NCLAT Dismisses Plea to Revive CIRP After Corporate Debtor Clears Part IV Dues [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, has dismissed appeals filed by operational creditors challenging the rejection of restoration applications on revival of insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Bench held that once the entire amount in Part IV of the Section 7 application has been paid, insolvency proceedings cannot be restored.

The appeals were filed by Campbell Advertising Pvt. Ltd. and Dhankalash Distributors Pvt. Ltd. against Vipul Ltd., against the order dated July 10, 2025 passed by the NCLT, New Delhi, rejecting Restoration Applications.

The insolvency proceedings had originally been initiated under Section 7 of the IBC by financial creditors against the same corporate debtor. During the hearing of the Section 7 application, the Adjudicating Authority recorded that the principal amount and interest claimed in Part IV of the application had already been paid.

There was a dispute regarding pendente lite interest, for which the corporate debtor agreed to pay interest at the rate of 8% per annum during pendency. In view of the absence of any default, the Section 7 application was dismissed by order dated March 18, 2025.

Subsequently, the corporate debtor paid an amount of ₹46,93,907 towards pendente lite interest, as acknowledged by the financial creditor on May 3, 2025. Thereafter, the restoration applications were filed seeking revival of the insolvency proceedings on the ground that the entire pendente lite interest had not been discharged.

The NCLT rejected the restoration applications on the ground that the amount claimed in Part IV along with interest had been paid and acknowledged. Aggrieved by this decision, the appellants approached the NCLAT.

Before the Appellate Tribunal, the appellants contended that the interest paid was insufficient and that the Adjudicating Authority ought to have restored the insolvency proceedings. The respondent corporate debtor opposed the appeals, arguing that once the entire default amount was paid, there was no justification to revive the CIRP.

After perusal of records, the NCLAT observed that insolvency proceedings under Section 7 are meant for resolution of insolvency and not for recovery of disputed interest amounts. The Tribunal relied on its earlier decision in Reliance Commercial Finance Limited v. Darode Jog Builder Pvt. Ltd., wherein it was held that once the corporate debtor deposits the entire defaulted amount, there is no purpose in continuing insolvency proceedings.

It was further held that if the appellants believed they were entitled to any additional interest, they were free to pursue appropriate remedies available in law.

Accordingly, the NCLAT dismissed the appeals, holding that no case was made out for restoration of the Section 7 application once the admitted dues stood paid.

The Bench comprised Justice Ashok Bhushan, Chairperson, and Mr. Barun Mitra, Member (Technical).

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates