The National Company Law Appellate Tribunal (NCLAT) has set aside an NCLT order, which rejected Srei Equipment Finance Ltd's Rs 919.78 crore claims from ARSS Infrastructure Projects.
The appellate tribunal observed that its claim had been rejected on "flimsy grounds".
Srei Equipment Finance Ltd (SEFL) had initially disbursed loans of Rs 222.81 crore to ARSS Infrastructure Projects Ltd in 2015 after entering into an agreement.
For security, a charge in favour of the company was created, including movable plant and machinery, machinery spares, tools and accessories, and other movables.
However, it has not recovered any amount under the deed of assignment. Instead, it was revealed later that ARSS Infrastructure Projects made misleading and false representation in the deed of assignment.
The receivables assigned to SEFL were already encumbered and a charge was created in favour of the financial creditor -- the State Bank of India. After this came to light, SEFL sought rectification of the discrepancies.
Meanwhile, the Corporate Insolvency Resolution Process (CIRP) was initiated against SEFL on the Reserve Bank of India's plea on October 8, 2021 by the Kolkata bench of National Company Law Tribunal (NCLT).
On the other hand, CIRP was also initiated against ARSS Infrastructure Projects on November 30, 2021 by the Cuttack bench of NCLT.
Following this, SEFL filed claims worth Rs 919.78 crore before the IRP of ARSS Infrastructure Projects, which rejected it claims. It asked to reconstitute the Committee of Creditors (CoC) and invite it to the meeting.
After this, SEFL approached the NCLT, where its application was dismissed. It then challenged the order before NCLAT.
NCLAT said there is no dispute on the fact that the corporate debtor had availed of the loan from SEFL and was unable to repay and thus entered into a deed of assignment on March 29, 2017.
Moreover, there was no doubt that ARSS Infrastructure Projects made the misrepresentation in the deed of assignment.
NCLAT also observed that arbitration proceedings were also not initiated by ARSS Infrastructure Projects in the matter.
"It is really heartening to mention that this is the third round of litigation at the instance of the appellant in which the appellant is only asking for admission of its claim by the RP which has been rejected on flimsy grounds," said NCLAT.
It further said, "....we are satisfied that there is an error in the impugned order in rejecting the application filed by the appellant, therefore, the appeal is hereby allowed and the impugned order is set aside."