NCLT Upholds CIRP Over ₹34.6 Crore Default Against IREDA Borrower; Observes No Pre-Existing Dispute Against Financial Creditor [Read Order]

The National Company Law Tribunal (NCLT) has upheld the initiation of Corporate Insolvency Resolution Process (CIRP) against a borrower of Indian Renewable Energy Development Agency Limited (IREDA) in a default of ₹34.6 crore, observing that no dispute was raised to negate the insolvency case.

The Tribunal held that the financial creditor had successfully established the existence of financial debt and default as required under Section 7 of the Insolvency and Bankruptcy Code, 2016. It observed that the corporate debtor failed to produce any credible material to demonstrate a genuine dispute or to rebut the claim of default.

Also, the corporate debtor was sanctioned financial assistance by IREDA for renewable energy projects. Due to the failure of the corporate debtor to follow the payment schedule the account was marked a non-performing asset.

Despite repeated requests and recall of the outstanding amount, the corporate debtor failed to settle the outstanding amount, prompting the application under Section 7 of the IBC for initiation of the CIRP process.

The amount of default was claimed at ₹34.6 crores, for which the loan agreements, sanction letters, statements and records of default were provided.

However, the application was opposed by the corporate debtor stating that the computation of the outstanding amount was disputed, and the procedure for invocation of the loan documents was also not proper which was a procedural lapse.

It was also stated that the matter was a contractual issue, which was not appropriate for the initiation of the insolvency process. However, contended by the respondent that the payment was clearly made and the amount was acknowledged by the corporate debtor and mere allegations without any evidence cannot be considered a pre-existing dispute.

The NCLT after examining the document held that the debt and default have been duly established. The Tribunal reiterated that allegations of default cannot negate an application under Section 7 if default is proven. Thus, CIRP was commenced and an IRP was appointed.

This order was passed by a Division Bench of the NCLT held the importance of the IBC being a creditor driven to ensure timely resolution on the basis of default.

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