The National Company Law Appellate Tribunal (NCLAT) has dismissed a petition filed by the insolvency regulator, which had challenged a bankruptcy court decision to reject lenders’ plea to admit GTL Infrastructure for insolvency proceedings.
The Insolvency and Bankruptcy Board of India’s (IBBI) petition was seen as an attempt towards course correction after various tribunals rejected applications to initiate insolvency proceedings against defaulters citing a Supreme Court order. The apex court had struck down a bankruptcy court decision to admit Vidarbha Industries Power for insolvency proceedings, saying that its receivables were enough to pay off the debt.
In the GTL Infra case, the NCLAT said the IBBI was not an aggrieved party and dismissed its petition.
In November last year, the Mumbai bench of the National Company Law Tribunal (NCLT) had dismissed Canara Bank’s petition to admit GTL Ltd and its telecom infrastructure unit GTL Infra, citing the Vidarbha Industries order. The bankruptcy court said both cases were similar.
Canara Bank has separately challenged the NCLT’s order. The appellate tribunal is hearing that as well.
Meanwhile, the IBBI appealed that as an insolvency regulator, it was responsible for enforcing various regulations of corporate insolvency resolution. “Therefore, it becomes imperative for the appellant to file the instant appeal as the impugned order is based on an incorrect interpretation of the provisions of the Insolvency & Bankruptcy Code, inter alia Section 7,” the board said in its appeal, according to the order issued early this week.
The NCLAT said the IBBI had nothing to do with the litigation between two parties: the financial creditor and the corporate debtor. It asked how the IBBI could be an aggrieved person, especially when Canara Bank had already filed an appeal, and said its appeal was totally misconceived and non-maintainable.
Last year, the Supreme Court struck down the bankruptcy court order on Vidarbha Industries, saying that the power producer had won a ₹1,730 crore award but was unable to pay lenders because that award was challenged.
Tribunals have the discretion to reject or admit a company despite proof of default, the apex court said. The mere existence of debt and default cannot be the only criteria to admit a company for corporate insolvency, it said.
At least 16 cases have been rejected by various courts citing the Vidarbha Industries case, leading to frustration among lenders keen to recover money from defaulters.
While dismissing Canara Bank’s plea, the NCLT said that GTL Infra had claims pending from various telecom companies amounting to ₹14,700 crore, which would be sufficient to pay its debt. The tribunal, however, ignored that the receivables include a ₹13,394 crore claim from Aircel entities, which itself is undergoing insolvency proceedings, said bankers.
Canara Bank has approached the appellate tribunal through its counsels Bishwajit Dubey and Srideep Bhattacharyya. Senior advocate Arun Kathpalia and counsels Prasad Lotlikar and Rohan Rajdyaksha are representing GTL and GTL Infra.
