CIRP cannot be initiated by Financial Creditor against Successful Resolution applicant on Default of Payment on Resolution Plan: NCLT
CIRP cannot be initiated by Financial Creditor against Successful Resolution applicant on Default of Payment on Resolution Plan, rules NCLT
CIRP – Financial Creditor – Resolution applicant – Payment on Resolution Plan – NCLT – taxscan
CIRP – Financial Creditor – Resolution applicant – Payment on Resolution Plan – NCLT – taxscan
The Mumbai Bench of the National Company Law Tribunal (NCLT) ruled that the Corporate Insolvency Resolution Process (CIRP) cannot be initiated by Financial Creditor against Successful Resolution applicant on default of payment on Resolution Plan.
The Company petition was filed by ICICI Prudential Real Estate AIF I Acting through its Investment Manager ICICI Prudential Asset Management Company Limited (“the Petitioner”) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Nandi Vardhan Infrastructure Limited ( “Corporate Debtor”) alleging that the Corporate debtor committed default in making payment to the Petitioner.
This petition has been filed by invoking the provisions of Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) on the ground that the Corporate Debtor has failed to make payment of a sum of Rs. 5,00,00,000/-.
The Financial Creditor submitted that in terms of Clause 3.6.1 of the Resolution Plan, the Corporate Debtor was required to pay AIF I, a sum of INR 5 Crores in partial discharge of the financial debt owed to the AIF I within six months from the Plan Approval Date. The Corporate Debtor failed to abide by the payment obligation under the Resolution Plan.
The Counsel for the Financial Creditor has further contended that the Corporate Debtor in the capacity of Successful Resolution Applicant agreed to pay an amount of Rs. 5 crores to the Financial Creditor within a period of 6 months from the NCLT approval date or the receipt of the commencement certificate of the first sale building whichever is earlier, as stated in clause 3.6.1 of the approved Resolution Plan.
A Two-Member Bench comprising Anil Raj Chellan, Technical Member and Kuldip Kumar Kareer, Judicial Member observed that “. In our considered view, in such an eventuality when the SRA is not able to implement the plan, some consequences are bound to follow. The performance guarantee furnished by such SRA can be forfeited and the SRA can also be prosecuted u/s 74 of the Code, 2016 but since the liability of the SRA either to pay the creditor or to infuse money in the Corporate Debtor in CIRP for its revival cannot be equated with a financial debt, proceedings u/s 7 of the Code, 2016 cannot be initiated.”
“In our considered view, it would be quite far fetched to equate the obligation of the Successful Resolution Applicant to implement the plan with incurring a financial debt qua the Financial Creditors or Members of the Committee of Creditors of the Corporate Debtor in CIRP” the Bench said.
To Read the full text of the Order CLICK HERE
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