NCLAT sets aside insolvency proceeding against firm after finding 'malicious intent'

The National Company Law Appellate Tribunal (NCLAT) has set aside insolvency proceedings initiated against Romesh Power Products, observing that the plea was filed by one of the company's operational creditors with "malicious intent". The appellate tribunal said that Rajdhani Trading Company, an operational creditor of Romesh Power Products, which had filed a plea before the NCLT claiming default for the goods supplied to South Bihar Power Distribution Company, was aware that it would be paid directly by the discom.

The Jaipur bench of the National Company Law Tribunal (NCLT had on December 20 ex-parte admitted a plea by Rajdhani Trading's plea to initiate insolvency and had later also refused to recall its order on February 21, 2019. "We hold that the application u/s 9 was filed against Romesh Power Products with malicious intent for purpose other than the Resolution of Insolvency or liquidation of the ‘Corporate Debtor’ and in fact the application u/s 9 was not maintainable," said a three member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya.

It further said: "For the reason aforesaid, we set aside both the impugned orders dated December 20, 2018 which was passed ex-parte and the order refusing recalling dated February 21, 2019." It also directed the operational creditor and the corporate debtor to pay equally to the resolution professional as his fee and costs within 30 days.

NCLAT's order came over a petition filed by a shareholder of Romesh Power, alleging that NCLT passed order ex-parte, without even issuing notice to the company. Rajdhani Trading had supplied goods to South Bihar Power Distribution Company at the instance of Romesh Power Products, which had got contract for rural electrification.

South Bihar Power Distribution Company had agreed to pay the dues of around Rs 12 crore to the supplier, Rajdhani Trading Company. "The aforesaid fact has not been noticed by the Adjudicating Authority and impugned order of admission was passed on December 20, 2018," said NCLAT.

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