The Hon'ble NCLAT has in a crucial decision held that the NCLT has the powers to declare moratorium prior to admission of the petition against the corporate debtor.
In the case of "NUI Pulp and Paper Industries Pvt Ltd v. M/s Roxcel Trading GMBH", an appeal was filed by M/s NUI Pulp and Paper Industries Pvt Ltd (Appellant/Corporate Debtor) against the order of the NCLT, Chennai wherein the NCLT had directed the directors of the corporate debtor not to alienate, encumber, or create any third party interest on the assets of the corporate debtor till admission/rejection of the petition by the NCLT.
What exactly transpired:
- Appellant contended that before Admission of the petition, NCLT has no powers to restrain the corporate debtor or its directors from alienating, encumbering or creating third party interest.
- Respondent/Operational Creditor had expressed the apprehension that the Corporate Debtor or its directors are intended to sell assets of the corporate debtor to cause wrongful losses to the Respondent.
- Counsel on behalf of the Corporate Debtor could not give any undertaking against selling, alienating or transferring assets of the Corporate Debtor.
What was held by NCLAT: - Once an application under Section 7 or 9 is filed in the Adjudicating Authority, it is not necessary for the Adjudicating Authority to await hearing of the parties for passing order of 'Moratorium' under Section 14 of the I&B Code.
- To ensure that one or other party may not abuse the process of the Tribunal or for meeting the ends of justice, it is always open to the Tribunal to pass an appropriate interim order.
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