NCLT | Prosecution lodged against Corporate Debtor for suppressing material facts while filing petition under S. 10 IBC

National Company Law Tribunal, Mumbai: The Bench of V.P. Singh, Member (Judicial) and Ravikumar Duraisami, Member (Technical) ordered for prosecution to be lodged against the Corporate Debtor / Corporate Applicant on the ground that it suppressed material information while filing a petition under Section 10 of the Insolvency and Bankruptcy Code, 2016  for initiating corporate insolvency resolution process.

The matter had reached upto the stage of the Resolution Professional filing the application for approval of the Resolution Plan by NCLT. During arguments, one of the Financial Creditors, IDBI Bank, brought to NCLT’s notice that the Bombay High Court had already ordered winding-up of the Corporate Debtor and this material fact was suppressed while filing the petition under Section 10.

Extensive arguments were made by both the sides and reliance was placed on various Supreme Court decisions. S. Purohit, Advocate appeared for the Corporate Debtor. On the other hand, Advocates Shavey Mukri along with Nishitha Manbiar  and Almira Lasrado of IndiaLaw represented IDBI Bank; Advocates Ashish and Priyanak Upadhyaya of Ethos Legal Alliance represented SBI Global Factors (P) Ltd.; Advocate Sugatya Chaudhary represented Axis Bank; Nikhil Rajani and Jyoti of V. Deshpande & Co. along with Naman Awasthi, Authorised Signatory represented Edelweiss ARC; Advocates Bhupesh V. Samant and Ganesh Kale represented Saraswat Coop. Bank; Sushmita Gandhi and Anamika of HSA Advocates represented ICICI Bank (all creditors). Another creditor, Ramkumar Birendrakumar (P) Ltd. was represented by Counsel Subir Kumar and Priyanka Sinha of A&P Partners.

The question before NCLT was whether disclosure of the Bombay High Court’s order was material for applying under Section 10 for initiation of corporate insolvency resolution process?

NCLT noted that the Corporate Debtor was fully aware that the company stood wound up by the order of the High Court. According to NCLT, this fact was without an iota of doubt, a material fact for presenting a petition under Section 10. Further, relying on Forech (India) (P) Ltd. v. Edelweiss ARC, 2019 SCC OnLine SC 87, NCLT observed that a Corporate Debtor is barred from filing a Section 10 petition after passing of liquidation orders in winding-up proceedings. The act of the Corporate Debtor in suppressing the information known to it to be material for filing Section 10 petition was held to be punishable under Section 77(a) IBC. Accordingly, the Registrar of Companies, Mumbai was directed to lodge prosecution against the Corporate Debtor under Section 77(a). Furthermore, cost of Rs 10 lakhs was imposed on Corporate Debtor and the petition was dismissed. [Amar Remedies Ltd., In re, 2019 SCC OnLine NCLT 1, Order dated 29-01-2019]

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