NCLT questions insolvency proceedings

A bench of National Company Law Tribunal (NCLT) on Tuesday wanted to know if corporate insolvency proceedings could be maintained when the winding up process is already on in courts. The New Delhi Bench of NCLT was hearing an insolvency application against Era Infra Engineering filed by Union Bank of India. 

Winding up proceedings against Era Infra are going on in Delhi High Court. The Bench asked the counsel of Union Bank if insolvency proceedings against Era Infra could be initiated in this case, sources said. Union Bank had sought the appointment of an interim insolvency professional for repayment of loans.

The primary issue before the NCLT is whether an application under Section 7 of the Insolvency and Bankruptcy Code 2016 to initiate the corporate insolvency process can be filed during the pendency of the winding-up proceedings, as the process will involve placing a moratorium on pending proceedings according to Section 14 of the Code.The main concern of the tribunal is that these winding-up proceedings (filed under Section 430 of the erstwhile Companies Act 1956) are before the high court, which is a superior court to the NCLT and exercises advisory jurisdiction over the tribunal under Article 227 of the Constitution.    

The next date of hearing on this issue is on July 25. Era Infra is one of the 12 accounts identified by RBI for insolvency proceedings.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel