NCLT Admits IBC Plea against Palchan Bhang Power for Default in Repaying ₹5.7 Cr over 10-Year Interest-Free Period [Read Order]
As the admitted amount was above the statutory threshold of ₹1 crore, and since the default stood proved, the requisites of the petition were deemed complete by the NCLT.
NCLT - IBC -Palchan Bhang Power - taxscan
NCLT - IBC -Palchan Bhang Power - taxscan
The Chandigarh Bench of the National Company Law Tribunal recently admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Palchan Bhang Power Private Limited (PBPPL), initiating the Corporate Insolvency Resolution Process (CIRP).
The plea was filed by entities who claimed to be financial creditors of the company, namely, Ashirwad Agarwal, Sreedhar Ramakrishnan, Gurpartap Singh Mann, Triimech Power Pvt. Ltd. and Rising Sun Power Pvt. Ltd.
The dispute pertained to promoter and inter-corporate loans advanced to the respondent-corporate debtor between 2011 and 2014 for the development of the Palchan Bhang Hydro Electric Project. A Board Resolution dated 18 March 2011 had stipulated that such borrowings would remain interest-free for ten years from the date of first disbursement, following which it would attract interest at 24% per annum for as long as the loan remained unpaid.
The first loan was disbursed on 3 May 2011, establishing 3 May 2021 as the end of the interest-free period. Since the corporate debtor failed to repay the loan amount within the stipulated period, the petitioners claimed a default on the total loan amount of ₹5.7 crore, which was tagged with accrued interest, resulting in a total claim of ₹10.62 crore by 2024.
PBPPL, represented by Amit Jhanji and Kudrit Kaur Sara, resisted the petition and disputed the existence of financial debt while questioning the validity of the Board Resolution. PBPPL argued that the claims were time-barred and contended that part payments had been made under a Memorandum of Understanding (MoU) in 2017.
The petitioners, who were represented by Ramanjit Singh countered by presenting documentary evidence including bank statements, the corporate debtor’s balance sheet for the financial year 2021–22 where the loan liability was reflected under "Long Term Borrowings" and the corporate debtor’s own loan application to the Indian Renewable Energy Development Agency Limited (IREDA) acknowledging promoter contributions of ₹5.77 crore within their rejoinder.
Against the arguments on the basis of the 2017 MoU, the petitioners maintained that the payments pertained to the divestment of the project’s shareholding, assets and liabilities and was not towards repayment of the outstanding loans.
The Bench of Member (Judicial) Harnam Singh Thakur and Member (Technical) Shishir Agarwal noted that the petition was filed within limitation, holding that the date of default arose upon expiry of the ten-year repayment period and that the debt was acknowledged in the corporate debtor’s balance sheet for the financial year 2021–22 under “Long Term Borrowings”.
The NCLT observed that the documentary evidence sufficiently established the existence of financial debt under Section 5(8) of the IBC. As the admitted amount was above the statutory threshold of ₹1 crore and since default stood proved, the petition was deemed complete.
Accordingly, the NCLT admitted the petition and declared a moratorium under Section 14 of the Code, appointing Vigyan Prakash Arora as the Interim Resolution Professional to oversee the corporate insolvency resolution process and management of PBPPL. The Tribunal directed the commencement of the CIRP, while creditors were directed to submit their claims to the IRP for verification and collation in the resolution process.
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