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2023 Supreme(Online)(SC) 28279
SUPREME COURT OF INDIA
Dr Dhananjaya Y Chandrachud, CJ, J B Pardiwala, J, Manoj Misra, J
Maneesh Pharmaceuticals Ltd – Appellant
Versus
Export Import Bank of India and Ors – Respondent
Civil Appeal No 8135 of 2023
For the Appellants/Petitioners: Dr. Abhishek Manu Singhvi, Mr. Dhruv Mehta, Mr. Ashok Kumar Singh, Mr. Awanish Sinha, Mr. Milan Singh Negi, Mr. Parth Shekhar, Mr. Gauransh Singh Chauhan, Mr. Shubham Singh, Mr. Richik Harikant, Mr. Prem Ranjan Kumar
For the Respondents: Mr. Krishnendu Datta, Ms. Palak Nenwani, Mr. Hafeez Patanwala, Ms. Riya Hotchandani
An appellate court cannot skip a merits review before directing a lower tribunal to admit an application.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 62 and Section 7 - Appeal against NCLAT order - Application under Section 7 dismissed by NCLT as the debt was barred by limitation, set aside by NCLAT as 'patently illegal' - NCLAT directed NCLT to admit application - Supreme Court holds NCLAT's direction inappropriate without consideration of merits. (Paras 8, 9)
(B) Jurisprudence - The appellate court's function does not include issuing directions that run counter to a full examination of merits in lower tribunal decisions. (Para 9)
Facts of the case:
An application filed by the first respondent under Section 7 was dismissed by the NCLT on limitations; NCLAT set aside this order, leading to the appeal.
Findings of Court:
The Supreme Court ruled that the NCLAT should not have directed the admission of the Section 7 application based on a prior determination that the debt was barred by limitation.
Issues: Whether the NCLAT erred in violating the procedural requirements of addressing the merits.
Ratio Decidendi: The court emphasized that an appellate court must conduct a thorough evaluation before issuing directives, reaffirming the significance of a full review regarding merits when determining applications.
Result: The appeal is allowed, and the NCLAT's order is set aside.
ORDER
1 The appeal under Section 62 of the Insolvency and Bankruptcy Code 20161 arises from an order dated 6 December 2023 of the National Company Law Appellate Tribunal2.
2 The application filed by the first respondent under Section 7 of IBC was dismissed by the National Company Law Tribunal3 on 25 March 2022 on the ground that the debt was barred by limitation. However, while dismissing the petition on the ground of limitation, the NCLT also made the following observations on merits in paragraph 29 of its decision:
- “29.
- It is clear to the Bench that there is a ‘debt’ in terms of section 3(11) and there is a ‘default’ in terms of Section 3(12) of the IBC. However, keeping in view that the date of NPA in respect of all the four loans are between 26.06.2011 to 31.07.2011 and the Petition has been filed only on 30th August, 2019, the limitation issue is very pertinent in the matter. The Bench has to take a call whether the debt is time-barred or not, in terms of provisions of the Limitation Act, 1963. The Bench before proceeding further would like to mention certain dates and events subsequent to the invocation of guarantee which will help in deciding the matter.”
1 “IBC”
2 “NCLAT”
“NCLT”
Digitally signed by Sanjay Kumar Date: 2023.12.16 12:37:28 IST Reason:
- Signature Not Verified The order of the NCLT was challenged in appeal by the respondents. The NCLAT, by its judgment dated 9 May 2023, 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”.
4 The judgment of the NCLAT was questioned before this Court in appeal. The appeal was dismissed on 4 July 2023.
5 The respondents filed an IA before the NCLT seeking restoration of the application under Section 7 and the initiation of the Corporate Insolvency Resolution Process. The NCLT allowed the restoration application on 5 July 2023. A review petition has been filed before this Court seeking a review of the order passed on 4 July 2023, which is pending.
6 The NCLT, by an order dated 25 October 2023, declined to adjourn the proceedings on the ground of the pendency of the review petition and also recorded the request of the counsel for the appellant who sought time to file a further affidavit. No specific leave for filing an affidavit was granted by the NCLT. Aggrieved by the order of the NCLT dated 25 October 2023, the respondents filed an appeal before the NCLAT, which has been disposed of by the impugned order dated 6 December 2023. The NCLAT has directed the NCLT to admit the application under Section 7 . That is how the appeal arises before this Court.
We have heard Dr Abhishek Manu Singhvi and Mr Dhruv Mehta, senior counsel appearing on behalf of the appellant and Mr Krishnendu Datta, senior counsel appearing on behalf of the respondents.
The application under Section 7 was originally dismissed by the NCLT on the ground that the debt was barred by limitation. 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
