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Synopsis

The National Company Law Appellate Tribunal at Delhi has recently observed that the proceedings under Section 13 of the Companies Act 2013 cannot be questioned in proceedings under Section 7 of the Insolvency and Bankruptcy Code 2016 but the relevancy of the documents can be decided by the adjudicating authority.

“We accept the submission of the Appellant that in proceeding under Section 7 orders passed in the proceedings under Section 13 of the Companies Act, 2013 cannot be questioned. Whether the documents have any relevance or not has to be considered by the Adjudicating Authority after the document is seen,” the bench said.

These observations were rendered by the NCAT bench, presided over by Chairperson Justice Ashok Bhushan, Technical Member Barun Mitra, and Technical Member Arun Baroka while hearing an appeal challenging the National Company Law Tribunal's (NCLT) decision to dismiss the appellant's plea to take on record an application filed by a company under Section 13 of the Companies Act 2013.

The appellant, Ishan Singh, had commenced the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC 2016 against the respondent, Spaze Towers Pvt. Ltd. During the course of the CIRP, the respondent filed an application to the Central Government, seeking a change in its registered office from the National Capital Territory of Delhi to the State of Haryana.

The appellant filed in IA before the NCLT praying to take on record the application of the respondent filed under Section 13(4) of the Companies Act, 2013. However, the NCLT dismissed this IA. Subsequently, an appeal was lodged with the NCLAT challenging the NCLT's decision.

The counsel representing the appellant argued that in proceedings under Section 7 of the Insolvency and Bankruptcy Code, orders issued in proceedings under Section 13 of the Companies Act cannot be questioned. Nevertheless, the documents presented may bear relevance to the Section 7 application and can be looked into by the adjudicating authority to examine them.

On the other hand, the counsel for the respondent contended that an application under Section 7 should primarily focus on debt, default, and the territorial jurisdiction of the Adjudicating Authority. They argued that the document in question was not relevant to this Section 7 application, and therefore, the Adjudicating Authority correctly rejected it.

While allowing the appeal the NCLAT agreed with the contentions of the appellant and recorded that documents may be relevant which can be looked into by the adjudicating authority and the respondent has full liberty to raise objections with regard to the relevance of the document and to support its submission that it does not improve the case of the Appellant in any manner.

Therefore, while setting aside the order of the NCLT the bench said that NCLT had erred in rejecting the application filed by the Appellant

“We, thus, are of the view that the Adjudicating Authority ought to have taken the document on record and thereafter examine the relevance of the document, if any, after hearing the parties. We are satisfied that the Adjudicating Authority erred in rejecting the application filed by the Appellant to take on record documents which was a document filed by the Corporate Debtor itself,” the bench said.

Case title: Ishan Singh vs Spaze Towers Pvt. Ltd.