NCLAT allowed the appeal, finding an error in the Adjudicating Authority's dismissal of the Section 7 Application.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) was hearing an appeal and observed that the Adjudicating Authority erred in dismissing the Section 7 Application. The NCLAT Bench noted that the existence of debt and default under Section 7 of the IBC, evidenced by the loan agreement, audit report, and information utility records, was sufficient to initiate the Corporate Insolvency Resolution Process, notwithstanding procedural objections related to the stamping of the promissory note. The Appellate Tribunal allowed the appeal.
An appeal was filed under Section 61 of the Insolvency and Bankruptcy Code (IBC) challenging the order of the National Company Law Tribunal (NCLT), Indore Bench, which dismissed their application under Section 7 of the IBC filed by the Appellant (Financial Creditor) seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Respondent (Corporate Debtor). The appeal arose due to SPG Macrocosm's failure to repay a loan of Rs. 70,00,000 disbursed in 2018, despite repeated demands and notices.
The Appellant argued that the existence of debt and default was clearly established through various documents, including the loan agreement, balance sheet entries, and the Record of Default authenticated by NeSL. They contended that the Adjudicating Authority erred by focusing on the insufficient stamping of the promissory note, which should not have overshadowed the evidence of debt and default.
The Respondent contended that the interest component on the loan was disputed and that the promissory note was insufficiently stamped. They also argued that the loan should be considered a business loan, not a financial loan under the IBC, thereby rendering the CIRP application inapplicable.
The NCLAT concluded that the Adjudicating Authority erred in dismissing the application under Section 7 of the IBC. The existence of debt and default was clearly established, and the procedural requirements were met by the Appellant. The issue of stamping did not outweigh the substantive evidence of debt and default. Consequently, the appeal was allowed, the impugned order was set aside, and the application under Section 7 of the IBC was admitted. The matter was directed to be taken up by the Adjudicating Authority within ten days to initiate the CIRP.
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