In the case of Canara Bank v. Sri Chandramoulishvar Spg. Mills (P) Ltd. & Another [2018 SCC Online NCLAT 389], an appeal was filed by the appellant Bank (Financial Creditor) against the order of the NCLT. The Operational Creditor had preferred an application before the NCLT under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”) against the Corporate Debtor which was admitted and further steps including passing of an order of moratorium was done and name of an Interim Resolution Professional was declared. The Financial Creditor, the Bank, submitted before the NCLT that it had taken possession of certain lands that belonged to the Corporate Debtor, in furtherance of which the Corporate Debtor schemed with the Operational Creditor to file a CIRP application under Section 9 of the Code.

The NCLT rejected the submissions of the Financial Creditor Bank due to lack or absence of evidence and moreover, the NCLT held that it could not decide on the issue of collusion as it was not the Court of competent jurisdiction to decide the same. The NCLAT held that if the CIRP application under Section 9 of the Code was complete and if the NCLT was convinced that there was nothing to prove the existence of a dispute and there existed a debt and there had been default, then the Adjudicating Authority, i.e., the NCLT was bound to admit the CIRP application. The NCLAT held that the steps taken by the Financial Creditor Bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Interest (SARFAESI) Act, 2002, could not be initiated since the Code had prevalence over the SARFAESI Act and that when the CIRP proceedings had been initiated, the Financial Creditor Bank could not initiate any proceedings under the SARFEASI Act. On these grounds, the NCLAT dismissed the appeal filed by the Financial Creditor Bank against the Corporate Debtor.