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The National Company Law Appellate Tribunal has held the NCLT,the ‘adjudicating authority’ under the insolvency and Bankruptcy Code,was not a ‘court’ or a ‘tribunal’ and hence cannot decide legality of a foreign decree.
The appeal was filed against the refusal NCLT to admit a petition filed under Section 9 of IBC .The appellant’s claim of being an operational creditor was founded on default of the respondent-company in complying with a money decree passed by a US Court.
The NCLT’S Principal bench at New Delhi found that the decree was passed in violation of laws prevalent in India and hence not executable by Indian courts as per Section 13 and 14 of the Code of Civil Procedure. It also found that procedural requirements under Section 44A CPC were also not fulfilled by foreign decree. The further finding was that the decree did not give rise to any claim of ’operational debt’ .On these grounds,the application was rejected.
The NCLAT criticized the approach of NCLT in appeal while deciding the legality of the foreign decree. Referring to NCLAT decision in Binani Industries Limited Vs.Bank of Baroda & Anr, the branch comprising of Justice Bhansi Lal Bhat held that the objective of IBC was resolution of corporate debt.
The adjudication of merits of foreign decree undertaken by NCLT was held to be not in consonance with the spirit and objective of IBC. However, the appellant tribunal concurred with the finding that appellant was not an ‘operational creditor’. The money decree did not relate to supply of goods or services and therefore the application under Section 9 was not maintainable, therefore the appeal was dismissed.
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