Corporate Debtor Cannot Escape Liability By Transferring Debt To Holding Company: NCLT New Delhi

The National Company Law Tribunal (NCLT), New Delhi Bench, comprising Shri Manni Sankariah Shanmugha Sundaram (Member-Judicial) and Shri Atul Chaturvedi (Member-Technical), has observed that merely the internal arrangements between the group companies cannot absolve the corporate debtor of its obligation towards third-party creditors. The appellant was engaged in the trade of Kraft paper reels, and it supplied material to the corporate debtor. Out of the total consideration amount of Rs. 5 Cr., the corporate debtor made only partial payments, and an amount of Rs. 2.48 Cr. was due. The Section 8 demand notice was served by the operational creditor, and subsequently the Section 9 petition for CIRP was filed. However, the corporate debtor argued that the debt has been transferred to its holding company, AL Hamid Agro Foods Products Pvt. Ltd., pursuant to a change in management and a share purchase agreement. It also argued that the operational creditor consented to the transfer. The NCLT observed that the contention of the corporate debtor with regard to the transfer of debt itself amounts to admission that the debt exists and only the shift of liability is the issue for consideration. The bench observed that merely the internal arrangements between the group companies cannot absolve the corporate debtor of its obligation towards third-party creditors. The bench further observed that the corporate debtor created the present situation to defeat the claims of its creditors and mechanized documents to defraud its creditors. Therefore, the director of the corporate debtor and its group company should be proceeded against under appropriate criminal provisions. Also, the applicant was not privy to the share purchase agreement entered between shareholders of the corporate debtor and its group company. Accordingly, the bench admitted the application while observing that the applicant has established its claim, which is due and payable by the corporate debtor. Case Name: Ashu Agencies Vs. Al-Dua Food Processing Pvt. Ltd. Case No.: I.A. NO. 5208 OF 2024 & Restored Company Petition (IBC) /15/ND/2024 (Old Case C.P. (IB)/2405/ND/2019) Coram: Shri Manni Sankariah Shanmugha Sundaram (Member-Judicial) and Shri Atul Chaturvedi (Member-Technical), For Applicant: Mr. Abhinav Prakash, Mr. Himanshu Singh, Advs. For Respondent: Mr. S. A. Saud, Mr. Mohd. Shohib, Advs. Order Date: 24.09.2025Click Here To Read/Download The Order

Corporate Debtor Cannot Escape Liability By Transferring Debt To Holding Company: NCLT New Delhi

Mohd.Rehan Ali

Tags