Case Title: Mr Amar Vora v. City Union Bank Ltd.,
The Hon'ble National Company Law Appellate Tribunal, Chennai, while adjudicating a matter in the aforementioned case held that a petition can be moved under Sections 7, 9, or 10 of the Insolvency and Bankruptcy Code even when on the same subject matter, proceedings are continuing in the DRT, SARFAESI, or other Fora.
By using the property in town bearing survey nos. 80 to 85 of Managiri Bit Village, KK Nagar Madurai North Taluk, as collateral, the appellant, in this case, obtained three credit facilities from the financial creditor/first respondent to develop the mall for a total of Rs. 5,20,00,000/- on various dates. It is the case of the appellant that it has obtained financial credits from the respondent bank on multiple occasions and has also repaid the interest. However, the bank approached NCLT Chennai under Section 7 of the code on the grounds of certain defaults.
The counsel on behalf of the appellant contended that the Hon'ble NCLT did not consider the fact that there are parallel proceedings going on in the DRT Mumbai through O.A. No. 497 of 2019 and that the subsequent filing of the application under Section 7 of the Code amounts to forum shopping by the respondent. Furthermore, it was contended that the CIRP proceedings under Section 7 of the Code should have been kept in abeyance until the orders had attained finality.
One of the primary issues, in this case, was whether the pendency of proceedings under the SARFAESI Act, DRT, restricted the respondent from CIRP under the IBC.
The NCLAT bench observed that the code has been enacted to amend and consolidate the laws pertaining to the reorganisation and insolvency resolution of corporate persons to balance the interests of all stakeholders through the maximisation of the value of their assets. Furthermore, the NCLAT took the precedent of the Hon'ble Supreme Court, wherein it was held that the object of the code is not the recovery of debts but the resolution of corporate debts. The NCLAT observed that, as per Section 238 of the Code, the financial creditor, operational creditor, or corporate person can file an application under Sections 7, 9, and 10 of the Code irrespective of the fact that any proceeding is pending before other forums on the ground that the code has overriding effect over other laws. The NCLAT further concluded and held that the application under Section 7 of the Code is maintainable as the appellant cannot take the stand to bar the respondent on the basis that the proceedings are pending before DRT and PBPT.