The NCLAT, Principal Bench, New Delhi observed that Order XXII Rule 10 of the Code of Civil Procedure, 1908 contemplates continuance of proceedings based on devolution of rights with the leave of the Court.
Bench further added that,"There is no bar in either Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) or any of the Regulations to prevent the continuation of the proceedings by an assignee. Section 5(7) of the IBC defines a financial creditor, which includes a person to whom debt has been legally assigned or transferred".
Brief Facts
HDFC Ltd. Sanctioned a loan to the Corporate Debtor in 2016. In 2019, the Corporate Debtor account was declared as a Non-Performing Asset. Thereafter, an application under Section 7 of the IBC for seeking the commencement of the Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”).
HDFC Ltd. Vide a Registered Assignment Deed assigned the debt of the Corporate Debtor to Respondent No.1 and the same was communicated to the Corporate Debtor.
Later, Respondent No.1 filed an application to be substituted as Financial Creditor in place of the original Applicant. The NCLT had allowed the said application.
The present Appeal is preferred against the said order passed by the NCLT.
Contentions of Appellant
It was submitted that the Assignee couldn’t have been allowed to continue with the Section 7 proceedings. The Assignee was free to file a fresh application under Section 7 based on the assignment.
Contentions of the Respondent
It was argued that the assignment happened after the filing of the Application by HDFC Ltd. and therefore, the Respondent has the right to be substituted to continue the proceedings.
Observations of the Tribunal
It was observed that Order XXII Rule 10 of the Code of Civil Procedure, 1908 contemplates continuance of proceedings based on devolution of rights with the leave of the Court. There is no bar in either IBC or any of the Regulations to continue the proceedings by an assignee.
Further, it was noted that Section 5(7) of the IBC defines a financial creditor, which includes a person to whom debt has been legally assigned or transferred.
The decision of the Tribunal
The Appellate Authority, based on the abovementioned reasons, upheld the order of the Adjudicating Authority and accordingly dismissed the Appeal.
Case Title: Siti Networks Ltd v. Assets Care and Reconstruction Enterprises Ltd. & Anr.
Coram: Justice Ashok Bhushan, Mr. Barun Mitra (Technical Member)
Case No.: Comp. App. (ATA) (Ins.) No. 1449 of 2022
Advocate for Appellant: Adv. Mr. Bharat Sood
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