Hon’ble Calcutta High Court sets aside mandatory requirement for filing record of Information Utilit

In exercise of powers under Article 226 of the Constitution of India, the Hon’ble Calcutta High Court has set aside Order dated 12.05.2020 of the NCLT vide which it was made mandatory to file default record from Information Utility referred in Section 215 of the IBC, 2016; holding that the said Order dated 12.05.2020 is in violation of the provisions of section 7(3)(a) of the IBC, 2016 and is further outside the scope of Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and Regulation 8 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which respectively deals with Applications and Claims by Financial Creditors.

The provisions of section 215 of the IBC do not make it mandatory to file records of the Information Utility to evidence the default and as per the wordings of the said section 215, filing of record of default from an Information Utility is optional provided a Financial Creditor is willing to file the same.

The Hon’ble Court held that under Rule 11 of the NCLT Rules, i.e. the inherent power of the NCLT, the Hon'ble NCLT do not have the powers to make Rules with respect to matters which are governed by the substantive provisions of the law.

It was also held that any valid rule made by any delegatee under the IBC or Companies Act can only be prospective and not have retrospective effect.

Therefore, a Financial Creditors shall have the option of evidencing the default by any of the four classes of documents stated in sub-regulation 2(b) of Regulation 8 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

It is pertinent to mention here that prior to the passing of the abovementioned Judgement by the Hon'ble Calcutta High Court, the Hon'ble NCLT has modified the impugned Order dated 12.05.2020 vide an Order dated 13.08.2020 and made the impugned filing optional instead of mandatory.

Ref: W. P. No. 5595 (W) of 2020 With C.A.N. 3347 of 2020 Univalue Projects Pvt. Ltd. Versus The Union of India & Ors. And W.P. No. 5861 (W) of 2020 With C.A.N. 3937 OF 2020 Cygnus Investments and Finance Pvt. Ltd. & Anr. Versus The Union of India & Ors. Dated 18.08.2020.