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NCLAT Upholds Dismissal of Panshul Agro Food Insolvency Plea, Reduces Penalty to Rs 5 Lakh
The on upheld the dismissal of Panshul Agro Food LLP's insolvency application under , while reducing the penalty from Rs 10 lakh to Rs 5 lakh. A bench of Justice Mohd Faiz Alam Khan and Technical Member Naresh Salecha found that the application was filed with to stall State Bank of India's (SBI) under the .
Timely Filing and Missing Machinery Raise Red Flags
Panshul Agro Food LLP, a designated partner of the corporate debtor, filed a Section 10 petition before the on , seeking initiation of for a default exceeding Rs 42.20 crore, including Rs 40.92 crore owed to SBI. SBI had declared the account a on , and issued a on . The bank filed an original application before the on , and took on . The NCLT dismissed the petition on , with a cost of Rs 10 lakh, citing the filing as a calculated attempt to derail and noting the suspicious removal of from the factory premises.
Appellant Argued for Mandatory Admission, Respondent Cited
The appellant contended that the was required to admit the application upon proof of debt and default, relying on the precedent in . It argued that the missing machinery could not be attributed to it as the bank had already taken possession. The respondent SBI countered that the application was filed with an to obtain a and defeat the SARFAESI proceedings. It highlighted the timing—the petition was filed just six days after the bank moved the DRT—and the discovery during inspection that substantial plant and machinery had been removed after .
Court's Duty is Not to Act as a ''
The NCLAT rejected the appellant's argument that the must act mechanically. Citing its own judgments in and , the tribunal held that it is the duty of the to sift through material to assess whether the Section 10 application is a genuine attempt at resolution or a tool to derail recovery. The removal of hypothecated assets without the secured creditor's consent during pending was a serious act undermining creditors' interests. The absence of trade receivables, loan receivables, and fixed asset registers further indicated that the corporate debtor was not a .
Key Observations
"It is not only the jurisdiction but the duty of the Ld. to sift the material available on record in order to assess as to whether the filing of application under Section 10 of the Code is a genuine attempt on the part of the applicant to resolve the debt or the exercise is being done only to derail the process of recovery initiated by the financial creditors before the Ld. DRT under the . Therefore, it could not be said that the duty of the Ld. is to act like a ."
"Removal of plant and machinery from the factory site during the process of recovery is a very serious incident."
Penalty Slashed on Proportionality Grounds
The NCLAT agreed with the NCLT's conclusion that the application was filed with under , but found the Rs 10 lakh penalty excessive. Applying the , the tribunal reduced the penalty to Rs 5 lakh, noting that the NCLT had not provided reasons for the quantum. The appeal was partly allowed: the dismissal of the Section 10 application was upheld, but the penalty was reduced. If Rs 10 lakh had already been deposited, the appellant is entitled to a refund of Rs 5 lakh; otherwise, it must deposit Rs 5 lakh within 30 days into the .
