NCLAT Upholds Unilateral Set-Off In Commercial Transactions Based On Nominee Director's Signature On Financial Statements

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical), has upheld the unilateral set-off by the corporate debtor against a financial creditor, even when the term sheet excluded such set-off. The appellant filed a petition under section 7 of the IBC, seeking initiation of CIRP against the corporate debtor. It was the case of the appellant before the adjudicating authority that out of the due amount of Rs. 2 Crore, the corporate debtor only made the payment of Rs. 1.35 Cr. The remaining amount and the interest thereof made the total default amount of Rs. 1,00,12,157. However, the NCLT, Mumbai, rejected the petition. Aggrieved by the fact, the financial creditor has preferred the present appeal. Contention of the Parties The appellant contended that the term sheet explicitly excluded set-off rights towards the receivable from the financial creditor. And the corporate debtor has unilaterally claimed set-off, which is not permissible under the IBC, 2016. Also, the NCLT allowed the set of considering the equitable principles, which are not relevant under the IBC. The appellant further submitted that the reliance the reliance of adjudicating authority on equitable set-off was misplaced and against the frameworks of the IBC. Per contra, the respondent submitted that the financial statements where the set-off was claimed have been duly signed by the director of the appellant; therefore, the objection is meritless. Observations of the NCLAT The NCLAT held that the financial statements audited and signed by the nominee director of the financial creditor clearly mentioned the set-off and the absence of any outstanding debt. The NCLAT observed that the financial statements of the corporate debtor showed 'NIL' loan liability to the financial creditor and receivables from the same creditor. It also observed that the financial statements were prior to that of the Section 7 petition. The bench further observed that even if the term sheet expressly prohibited the set-off, then also the approved financial statement will prevail over that. Further, the tribunal observed that the adjudicating authority has noticed that there is a dispute between the shareholders of the financial creditor and the corporate debtor. Accordingly, the bench dismissed the petition. Case Name: Future Consumer Ltd. Aussee Oats India Ltd. Case No.: Company Appeal (AT) (Insolvency) No. 1382 of 2025 & I.A. No. 5379 of 2025 Coram: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical), Order Date: 23.09.2025Click Here To Read/Download The Order

NCLAT Upholds Unilateral Set-Off In Commercial Transactions Based On Nominee Director's Signature On Financial Statements

Mohd.Rehan Ali

Tags