The Hon’ble High Court at Calcutta on 18th August 2021 nullified order of National Company Law Tribunal directing all financial creditors to mandatorily file a default record from information utility along with a plea under Section 7 of Insolvency & Bankruptcy Code.
The judgment has been rendered by Hon’ble Mr. Justice Shekhar B. Saraf in the petition challenging the order passed by the NCLT earlier on May 12, 2020, with respect to the submission of records from Information Utility. Earlier the order prescribed mandatory obligation on all financial creditors to submit financial information from the Information Utility as a condition precedent for filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
The Court has held that a financial creditor can rely on any other mode of evidence to represent a financial debt. It was also stated that there will be no mandatory requirement to file a default record of financial information from Information Utility along with a plea under Section 7 of Insolvency & Bankruptcy.
The judgment stated that financial creditors can independently depend upon any of the means to present a financial debt which could be any record of default from the information utility or any other specified document that evidences the existence of the financial debt.
The Court examined in detail the extent of the powers granted to and available with the NCLT and NCLAT and stated though institutions like NCLT/NCLAT are free to regulate their own procedure, such use of its power is restricted and subject to the principles of natural justice as well as the provisions of Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016 which also includes rules/ regulations made under the IBC, 2016 formulated by the regulatory body namely, the IBBI.
The Court acknowledged that the NCLT has acted without its jurisdiction and exceeded its jurisdiction beyond the provisions of Section 424 of the Companies Act, 2013 and Section 7(3)(a) of the Insolvency and Bankruptcy Code, 2016. Additionally, the order was in contradiction to the Rule 4 of AA Rules, 2016, and Regulation 8 of the CIRP Regulations, 2016.