Application U/S 9 Of IBC Cannot Be Admitted When Debt Is Discharged By Corporate Debtor After Receipt Of Demand Notice: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that Insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) cannot be initiated if the debt in question has been discharged and settled between the parties after the issuance of demand notice under section 8 of the Code. Brief Facts: The Corporate Debtor entered into a contract on 02.12.2013 and 31.12.2015, for purpose of hiring drilling rig services from Greeka Greens Solution (India) Limited (Respondent No.1). Respondent No. 1 issued a demand notice on March 5, 2018 for the unpaid amount to which the corporate debtor replied. This led to a settlement agreement executed between the parties on June 24, 2019 which was further revised on July 7, 2020 with updated payment terms for full and final settlement. In furtherance of the settlement, the Corporate Debtor from 03.07.2020 to 01.06.2022 has made payment of 20 instalments for a total amount of Rs.7,40,00,090/-. The last instalment could not be paid due to certain calculation dispute pertaining to final instalment between the parties. During course of the pendency of the Section 9 application, the balance payment of USD 125,833/- was made on 26.06.2024.The Adjudicating Authority after hearing the parties by the impugned order has admitted Section 9 application, which has been challenged in the present Appeal. Contentions: The Appellant submitted that present was not a case for initiation of any Section 9 proceeding since the Corporate Debtor has discharged its liability and last instalment could not be paid due to some calculation issues, which amount was also paid during pendency of the Section 9 application. The Respondent has also admitted the fact that the entire liability has been discharged. Observations: The Tribunal noted that in the facts of the present case, initiation of CIRP proceedings was unwarranted as the corporate debtor after receipt of demand notice under section 8 of the code had entered into a settlement and paid 20 out of 21 installments. It was only the 21st installment which could not be paid due to calculation issues between the parties. Based on the above, the Tribunal held that in the present case, insolvency proceedings could not be initiated. Accordingly, the present appeal was allowed and the order admitting the section 9 application was set aside. Case Title: Mr. Pankaj Kalra (Suspended director of Essar Oil & Gas Exploration & Production Limited) Vs Greeka Greens Solution (India) Limited and Anr. Case Number:Company Appeal (AT) (Insolvency) No. 1783 of 2024 Judgment Date: 19/03/2025 For Appellant:Mr. Abhijeet Sinha, Sr. Advocate with Mr. Mahesh Agarwal and Mr. Abhinav Garg, Advocates. Mr. Mrinal Bharat Ram, Mr. Aditya Laroyia and Mr. Ananya Bhardwaj, Advocates for R-1. Click Here To Read/Download The Order

Application U/S 9 Of IBC Cannot Be Admitted When Debt Is Discharged By Corporate Debtor After Receipt Of Demand Notice: NCLAT

Mohd Malik Chauhan

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