E S KRISHNAMURTHY & ORS. versus M/S BHARATH HI TECH BUILDERS PVT. LTD.

E S KRISHNAMURTHY & ORS. versus M/S BHARATH HI TECH BUILDERS PVT. LTD.

The NCLT exceeded its statutory jurisdiction under Section 7(5) by disposing of the Section 7 petition at the pre-admission stage with directions to the corporate debtor to settle remaining claims; Section 7(5) permits only admission or rejection upon satisfaction as to default, and the NCLAT erred in holding the appeal not maintainable. Consequently, the NCLT and NCLAT orders were set aside and the Section 7 petition restored to the NCLT for fresh adjudication.

Parties
Appellant: E S Krishnamurthy & Ors.; Respondent: M/s Bharath Hi Tech Builders Pvt. Ltd.
Jurisdiction
India
Judgment Date
14 December 2021
Procedural Posture
Civil Appeal Under Section 62 of the Insolvency and Bankruptcy Code, 2016 / Judgment on Appeal (supreme Court Restored Petition to NCLT for Fresh Consideration)
Outcome
Appeal allowed; impugned orders of the NCLAT (30 July 2020) and NCLT (28 February 2020) set aside; Section 7 petition restored to NCLT for fresh disposal.
Legal Topics
Section 7 IBC Initiation of CIRP, Section 7(5) Admission or Rejection, Definition of 'default' (s.3(12)) and 'debt' (s.3(11)), Pre Admission Disposal and Settlements, Jurisdiction of NCLT and NCLAT, Maintainability and Threshold for Homebuyers
Insolvency and Bankruptcy Law Corporate Law Judicial Review Section 7 IBC Initiation of CIRP Section 7(5) Admission or Rejection Definition of 'default' (s.3(12)) and 'debt' (s.3(11)) Pre Admission Disposal and Settlements Jurisdiction of NCLT and NCLAT +1 more

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Parties

E S Krishnamurthy & Ors.

Appellant

M/s Bharath Hi Tech Builders Pvt. Ltd.

Respondent

Procedural Posture

Civil Appeal Under Section 62 of the Insolvency and Bankruptcy Code, 2016 / Judgment on Appeal (supreme Court Restored Petition to NCLT for Fresh Consideration)

Legal Issues

  1. 1 Whether the Adjudicating Authority (NCLT) may dispose of a Section 7 petition at a pre-admission stage by directing the corporate debtor to settle claims instead of admitting or rejecting the application under Section 7(5)
  2. 2 Whether the Appellate Authority (NCLAT) erred in holding the appeal not maintainable and in upholding the pre-admission disposal
  3. 3 Whether an Adjudicating Authority can compel or direct settlements of claims as part of disposing a Section 7 petition

Ratio Decidendi

The NCLT exceeded its statutory jurisdiction under Section 7(5) by disposing of the Section 7 petition at the pre-admission stage with directions to the corporate debtor to settle remaining claims; Section 7(5) permits only admission or rejection upon satisfaction as to default, and the NCLAT erred in holding the appeal not maintainable. Consequently, the NCLT and NCLAT orders were set aside and the Section 7 petition restored to the NCLT for fresh adjudication.

Court Disposition

Appeal allowed; impugned orders of the NCLAT (30 July 2020) and NCLT (28 February 2020) set aside; Section 7 petition restored to NCLT for fresh disposal.

Orders

  • Set aside judgment and order of the National Company Law Appellate Tribunal dated 30 July 2020 in Company Appeal (AT) (Insolvency) No.649 of 2020.
  • Set aside order of the National Company Law Tribunal dated 28 February 2020 in CP(IB) No.188/BB/2019.