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Tuesday, July 27, 2021

NCLAT sets aside insolvency proceedings against Ansal Properties

The judgment takes an opposing view, compared to an earlier judgment by the NCLAT itself.

Written by Aashish Aryan | New Delhi |
August 15, 2020 12:53:26 am
The government, in June, issued an Ordinance preventing the initiation of insolvency proceedings against companies for defaults in the six-month period starting March 25 under the Insolvency and Bankruptcy Code (IBC).

The National Company Law Appellate Tribunal (NCLAT) on Friday held that decree holders cannot be treated as financial creditors for the purpose of triggering insolvency against a company.

The judgment takes an opposing view, compared to earlier judgment by the NCLAT itself, in which the adjudicating authority had held that the definition of creditor under the Insolvency and Bankruptcy Code (IBC) would include decree holders, and their application for initiating insolvency could not be dismissed just because they could have approached a civil court to execute the degree.

In its judgment on Friday, which set aside the insolvency process initiated against Ansal Properties and Infrastructure Limited (APIL), a three-member Bench of the NCLAT, headed by acting Chairperson Justice Bansi Lal Bhat, held that though decree holders are treated as creditors, they cannot claim to be financial creditors and, thus, seek to initiate insolvency against a company.

A Bench of the National Company Law Tribunal (NCLT) in Delhi had accepted an insolvency application filed against APIL. Subsequently, an interim resolution professional was appointed and the company was placed under moratorium.

The insolvency was initiated on an application filed by two people who had paid advance money for two flats in a real estate project of the company in Lucknow. However, the company failed to deliver the project on time, following which the both the allottees approached the Uttar Pradesh Real Estate Regulatory Authority (Rera). The state’s Rera issued recovery certificate against APIL, which the NCLT treated as a financial debt and admitted the firm into insolvency.

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