Encore Asset Reconstruction Company Private Limited Vs New Tech Imports Private Limited (NCLT Delhi)
NCLT Delhi held that the pendency of proceedings before Debt Recovery Tribunal [DRT] does not preclude or bar the initiation of Corporate Insolvency Resolution Process [CIRP] under the Insolvency and Bankruptcy Code, 2016 [IBC].
Facts- This Petition is filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by City Union Bank, seeking to initiate Corporate Insolvency Resolution Process against M/s New Tech Imports Private Limited [Corporate Debtor]. Notably, the present petition was registered on 16.11.2022 before this Adjudicating Authority. The amount of default as per Form I part IV of the Petition sums up to an amount of 28,16,38,921/- as on 31.08.2022.
Conclusion- Held that an order of the DRT setting aside NPA classification does not negate the existence of financial debt or the occurrence of default, which are the two primary factors for admitting a Section 7 petition under the IBC. The DRT’s jurisdiction is limited to determining whether the lender followed the correct procedure under SARFAESI, and it does not extend to making findings on default under IBC, which is the sole domain of the Adjudicating Authority (NCLT).
In light of the statutory framework under Section 238 of the IBC and the authoritative pronouncements of the Hon’ble NCLAT, it is evident that the order of the DRT does not have any bearing on the present proceedings. The determinative factor under IBC is ‘default’ and not the validity of NPA classification under SARFAESI. Accordingly, the present application remains fully maintainable and cannot be dismissed on the basis of the DRT’s ruling.
