Catalyst Trusteeship Limited vs ASF Buildtech Private Limited

ORDER

“We issued notice qua the captioned application filed under Section 7 of IBC, 2016 on 18.03.2024. On next date of hearing i.e. 01.04.2024 the matter could not reach for hearing due to paucity of time. On 04.04.2024 the Ld. Counsel for the corporate debtor sought an opportunity to file reply to the petition. Subsequently on 16.04.2024 the reply reported as filed on behalf of the corporate debtor was not reflected on the case information system, thus the corporate debtor was given an opportunity to ensure the uploading of the same. The Financial Creditor was also given an opportunity to file its rejoinder, if any. The order dated 16.04.2024 reads thus:-

“The reply stated to have been filed on behalf of the CD but it is not available on DMS/e-portal of this Tribunal. Nevertheless, the Ld. Counsels for the Creditor has admitted that a copy of reply has been made available to him. He seeks an opportunity to file the rejoinder. At the request made by the Ld. Counsel for the Creditor, the hearing is deferred to 30.04.2024. In the meantime, the CD shall also ensure that the reply is uploaded on DMS/eportal of this Tribunal. List the matter on 30.04.2024.”

Today, the counsels for the parties are ad idem that the corporate debtor has sent a restructuring proposal to the Financial Creditor and the proposal is under examination of the FC. The counsel for the Petitioner also submitted that in order to examine the proposal effectively the Financial Creditor has asked for certain more documents from the corporate debtor. In any case the parties are in process of arriving at some settlement qua the defaulted amount.

Ld. Counsel appearing for the Petitioner submitted that though the corporate debtor has some plausible defence, but to avoid any controversy, it has offered settlement to the Petitioner.

In the wake of the stand taken by Ld. Counsel for the parties, the present petition is disposed of.”

However, it is made clear that if the settlement is not finalized and implemented within 2 weeks from today i.e. by 14.05.2024, the Ld. Counsel for the Financial Creditor would mention for revival of present petition before this Bench on 14.05.2024. The present petition stands disposed of.”

I.A. NO. 1194 OF 2025

ANALYSIS & FINDINGS: -

“7. Initiation of corporate insolvency resolution process by financial creditor. —

(1)

A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

Explanation. —For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.”

“5.

Definitions. – In this part, unless the context otherwise requires, -[…]

(8)

“financial debt” means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes—

(a)

money borrowed against the payment of interest;

(b)

any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;

(c)

any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)

the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;

(e)

receivables sold or discounted other than any receivables sold on nonrecourse basis;

(f)

any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;

(g)

any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h)

any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i)

the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;”

“61.

The definition of “financial debt” in Section 5(8) then goes on to state that a “debt” must be “disbursed” against the consideration for time value of money. “Disbursement” is defined in Black’s Law Dictionary (10th ed.) to mean:

“1.

The act of paying out money, commonly from a fund or in settlement of a debt or account payable. 2. The money so paid; an amount of money given for a particular purpose.”

In the present context, it is clear that the expression “disburse” would refer to the payment of instalments by the allottee to the real estate developer for the particular purpose of funding the real estate project in which the allottee is to be allotted a flat/apartment. The expression “disbursed” refers to money which has been paid against consideration for the “time value of money”. In short, the “disbursal” must be money and must be against consideration for the “time value of money”, meaning thereby, the fact that such money is now no longer with the lender, but is with the borrower, who then utilises the money […].”

“7. Initiation of corporate insolvency resolution process by financial creditor.—

[...]

(3)

The financial creditor shall, along with the application furnish-

(a)

record of the default recorded with the information utility or such other record or evidence of default as may be specified;

(b)

the name of the resolution professional proposed to act as an interim resolution professional;

(c)

any other information as may be specified by the Board.”

“Dear Madam/ Sir,

This has reference to the Loan Agreement executed by the (a) Borrower(s) and (b) Lender (more particularly mentioned in Schedule I hereunder), for the loan facility, more particularly mentioned in Schedule I hereunder, and/ or any amendment(s)/ addendum(s) thereto, ("Loan Agreement'') and/ or other Loan Document(s).

That at the time of availing the said loan facility, you had assured and promised not to commit any default in the payment of regular monthly installments, pursuant to the execution of the loan agreement.

Subsequently, Indiabulls Housing Finance Limited (now known as Sammaan Capital Ltd.) ("Assignor") has assigned all their rights, titles, interests in relation to the Receivables under the Loan Documents to Catalyst Trusteeship Limited ("Trustee") acting in its capacity as Trustee of the Settlor for "India Wholesale Loan Opportunities Trust -I" "India Wholesale Loan Opportunities Trust -II", "India Wholesale Loan Opportunities Trust - III" and "India Wholesale Loan Opportunities Trust - IV" vide Assignment Agreement(s) Dated 29.03.2022.

Please note that Event of Default has/have already occurred under the Loan Documents as a result of failure by the Obligor(s) to comply with the provisions of the Loan Documents including payment default(s)/delay (viz. the interest) on the Due Date(s) under the Loan Documents.

Kindly note that, as on 27 August 2024, the total (aggregate) outstanding Loan amount(s) along with the interest thereon is Rs.1,97,91,37,394/- (Rupees One Hundred Ninety Seven Crores Ninety One Lakh Thirty Seven Thousand Three Hundred Ninety Four Only) alongwith pending TDS for an amount or Rs. 0/- (Rupees Nil Only), which is payable to the Trustee under the Loan Documents.

In view of the aforesaid and pursuant to the provisions of the Loan Documents, without prejudice to our other rights and remedies, we hereby recall the outstanding Loan(s) and call upon you to forthwith pay us all the amount(s) payable to the Trustee under the Loan Documents (including the amount(s) specified above) within 3 (three) days from the date of receipt of this notice.

In case of failure on your part to comply with the aforesaid, without prejudice to our other rights/remedies and without any further notice to any of you,

(a)

please treat this notice (issued under the Loan Documents and/ or the applicable laws) as a notice of/for invocation, sale, disposing off, transfer, grant, conveyance and/ or assignment of any/ all of the Security/ Securities including the Mortgaged Properties, Pledged/ Charged Shares (more particularly mentioned in Schedule II hereunder) and/ or the Receivables provided in favor of the Trustee under the Loan Documents; and/or

(b)

please treat this notice (issued under the Loan Documents and/ or the applicable laws) as a notice for invocation of the guarantee(s) executed by the Guarantor(s) in favor of the Trustee, and pursuant to which the Guarantor(s) shall be liable to forthwith pay to the Trustee all amount(s) payable to the Trustee under the Loan Documents (including the amount(s) specified above)

(c)

the Trustee shall be entitled to, inter alia, exercise other rights and/ or enforce remedies (at your costs and risk) available under the Loan Documents and/ or applicable laws to, inter alia, recover all amount(s) payable by you to the Trustee under the Loan Documents (including the amount(s) specified above) which legal proceedings include but are not limited to proceedings under the Insolvency and Bankruptcy Code.

You may also note that, upon such Application under Section 7 of Code being admitted, inter alia the following consequences shall ensue:

a. The management of the affairs of the Borrower/ Co-borrower/ Guarantor company(s) would be taken over by the Resolution Professional;

b. The powers of the Board of Directors of the Borrower/ Co-borrower/ Guarantor company(s) shall stand suspended and be exercised by the Resolution Professional, appointed by the National Company Law Tribunal;

c. After the Resolution Professional takes over the management of the affairs of the Borrower/ Co-borrower/ Guarantor company(s), the Committee of Creditors will take decisions on the resolution process, recommendation for liquidation, etc.;

d. The Resolution Professional will be entitled to get forensic audit done for the accounts of the Borrower/ Co-borrower/ Guarantor company(s) to identify the instances of frauds;

e. The Committee of Creditors can recommend the Resolution Professional to take recourse to prosecute directors of the Borrower/ Co-borrower/ Guarantor company(s) for fraud, embezzlement or other financial claims;

f. The Borrower/ Co-borrower/ Guarantor company(s) will be at risk of undergoing liquidation proceedings and as a result of which, their assets would be sold under liquidation;

g. In the event, an earlier transaction is found to be preferential, undervalued, defrauding, etc., then such transactions can be challenged in the corporate insolvency resolution process.

Further, insolvency proceedings against the Guarantors (who have executed Personal Guarantees) are also liable to be initiated under Chapter-III of the Code. Please note that on an application under Section 95 of the Code being admitted inter alia the following consequences shall follow:

a)

Pursuant to order for bankruptcy being passed the guarantor shall be declared bankrupt;

b)

A list of the personal assets of the guarantor shall be liable to be prepared and attached subject to exceptions given in the Code;

c)

Such a person cannot remain/become a member of a professional body;

d)

Such a person cannot act as a director/ promoter of any Company and also comes under restrictions under Limited Liability Partnership Rules, 2009;

e)

Such a person cannot be appointed as a trustee or representative in respect of any trust, estate, or settlement;

f)

Such a person cannot be appointed as a public servant and cannot be elected to any public office either by appointment or election as also cannot be elected or be a sitting or a voting member of any local authority;

g)

Such a person cannot retain even a sole residential house of value exceeding Rs.20 Lakh in urban area and Rs.10 lakh in rural area;

h)

Such a person cannot retain ornaments of value exceeding Rs.1 Lakh.

Notwithstanding anything to the contrary, this notice shall prevail over and/ or shall not be affected by any other correspondence, payments, actions, etc., in present or future, by or between you and the Trustee, unless this notice is specifically withdrawn/ annulled by the Trustee in writing.

Any capitalized terms used and not defined herein shall have the same meaning as ascribed to such terms under the Loan Documents.

We expect prompt action on your part.

“29.

The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.

30.

On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved· to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”

“11.

Thus, once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. "Default" is defined under sub-section (12) of Section 3 IBC which reads thus:

"3.

Definitions. In this Code, unless the context otherwise requires-……

(12)

"default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;"

Thus, even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a corporate debtor. In such a case, an order of admission under Section 7 IBC must follow. If NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application.”

[…]

“2. ASSIGNMENT OF LOANS

2.1. Assignment

i)

The Parties hereto acknowledge that in accordance with the applicable provisions of SARFAESI Act, 2002 and the conditions precedent set forth in Section 3 of this Agreement (Conditions Precedent) having been fulfilled or waived by the Assignee, as the case may be, and in consideration of the Assignee, paying the Purchase Price to the Assignor on or before December 30, 2024 (such date of payment of Purchase Price is hereinafter referred to as "Effective Date"), and upon the terms and conditions set forth herein and in the relevant Transaction Documents, and relying on the representations, warranties and covenants of the Assignor, the Assignor as the true, legal and beneficial owner of the Loans, in the ordinary course of its business, hereby, on and from the Effective Date, absolutely, unconditionally and irrevocably sells, assigns, transfers and releases to and unto the Assignee all the Financial Assistance forever, pursuant to pursuant to Section 5(1) (b) of the SARFAESI Act, 2002 TO HOLD the same absolutely IN TRUST for the benefit of the holders of the Security Receipts constituted by the Trust Deed and issued by Omkara PS 09/2024-25 Trust TO THE END AND INTENT THAT the Assignee shall hereafter be deemed to be the full and absolute legal and beneficial owner, and the only person legally entitled to the Loans or any part thereof, free from any or all encumbrances, and to recover and receive all Amounts Due on and from the Cut-Off Date, including the right to file a suit or institute such other recovery proceedings and take such other action as may be required for the purpose of recovery of the Loans, in its own name and right and as an assignee, and not as a representative or agent of the Assignor and to exercise all other rights of the Assignor in relation thereto. Provided, however, that in connection with any payments made by the Obligors in relation to the Loans prior to the Cut-off Date, if the Obligor has deducted tax at source but has not deposited the same with the relevant income tax authorities. the Assignor shall retain the right to claim such amounts due in relation to the tax at source from the Obligor ("TDS Claim").

2.1.2

The Assignor hereby on and from the Effective Date further assigns in favour of the Assignee, on 'as is where is', 'as is what is' and 'without recourse basis', all its absolute legal and beneficial rights, title and interest in the Financing Documents, all agreements, deeds and documents related thereto and all. collateral and underlying Security Interests and / or pledges created to secure, and/or guarantees issued in respect of, the repayment of the Loans, which the Assignor is entitled to. The Assignee shall have the right to enforce such Security Interests, pledges and / or guarantees and appropriate the amounts realized therefrom towards the repayment of the Loans and to exercise all other rights of the Assignor in relation to such Security Interests, pledges and / or guarantees. All original documents, correspondence, legal proceedings in relation to the Financing Documents are in the possession of the Assignor and the Assignor shall transfer/deliver or cause to be transferred/delivered all such original documents, deeds and/or writings. including but not limited to the Financing Documents, to the Assignee or any agent of the Assignee on or about the Effective Date, and until such transfer/delivery, hold the same of behalf of the Assignee. […]

SCHEDULE 1

Section 1: List of Loans

Details of the Loans which are secured against immovable properties and where such immovable properties are yet to be foreclosed pursuant to enforcement action are attached separately to this Schedule and details of other Loans which are not secured by immovable properties or where immovable properties have been foreclosed/sold off pursuant to enforcement action have been separately provided by the Assignor to the Assignee.

Section 2: Financing Documents

Details of Financing Documents in respect of remaining Loans will be separately provided by the Assignor to the Assignee. […]

“5. Definitions. —In this Part, unless the context otherwise requires, —

(7)

“financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;”

“28.

When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor – it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.”

“From the aforesaid provision it is clear that if the application is filed under Section 7, default in respect of a 'financial debt' owed to any of the 'Financial Creditors' of the corporate debtor, it need not be a default of debt owed to the particular Financial Creditor and may be a Co-Financial Creditor under Section 7(2). Application made under Sub-section (1) in the form prescribed required to accompany the documents and records therein. If the authorization letter was not accompanied or other record relating to debt or a default was not enclosed, as pleaded by learned counsel appearing on behalf of Corporate Debtor, which requires to be mentioned in Part-IV and Part-V of Form 1, it was duty on part of the Adjudicating Authority to allow time to the 'Financial Creditor(s)' to remove the defects and should not have rejected the application on the ground that the loan amount of certain 'Financial Creditor' is not clear from the record.”

“As has been observed rightly by the Adjudicating Authority, there is no prohibition in the IBC or any of the Regulations from continuing the proceeding by an assignee. Section 5(7) of the IBC which defines ‘Financial Creditor’ also includes a person to whom such debt has been legally assigned or transferred to. By virtue of assignment, Respondent No.1 become the Financial Creditor and having stepped in the shoes of ‘Housing Development Finance Corporation Limited’, it has every right to continue the proceeding which was initiated by Respondent No.2”.

“19.

In the present case we find that the appellant has sought declaration that the assignment made by HSBC to ‘Phoenix’ as illegal, which can be raised only in a civil suit. The appellant is trying to convert the proceedings under the ‘I&B Code’ as civil proceedings akin to a trial which is not the legislative intent.” It is apposite to note that the Applicant in I.A. No. 1194/2025 has been ‘legally assigned’ the financial debt in question in terms of the assignment agreement dated 28.12.2024. Further, the Applicant of the company petition viz. Catalyst Trusteeship Private Limited has not opposed the substitution of its name with that of Applicant of aforementioned I.A. viz. Omkara Assets Reconstruction Private Limited. Rather, during the course of hearing, Mr. Dhawan, Ld. Counsel for the Applicant i.e. Catalyst Trusteeship Private Limited submitted that he had instruction from the assignee to represent it and the application for substitution which had already been filed on the date on which the order was reserved and was awaiting listing before the Bench, had been filed through him only. Even otherwise also, as can be seen from the provisions of Section 7(4) of the Code, this Adjudicating Authority should within 14 days of the receipt of application under sub-section (2) of Section 7 ascertain the existence of default from the records of the Information Utility or on the basis of other evidence furnished by the financial creditor under sub-section (3) of Section 7 of the Code. The provision does not expect us to go into the issues of assignor and assignee of debt at the stage of admission. Whether the application for substitution comes or not, the assignee steps into the shoes of the financial creditor and the debt and default subsist. Such is the requirement of clause (a) of sub-section (5) of Section 7 of the Code also. At the stage of admission of an application, we are not expected to delve into the controversy of assignor and assignee, unless the issue is raised by either assignor or assignee. In the present case, there is no dispute between the assignor or assignee and it is not for the CD to raise any issue that what transaction transpired between the creditor and the assignees of debt. It has already been discussed hereinabove that as per explanation given below sub-section (1) of Section 7, a default includes a default in respect of a financial debt owed not only to the Applicant but also to any other financial creditor of the CD. Hence, this Adjudicating Authority finds no infirmity in the maintainability of the present company petition in context of the application filed for substitution of Financial Creditor’s name in the captioned company petition. Here it would not be out of context to take note of para 182 of the judgment of Hon’ble Supreme Court in State Bank of India vs. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Ors. [Civil Appeal No. 5023-5024/2024] in terms of which the Hon’ble Supreme Court expect this Tribunal to adhere to the timelines. The para reads thus: -

“182.

Moving on to certain efficiency issues within the NCLTs and NCLAT, it has been noticed over a period of time that there is a serious lack of timely admission and disposal of the applications filed as regards the initiation of CIRP, approval of the resolution plan and liquidation. This only adds to the uncertainty of the process and prolongs the dispute thereby jeopardizing the interest of all the stakeholders involved. Adjudication in a time-bound manner would help prevent any further deterioration of the value of the corporate entity. The integrity of the original timelines laid down by the Code and the Resolution Plan must not be allowed to be violated since it would dilute the objective of the Code in its entirety, erode investor confidence and hinder all corporate restructuring efforts.”

“7. Initiation of corporate insolvency resolution process by financial creditor.—

[…]

(5)

Where the Adjudicating Authority is satisfied that—

(a)

a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or

(b)

default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.”

“14.

However, the narrow question which is required to be considered in this appeal is : whether the winding-up proceedings were pending or had come to an end when the Appellate Bench froze the winding-up order by keeping it in abeyance? Let it be made at once clear that the winding-up order made by the learned Company Judge in respect of the appellant Company has neither been quashed, set aside, cancelled, revoked nor recalled. On the contrary after directing that the winding-up order shall be held in abeyance, the Appellate Bench directed that Official Liquidator shall continue to act as Provisional Liquidator as provided by Section 450 and that itself is a stage in the winding-up proceedings. When winding-up order is kept in abeyance it is in a state of suspended animation. The fact that the Appellate Bench directed that pending the implementation of the scheme as sanctioned by the High Court, the winding-up order will be kept in abeyance itself without anything more shows that the order was neither cancelled nor recalled nor revoked nor set aside. It continued to exist but was inoperative. Any default on the part of the Company in carrying out its obligation under the scheme by itself without anything more would revive the winding-up order. Therefore, the winding-up order was effectively subsisting but inoperative for the time being. Having all the potentiality of being rejuvenated or being brought back to life.

15.

Now if the winding-up order was merely held in abeyance i.e. it was not operative for the time being, but it had not ceased to exist, the winding-up proceedings are in fact pending and the court which made the winding-up order would be the court which is winding up the Company. It is now well-settled that a winding-up order once made can be revoked or recalled but till it is revoked or recalled it continues to subsist. That is the situation in this case. If the winding-up order is subsisting the court which made that order or the court which kept it in abeyance will have jurisdiction to give necessary directions to the Provisional Liquidator to take recourse to Section 446(2).”

“27.

According to the Ld. Sr. Counsel for the Corporate Debtor, even if it is assumed without accepting that the corporate debtor has defaulted an amount of Rs. 100,05,77,347/-, there is a Decree dt. 09.08.2019 issued in favor of corporate debtor by District Judge – XIV, Cum Presiding Officer, Commercial Court, Dhanbad for an amount of Rs. 163,55,52,895/- and an Arbitral Award dt. 17.01.2021 for a sum of Rs. 52,62,76,413/- and together the total amount of receivables vide the above said decree and award is much greater than the alleged defaulted debt claimed by financial creditor. Relying on the ruling of Hon’ble Supreme Court in the case of Vidarbha Industries Power Limited supra, Ld. Sr. Counsel for the Corporate Debtor contended that, the alleged debt in default by CD is much lesser than the amounts that it is entitled no justice would be served to admit the Section 7 application and to proceed with CIRP.

28.

We have carefully considered the Decree dt. 09.08.2019 issued in favor of corporate debtor by District Judge – XIV, Cum Presiding Officer, Commercial Court, Dhanbad for an amount of Rs. 163,55,52,895/- and an Arbitral Award dt. 17.01.2021 for a sum of Rs. 52,62,76,413/- which together make the total amount of receivables much greater than the defaulted debt, besides the unrebutted plea that the corporate debtor is a running concern having more than 5000 employees, and are of the firm view that the facts and circumstances of this case warrant keeping the admission of the corporate debtor into Corporate Insolvency Resolution Process (CIRP) in abeyance for three months from the date of this order, however by giving liberty to the applicant/financial creditor to approach this Tribunal if its dues continue to remain unpaid within three months from the date of this order.”

“20.

Now, we come to the submission of learned Counsel for the parties regarding order dated 28.10.2022, by which Section 7 Application has been admitted. The learned Counsel for the Appellant has relied on the judgment of the Hon'ble Supreme Court in Vidarbha Industries Power Limited v. Axis Bank Limited, (2022) 8 SCC 352 to contend that in the facts of the present case their OTS proposal which was under consideration and the fact that the Corporate Debtor is a running entity with 7000 workmen, the Adjudicating Authority ought to have exercised its discretion in rejecting Section 7 Application.

21.

The learned Counsel for the Bank in reply to the said submission contends that judgment of the Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 covers the issue. The judgment of the Hon'ble Supreme Court in E.S. Krishnamurthy v. Bharath Hi-Tecch Builders (P) Ltd., (2022) 3 SCC 161 also covers the case. A recent judgment of the Hon'ble Supreme Court in Civil Appeal No. 7121 of 2022 - M. Suresh Kumar Reddy v. Canara Bank has also been relied […]

22.

In the present case, the Adjudicating Authority has noticed in the impugned order that there was admission on behalf of the Corporate Debtor of the debt of Rs. 50 Crores, which was noticed in paragraphs 8.9 and 8.10 of the order. The present is a case where, there is no denial to the debt and default. On the date when Adjudicating Authority heard the matter and reserved the order, there was no OTS proposal under consideration before the UCO Bank, since according to the Appellant, the letter submitting OTS proposal of Rs. 41 Crores was given on 26.10.2022, after it received the Expression of Interest from Lemongrass. We, thus, are of the view that no error can be found in the order of the Adjudicating Authority, admitting Section 7 Application by its order dated 28.10.2022. We, however, cannot be oblivious to the facts and sequence of events, which took place during the pendency of the Appeal.”

[…]

25.

We have already found that the impugned order dated 28.10.2022, admitting Section 7 Application was an order, which cannot be faulted in law. However, we are inclined to direct that for a period of 60 days, no further steps in pursuance of the order dated 28.10.2022 of the Adjudicating Authority shall be taken and interim directions issued by this Tribunal by order dated 21.11.2022 shall continue for a period of 60 days, during which period, the Bank may take a final decision in reference to the OTS proposal lastly increased by the Corporate Debtor by its letter dated 03.05.2023, accepting the offer of the Bank for Outstanding Ledger Balance. In event of a settlement accepted by the Bank, the Bank is permitted to file an application through IRP to close the CIRP.

26.

In event, the parties are unable to arrive at any settlement, CIRP proceedings shall commence after 60 days and the interim directions issued by this Tribunal in this Appeal shall become inoperative.”

“50.

In light of the discussion above, what emerges is, a court or a tribunal, in absence of any provision to the contrary, has inherent power to recall an order to secure the ends of justice and/or to prevent abuse of the process of the court. Neither the IBC nor the Regulations framed thereunder, in any way, prohibit, exercise of such inherent power. Rather, Section 60(5)(c) IBC, which opens with a non obstante clause, empowers NCLT (the adjudicating authority) to entertain or dispose of any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under the IBC. Further, Rule 11 of the NCLT Rules, 2016 preserves the inherent power of the Tribunal. Therefore, even in absence of a specific provision empowering the Tribunal to recall its order, the Tribunal has power to recall its order. However, such power is to be exercised sparingly, and not as a tool to rehear the matter. Ordinarily, an application for recall of an order is maintainable on limited grounds, inter alia, where:

(a)

the order is without jurisdiction;

(b)

the party aggrieved with the order is not served with notice of the proceedings in which the order under recall has been passed; and

(c)

the order has been obtained by misrepresentation of facts or by playing fraud upon the court/tribunal resulting in gross failure of justice.”