NCLAT sets aside CIRP as appellant tried to settle dues of financial creditors

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  • Last Updated on 21 March, 2022

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Corporate insolvency resolution process; Limitation period; Insolvency and Bankruptcy; CIRP

Case Details: Air Travel Enterprises India Ltd. (Green Gateway Leisure Ltd.) v. Union Bank of India - [2021] 133 taxmann.com 462 (NCL-AT)[09-09-2021]

Judiciary and Counsel Details

    • Anant Bijay Singh, Judicial Member and Ms. Shreesha Merla, Technical Member
    • Dr. KSRavichandran, (PCS) and Ms. S. Manjula Devi, Adv. for the Appellant. 
    • Alok Kumar, Shinoj K. Narayanan , Client Li Johny, Advs. and Raju P.K., RP for the Respondent.

Facts of the Case

The appellant was the major shareholder of the corporate debtor which was formed as a special purpose vehicle (SPV) for implementation and operation of the project i.e. Resort. The Corporate debtor had obtained financial assistance from a consortium of the banks.

During the implementation of the project, additional funds were required and lenders agreed to grant additional term loans. However, later banks informed the appellant that they would not provide any additional funds and declared their accounts as Non-Performing Assets (NPA) on 27-10-2017.

One Time Settlement (OTS) proposal was rejected by a consortium of banks. The Financial creditor-bank filed an application under section 7 on 27-12-2019 for initiating CIRP against the corporate debtor. The Adjudicating Authority by impugned order admitted said application.

On appeal, the corporate debtor claimed that said application was time-barred as the application was filed after a prescribed limitation period of three years.

It was held that application filed under section 7 on 27-12-2019 for default dated 27-10-2017 was not barred by limitation as facts substantiated that period of limitation of three years as provided under article 137 of Limitation Act, 1963 was satisfied.

NCLAT Held

The Appellate Tribunal held that since there had been a conscious effort on behalf of the appellant to settle dues of banks and the corporate debtor had more than suffered negative impact of the crisis, an opportunity was to be given to settle which would help to mitigate blow and, therefore, admission of an application filed under section 7 was to be set aside. However, the corporate debtor was to be directed to settle dues in six months.

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