NCLAT declared the appeal filed by the Corporate Debtor through its director as non-maintainable following the initiation of CIRP under Section 7 of the IBC.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey reviewed an appeal and observed that an appeal against the admission of a Section 7 application under the IBC is not maintainable if filed by the corporate debtor through its director, as per the Supreme Court’s ruling in Innoventive Industries Limited v. ICICI Bank and Another, REEDLAW 2017 SC 08563, which holds that once an insolvency professional is appointed, the erstwhile management loses the authority to act on behalf of the company.
The NCLAT dismissed an appeal filed against the order dated May 3, 2024, which admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Stressed Assets Stabilization Fund (Financial Creditor) against Krystal Stone Exports Ltd. (Corporate Debtor). The appeal had been initiated by the Corporate Debtor through one of its directors, Mr. B.D. Agarwal, authorized by a board resolution dated December 1, 2023.
The respondent raised a preliminary objection regarding the maintainability of the appeal, arguing that the appeal could not be filed by the Corporate Debtor through its director after the initiation of insolvency proceedings. Relying on the Supreme Court’s judgment in Innoventive Industries Limited v. ICICI Bank and Another, REEDLAW 2017 SC 08563, the respondent contended that once an insolvency professional is appointed, the erstwhile directors lose the authority to act on behalf of the company, rendering the appeal non-maintainable.
Faced with this objection, the appellant’s counsel conceded the defect but sought to cure it by filing an application. However, the respondent’s counsel argued that such a defect could not be rectified after filing, as questions of limitation would arise, making the appeal fundamentally defective.
The NCLAT, considering the Supreme Court's decision in Innoventive Industries Limited v. ICICI Bank and Another, REEDLAW 2017 SC 08563, concluded that the appeal was not maintainable, as it had been improperly filed by the Corporate Debtor through its director based on a board resolution passed after the initiation of insolvency proceedings. The tribunal dismissed the appeal, holding that no costs were to be imposed.
Mr. Shashank Deo Sudhi, Mr. Aru Prakash, Mr. Reamnie Hooda, Mr. Amish Gupta, Advocates represented the Appellant.
Mr. Mohit Nandwani, the Advocate appeared for I.A. No. 6920 of 2024.
Mr. SK Verma, Insolvency Professional.
CMA S.K. Bhatt, CMA Kamal Deep Tyagi, Advocates appeared for Respondent No. 2.
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