCLT was challenged in appeal by the respondents. The NCLAT, by its judgment dated 9 May 2023, set aside the order of the NCLT and held that the finding that the debt was barred by limitation was “patently illegal”. However, while doing so, the NCLAT also observed that “there is no dispute raised regarding the liability of the Corporate Debtor towards the Financial Creditors and the guarantee by the Respondent”.

4. The judgment of the NCLAT was questioned before this Court in appeal. The appeal was dismissed on 4 July 2023.

5. The respondents filed an IA before the NCLT seeking restoration of the application under Section 7 and the initiation of the Corporate Insolvency Resolution Process. The NCLT allowed the restoration application on 5 July 2023. A review petition has been filed before this Court seeking a review of the order passed on 4 July 2023, which is pending.

6. The NCLT, by an order dated 25 October 2023, declined to adjourn the proceedings on the ground of the pendency of the review petition and also recorded the request of the counsel for the appellant who sought time to file a further affidavit. No specific leave for filing an affidavit was granted by the NCLT. Aggrieved by the order of the NCLT dated 25 October 2023, the respondents filed an appeal before the NCLAT, which has been disposed of by the impugned order dated 6 December 2023. The NCLAT has directed the NCLT to admit the application under Section 7. That is how the appeal arises before this Court.

7. We have heard Dr Abhishek Manu Singhvi and Mr Dhruv Mehta, senior counsel appearing on behalf of the appellant and Mr Krishnendu Datta, senior counsel appearing on behalf of the respondents.

8. The application under Section 7 was originally dismissed by the NCLT on the ground that the debt was barred by limitation. When the order of the NCLT was questioned in appeal, the NCLAT set aside the order of the NCLT as being “patently illegal”. Once the order of the NCLT was set aside, the order would cease to exist. The observations in regard to whether there was a debt due and payable would also not exist with the setting aside of the order. The order of the NCLAT, properly construed, dealt with the issue as to whether the debt was barred by limitation. A passing reference in the order of the NCLAT to whether the debt was in dispute must be read in the context of the nature of the appeal which arose from an order of the NCLT that the debt was barred by limitation. Hence, it would be inappropriate to read the order of the NCLAT as concluding the issue in regard to whether the application under Section 7 was or was not liable to be admitted. A stray observation in the order of the NCLAT cannot be regarded as a conclusive determination on merits. That apart, the order of the NCLT which contained an observation that the debt was not in dispute was set aside in appeal by the NCLAT in its entirety. Consequently, we are of the view that it was inappropriate for the NCLAT to direct the NCLT to admit the application under Section 7 straightaway without an evaluation of the rival contentions on merits.

9. We accordingly allow the appeal and set aside the impugned judgment and order of the NCLAT dated 6 December 2023. The application under Section 7 has already been restored to the file of the NCLT. The NCLT shall, after hearing the parties, determine as to whether the application under Section 7 is liable to be admitted. All the rights and contentions of the parties in that regard are kept open.

10. Having regard to the pendency of the proceedings before various fora, we direct that the application under Section 7 be disposed of expeditiously and, in any event, by 31 January 2024.

11. We clarify that this Court has not expressed any opinion on the merits of the rival contentions which will fall for determination in the course of the hearing of the application under Section 7.

12. Responding to the submission of Mr Krishnendu Datta, senior counsel appearing on behalf of the respondents, Dr Abhishek Manu Singhvi, senior counsel appearing on behalf of the appellant, has assured the Court that the appellant has no intention to dispose of the assets to the prejudice of the respondents between the date of this order and the date of the final decision of the NCLT on the application under Section 7.

13. Pending application, if any, stands disposed of.

1. The appeal is allowed in terms of the signed order.

2. Pending application, if any, stands disposed of.

Notes :

1 “IBC”

2 “NCLAT”

3 “NCLT”

Download Judgment/Order

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