NCLT justified in admitting CIRP plea as corporate debtor failed to repay the sum taken under share purchase agreement: NCLAT

Case details: Sree Bhadra Parks and Resorts Ltd. v. Sri Ramani Resorts and Hotels (P.) Ltd. - [2021] 133 taxmann.com 103 (NCLAT - Chennai)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member and V.P. Singh. Technical Member
  • Anil D. Nair, Adv. for the Appellant. 
  • P.H. Arvindh Pandian, Sr. Counsel and Mrs. Jayanthi K. Shah for the Respondent., Adv. for the Respondent.

Facts of the Case

In the instant case, the respondent was a Financial Creditor he had entered into a Share Purchase Agreement with the corporate debtor to purchase 100 per cent shares of the ‘corporate debtor’ for consideration.

The financial creditor had paid an advance to the corporate debtor, which was duly acknowledged by the ‘corporate debtor’ as per various letters. The corporate debtor had expressed its willingness to settle the matter for a sum. However, the other creditors of the corporate debtor didn’t accept the settlement of the corporate debtor and refused to take any payments from the respondent on behalf of the ‘corporate debtor’ and consequently, the agreement had not fructified and the ‘corporate debtor’ promised to pay back the advance paid by the financial creditor but corporate debtor failed to pay same and stated that such advance was not a financial debt rather was an operational debt.

The financial creditor filed an application under section 7 for initiation of CIRP. Adjudicating Authority by impugned order admitted application initiating CIRP proceedings against the corporate debtor and appointed the ‘Interim Resolution Professional’. The Adjudicating Authority concluded that the respondent had proved the existence of a ‘debt’ as well as the existence of ‘default’.

NCLAT Held

It was observed that the aforesaid promise comes squarely within the ambit of the definition of ‘financial debt’ and that the ‘respondent’ is without any haziness is a ‘financial creditor’ in the eye of Law.

NCLAT cited that the corporate debtor had not adhered to its commitment in respect of share purchase agreement and had not paid the debt due, the impugned order passed by Adjudicating Authority in admitting application under section 7 didn’t suffer from any irregularity and, therefore, the appeal was to be dismissed

Case Review

Sri Ramani Resorts and Hotels (P.) Ltd. v. Sree Bhadra Parks and Resorts Ltd. [2021] 133 taxmann.com 102 (NCLT – Kochi) (para 72) affirmed.

List of Cases Referred to

• • Pushpashah v. IL & FS Financial Services Ltd. [2019] 103 taxmann.com 242 (NCL – AT) (para 9),
  • Daya Engineering Works (P.) Ltd. v. UIC Udyog Ltd. [2018] 97 taxmann.com 338 (NCL – AT) (para 11),
  • Kavita Anil Taneja v. ISMT Ltd. [Comp App (AT)(Ins) No. 545-546 of 2018, dated 24-1-2019] (para 11),
  • Anuj Jain v Axis Bank Ltd. [2020] 114 taxmann.com 656 (SC) (para 14),
  • Premier Tyres Ltd. v Kerala State Road Transport AIR 1993 SC 1202 (para 20),
  • Orator Marketing (P.) Ltd. v Samtex Desinz (P.) Ltd. [2021] 128 taxmann.com 424/167 SCL 610 (para 21) and
  • Neelima Srivastava v State of Uttar Pradesh [Civil Appeal No. 4840 of 2021 dated 17-8-2021] (para 36).