NCLAT’s Reversal of Time-barred Plea Isn’t Automatic CIRP Admission Without Hearing Rival Claims | SC

Case Details: Maneesh Pharmaceuticals Ltd. v. Export Import Bank of India - [2024] 158 taxmann.com 109 (SC) [15.12.2023]

Judiciary and Counsel Details

• • Dr Dhananjaya Y. Chandrachud, CJI. & J.B. Pardiwala, Manoj Misra, JJ.
  • Dr Abhishek Manu Singhvi, Dhruv Mehta, Sr. Advs. Ashok Kumar Singh, Milan Singh Negi, Parth Shekhar, Gauransh Singh Chauhan, Shubham Singh, Richik Harikant, Prem Ranjan Kumar, Advs. & Awanish Sinha, AOR for the Appellant.
  • Krishnendu Datta, Sr. Adv. Palak Nenwani, Hafeez Patanwala & Riya Hotchandani, Advs. for the Respondent.

Facts of the Case

In the instant case, the application filed by Exim Bank under Section 7 of the Insolvency and Bankruptcy Code was dismissed by the NCLT on the ground that the debt was barred by limitation. However, while dismissing the petition on the grounds of limitation. The order of the NCLT was challenged in appeal by the respondents.

The NCLAT set aside the order of the NCLT and held that the finding that the debt was barred by limitation was “patently illegal”. However, while doing so, the NCLAT also observed that “there is no dispute raised regarding the liability of the Corporate Debtor towards the Financial Creditors and the guarantee by the Respondent”.

Supreme Court Held

The matter reached the Supreme Court. The Apex Court held that the order of the NCLAT, properly construed, dealt with the issue of whether the debt was barred by limitation.

The Court held that when the order of the NCLT was questioned in appeal, the NCLAT set aside the order of the NCLT as being “patently illegal”. Once the order of the NCLT was set aside, the order would cease to exist. The observations in regard to whether there was a debt due and payable would also not exist with the setting aside of the order.

The order of the NCLAT, properly construed, dealt with the issue as to whether the debt was barred by limitation. A passing reference in the order of the NCLAT to whether the debt was in dispute must be read in the context of the nature of the appeal which arose from an order of the NCLT that the debt was barred by limitation. Hence, it would be inappropriate to read the order of the NCLAT as concluding the issue in regard to whether the application under Section 7 was or was not liable to be admitted.

A stray observation in the order of the NCLAT cannot be regarded as a conclusive determination on merits.

That apart, the order of the NCLT which contained an observation that the debt was not in dispute was set aside in appeal by the NCLAT in its entirety.

Consequently, it was inappropriate for the NCLAT to direct the NCLT to admit the application under Section 7 straightaway without an evaluation of the rival contentions on merits.

Accordingly, the appeal was to be allowed and the impugned judgment and order of the NCLAT was to be set aside. The application under Section 7 has already been restored to the file of the NCLT. The NCLT shall, after hearing the parties, determine as to whether the application under Section 7 is liable to be admitted. All the rights and contentions of the parties in that regard are kept open.