CIRP plea filed u/s 7 rejected when a new loan agreement was agreed to after restructuring it: NCLT

Case Details: Bank of Baroda v. JBF Industries Ltd. - [2021] 133 taxmann.com 482 (NCLT - Ahd.)

Judiciary and Counsel Details

• • Madan B Gosavi, Judicial Member and Virendra Kumar Gupta, Technical Member
  • Navin Pahwa, Ld. Sr. Counsel and Bijal Chattrapati, Ld Counsel for the Appellant.
  •  Saurabh Soparkar, Ld Sr. Counsel and Maulik Nanavati, Ld. Counsel for the Respondent.

Facts of the Case

In the instant case, the financial creditor filed an instant application under section 7 on account of the corporate debtor’s failure to repay the loan amount. It was noted that after the account of the corporate debtor became NPA, restructuring of the loan account had been done and a new time schedule was prescribed which was acted upon by both sides.

Thus, there was an established fact situation of novation of contract between parties whereby earlier agreement stood extinguished and parties were governed by the new agreement.

NCLT Held

The NCLT held that since the instant application was based upon an event which became invalid in view of the subsequent contractual agreement between parties it was an instance of the premature application. Thus, the instant application was liable to be dismissed.

List of Cases Referred to

• • Dharani Sugar Chemicals Ltd. v. Union of India [2019] 104 taxmann.com 44/153 SCL 224 (SC) (para 9).