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NCLAT asks NCLT Mumbai to decide afresh on PNB's insolvency plea against Mittal Corp

NCLAT asks NCLT Mumbai to decide afresh on PNB's insolvency plea against Mittal Corp
Reserve Bank of India (RBI) has issued a circular on February 12, 2018, in which it has directed the banks to refer an account as a Non-Performing Asset (NPA) even for one day default over Rs 2,000 crore loan and should be given a time period of 180 days to clear their debts. The circular also has referred the banks to take such default cases to National Company Law Tribunal (NCLT).

Whereas, the Hon’ble Supreme Court of India quashed the circular April 2, 2019, stating it to be “ultra vires” and ordered RBI to make mandatory changes in the circular. Following the order, RBI revised the circular with alter modifications and offered the lenders a 30-day period of time to label their account to NPA.

Punjab National Bank (PNB) with its merging partner bank Oriental Bank of Commerce has filed a plea at NCLT, Mumbai Bench under Section 7 of the Insolvency and Bankruptcy Code (IBC) against the Mittal Corp for insolvency of their debts. Contending the plea, Mittal Corp has stated in its defense that the plea was filed following the circular by the RBI was not applicable as the total debt incurred by the company was Rs 1,077 crores which were less than Rs 2,000 crores.

Moreover, the company has also released a statement saying its Joint Lenders Forum (JLF) has started procedures to clear off the debts by converting their respective stakes with some investors. The JLF of the Company has classified its debt account as Special Mention Account (SMA) following the revised guidelines by RBI and reconstructed a special package for the company. Following such a master agreement has been signed between the Mittal Corp and PNB on March 30, 2015. But later on, the agreement was invoked by the company for not fulfilling the mentioned financial norms and the account then declared as NPA by the bank.

However, NCLT has rejected the plea filed by PNB on December 20, 2019, objecting that the plea filed by the applicant following the circular of RBI has no such substantial evidence and the debt amount was less than Rs 2,000 crores which should not be open to the Adjudicating Authority that is NCLT itself.

Later on, the verdict passed by NCLT has been challenged by PNB at National Company Law Appellate Tribunal (NCLAT). A three-member bench of the Appellate Tribunal, on September 11, 2020, observed the plea of the bank and the rejection grounds by NCLT and asked the NCLT, Mumbai bench to take the plea into immediate consideration and take necessary measures to solve it rapidly.


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