NCLAT Rules, Liberty Granted By NCLAT To File Fresh Application Does Not Permit Appellant To Alter Date Of Default In Application U/S 7 OF IBC
Pranav B Prem
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha and Mr. Indevar Pandey (Technical Members), clarified that liberty granted to file a fresh application under Section 7 of the Insolvency and Bankruptcy Code (IBC) does not entitle an applicant to alter the date of default at their own convenience. This decision was delivered in Company Appeal (AT) (Ins) No. 357 of 2024 involving Rolta Pvt. Ltd. (Appellant) and Varanium Cloud Ltd. (Respondent).
The matter stemmed from a short-term loan of Rs. 1.5 crore disbursed by the Appellant to the Corporate Debtor in three tranches in July 2019. The Appellant had initially filed CP (IB) No. 270/MB/2023 under Section 7 of the IBC, stating the date of default as 04.02.2021—five days after a recall notice dated 30.01.2021. This application was dismissed by the Mumbai Bench of the NCLT on 10.04.2023, as the date of default fell within the restricted period under Section 10A of the Code, which barred the initiation of CIRP proceedings.
Subsequently, an appeal was preferred against the dismissal order, but the Appellant chose not to contest the decision on merits and withdrew the appeal on 12.07.2023. While withdrawing, the Appellant was granted liberty to file a fresh application “on appropriate materials” without any opinion expressed on the merits of the case. Thereafter, CP (IB) No. 883/MB/2023 was filed, wherein the Appellant mentioned multiple dates of default—26.02.2020, 08.07.2020, 04.02.2021, and 27.01.2022—in an apparent attempt to overcome the Section 10A bar.
The Respondent challenged the maintainability of the fresh application by filing I.A. No. 5367 of 2023, arguing that the date of default could not be conveniently altered when it had already been fixed and accepted in the earlier proceedings. It was contended that since the Appellant did not amend the date of default during the earlier application or appeal, and chose instead to withdraw the appeal, the default date of 04.02.2021 had attained finality. The Respondent maintained that the liberty granted in the withdrawal order did not equate to permission to modify the default date and circumvent the law.
The Appellant, however, submitted that the earlier default date was inadvertently mentioned and that the liberty granted by the NCLAT allowed them to file a fresh petition with appropriate corrections. It was also argued that the initial dismissal was not on merits but solely under Section 10A, hence the bar of res judicata or Order II Rule 2 CPC should not apply.
The Tribunal examined these contentions in the light of precedents, including Ramdas Datta vs. IDBI Bank [2023 SCC Online NCLAT 1306], Ramesh Kymal vs. Siemens Gamesa [2021 (3) SCC 224] and Small Industries Development Bank of India (SIDBI) vs. Sambandh Finserve Pvt. Ltd [CA (AT) (Ins) No. 784 of 2023]. The Tribunal observed that the SIDBI case was factually distinct, as that matter involved a structured loan agreement with clearly defined installment defaults, each triggering a separate cause of action. In contrast, the present case involved a loan repayable on demand with no written agreement or installment-based repayment structure.
The Tribunal emphasized that the loan in question was repayable upon recall, and once the Appellant issued a recall notice dated 30.01.2021 with a five-day period for compliance, the default crystallized on 04.02.2021. It noted that the Appellant did not seek any amendment to the default date during the earlier application or appeal proceedings. Instead, they allowed the default date to remain unchanged, thereby leading to the dismissal of the first petition. According to the Tribunal, "merely the fact that liberty was given to the Appellant… does not mean that the Appellant can change the date of default at its convenience."
Further, the Tribunal highlighted that in the Streamcast case—also involving the same Appellant—their application to amend the date of default was allowed, but that situation differed as an amendment was properly sought and supported by material. In the present matter, no such effort was made.
Rejecting the Appellant’s argument that they were merely exercising the liberty granted by the NCLAT earlier, the Tribunal noted that the Appellant never disclosed any “appropriate materials” justifying the new dates in the second petition. The Tribunal also found merit in the Respondent's contention that permitting such conduct would allow litigants to bypass statutory bars by merely rephrasing or modifying claims after an adverse order.
Concluding that the application was barred under Section 10A, Order II Rule 2 CPC, and the doctrine of res judicata, the Tribunal held the appeal to be devoid of merit. Accordingly, the NCLAT dismissed the appeal and upheld the Tribunal’s decision dated 03.01.2024, reaffirming that procedural liberties cannot be misused to re-litigate settled issues or circumvent statutory bars under the IBC.
Appearance
For Appellant: Mr. Abhijeet Sinha, Sr. Advocate, Mr. Priyambada Mishra, Ms. Hina Kochar, Mr. Aditya Shukla, A. Kochar, Advocates
For Respondent: Ms. Renu Kallan, Mr. Anuj Agarwal, Mr. Nilesh Kumar, Mr. K. Mehra, Advocates.
Cause Title: Rolta Pvt. Ltd. Versus Varanium Cloud Ltd.
Case No: Company Appeal (AT) (Ins) No. 357 OF 2024
Coram: Justice Rakesh Kumar Jain [Member (Judicial)], Mr. Naresh Salecha [Member (Technical)], Mr. Indevar Pandey [Member (Technical)]
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