The court established that an agreement to assign does not absolve the corporate debtor of its debts if the conditions were unmet, maintaining creditor rights under insolvency law.

JUDGMENT

(12^th July, 2024)

Ashok Bhushan, J.

1. This Appeal by the Financial Creditor has been filed challenging the order dated 25.01.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Court No.II, Kolkata rejecting Section 7 application filed by the Appellant- Financial Creditor. Aggrieved by the order rejecting Section 7 application, the Financial Creditor has filed this Appeal.

2. Brief facts of the case necessary to be noticed for deciding this appeal are:-

2.1. Federal Bank had advanced various loans to Howrah Mills Company Limited (Corporate Debtor) in the year 2013 amounting to Rs.40.38 Crores. Federal Bank declared the loan accounts of the Corporate Debtor as Non- Performing Asset (NPA) on 30.12.2015. Federal Bank assigned the loans given to the Corporate Debtor with all right, title and security interest in favour of the Appellant vide a Registered Assignment Agreement dated 30.03.2016. Due to continued defaults by the Corporate Debtor, Appellant preferred a Company Petition bearing C.P.(IB) No. 4/KB/2019 to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. During pendency of Section 7 application, the Appellant entered into an Agreement to Assign dated 15.01.2020 with Respondent No.2- ‘Abhinandan Holdings Pvt. Ltd.’ (hereinafter referred to as ‘Intending Assignee’) under which agreement, Appellant agreed to assign the loan along with security interests upon receipt of total consideration of Rs.26.01 Crores. After Agreement to Assign, Appellant filed an application to withdraw Section 7 application which was allowed by the Adjudicating Authority by order dated 23.01.2020 while granting the Appellant the liberty to revive the Company Petition in case the settlement (Agreement to Assign) failed. As per Assignment Agreement, an amount of Rs.4.50 Crores was to be paid by intending assignee by 31.01.2020 which having not paid, on 27.02.2020, Appellant wrote to Respondent No.2 to make the payment along with interest otherwise it would be considered as an event of default under the Agreement to Assign. Respondent No.2 having failed to honour the terms of the Agreement to Assign, letter dated 02.03.2020 was issued by the Appellant to the intending assignee revoking and cancelling the Agreement to Assign and further forfeiting the amount paid by the Respondent No.2 with observations that amount submitted shall be adjusted to the outstanding dues payable by the Corporate Debtor. After receiving the letter dated 02.03.2020, there were certain correspondences made by the Respondent No.2 with Appellant proposing payments in September 2020. A pay order of Rs. 1 Crore was also sent to the Appellant which was not encashed by the Appellant. Appellant on 31.07.2020 filed an application for Restoration of the Company Petition being RST.A. 842/KB/2020. Adjudicating Authority vide order dated 02.02.2021 allowed the restoration. The Corporate Debtor filed an appeal being Company Appeal (AT) (Insolvency) No.339 of 2021 challenging the order dated 02.02.2021. This Tribunal vide order dated 11.01.2023 disposed of the Appeal refusing to interfere with restoration order with observations that the Adjudicating Authority to pass order on Section 7 application after hearing the Appellant, Corporate Debtor and Respondent No.2. Respondent No.2 impleaded itself as party in the Company Petition on 21.03.2023. Respondent No.2 filed a reply in Company Petition contending that in the Civil Suit being T.S. No.22 of 2020 filed in Commercial Court an interim injunction has been passed on 29.09.2021 restraining the Appellant from giving effect to the revocation letter dated 02.03.2020. Reference of another suit being T.S. No. 322 of 2020 was a