India Entry & Business Startup Consultings

In SREI Equipment Finance Limited v Rajeev Anand and Ors

The Supreme Court held that an admission made in a counter-affidavit of the Corporate Debtor, in a prior S.7 application, can be relied upon by the creditor in future S.7 applications for the purpose of establishing that a default has occurred. A document filed in the earlier petition that was dismissed as withdrawn can be relied upon by the adjudicating authority in a fresh application. 

Facts:

A loan, which was given way back in 2008, was restructured into two loans of Rs.18.86 crores by an agreement dated 01.04.2016, and the second being a loan of Rs.16.80 crores by agreement dated 24.06.2016, with an interest figure of Rs.2.72 crores, the total amount coming to Rs.38.39 crores.

To this section 7 application, a counter affidavit was filed by the corporate debtor on 15.05.2017, in which it was stated that though Rs.35.66 crores have become due, yet a section 7 application was premature in as much as installment payments that were agreed upon had not yet matured. It was on this basis that this first application was withdrawn by the appellant on 30.05.2017 with the liberty to file a fresh application.

A fresh application was filed on 04.08.2017 for the amount of Rs.21.41 crores to be still outstanding. The corporate debtor now filed a counter-affidavit in which it denied this and stated that an amount of Rs.65.60 crores have been repaid by it. As a result, NCLT admitted the application, ordered the setting up of a Committee of creditors, and appointed a resolution professional. 

On appeal to NCLAT, it dismissed the order or NCLT and dismissed the section 7 application. Further, civil appeal to the Supreme Court held that NCLAT has wrongly recorded the affidavits and evidence and set aside the order of NCLAT and restore NCLT’s order. 

In this case, an application under S.7 was filed. The Corporate Debtor in its counter affidavit stated that installment payments that were agreed upon had not yet matured. For this reason, the S.7 application was withdrawn. However, the counter-affidavit made an admission with respect to another loan that been taken by the corporate debtor from the financial creditor. Subsequently, the creditor filed another S.7 application, relying, inter alia, on the admission in the counter affidavit. The NCLT admitted the application. However, on appeal, the NCLAT set aside the order on the premise that a 'document' filed in the earlier petition that was dismissed as withdrawn could not have been relied upon by the adjudicating authority. This was later challenged in the supreme court as discussed herein.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

 

SUBSCRIBE OUR NEWS LETTER