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Three different categories of evidence can be produced by a Financial Creditor under Section 7 of the I & B Code

In Univalue Projects Pvt. Ltd. vs The Union of India, appeal was filed before the Calcutta High Court against an impugned order dated May 12, 2020 issued by the Registrar of the National Company Law Tribunal at its Principal Bench in New Delhi, that prime facie, appears to have been issued with the approval of the Hon’ble Acting President of the NCLT, New Delhi.

In the impugned order, the NCLT had directed all concerned to file default record from Information Utility alongwith the new petitions being filed under section 7 of Insolvency and Bankruptcy Code, 2016 positively. No new petition shall be entertained without record of default under section 7 of IBC, 2016 and this order was applicable to pending applications as well.

The appellant's contention was with the jurisdiction of NCLT, vires of the order itself.

Referring to the judgment of the Supreme Court in  Engineering Mazdoor Sabha –v- Hind Cycles Ltd., AIR 1963 SC 874, the High Court observed that the Tribunals which are contemplated by Article 136(1) are clothed with some of the powers of the courts. They can compel witnesses to appear, they can administer oath, they are required to follow certain rules of procedure: the proceedings before them are required to comply with rules of natural justice, they may not be bound by the strict and technical rules of evidence, but nevertheless they must decide on evidence adduced before them; they may not be bound by other technical rules of law, but their decisions must, nevertheless, be consistent with the general principles of law. In other words, they have to act judicially and reach their decisions in an objective manner and they cannot proceed purely administratively or base their conclusions on subjective tests or inclinations.

Clause (a) of sub-section 3 of Section 7 clearly states that the financial creditor shall furnish along with the application record of the default recorded with the information utility or such other record or evidence of default as may be specified. As is evident, the clause is disjunctive in nature and when the word “or” is used in drafting of positive conditions, the positive conditions separated by “or” are read in the alternative.1 The three categories of evidence that can be provided are as follows: (a) record of the default recorded with the information utility; (b) such other record; (c) evidence of default as may be specified. The disjunctive use of the above makes it clear that either of the three may be provided by the financial creditor to the adjudicating authority. As per the Respondents, the term “as may be specified” is applicable to all the three categories and not just to the evidence in default. In my view, if the intention of the legislature was to make the term applicable to all three categories a comma would have been inserted after the word “default”. Following the principles of litera legis, I am of the view that the legislature had no intention to extend the term “as may be specified” to all the three categories. In conclusion, on a plain reading of the above provision, it is immanent that three different categories of documents are available to a financial creditor to prove proof of default by a corporate debtor.

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