NCLT’s direction to settle a claim even after finding existence of debt and its default was to be set aside: NCLAT

Case Details: Dyanamic Engineers Ltd. v. Muhlenbau Equipments (P.) Ltd. - [2021] 131 taxmann.com 236 (NCLAT - Chennai)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member and Kanthi Narahari, Technical Member
  • Rakesh Mohan Sharma, Practising Company Secretary for the Appellant.

Facts of the Case

In the instant case, the Operational creditor supplied goods to the corporate debtor and raised invoices. However, the Corporate debtor accepted supplies and invoices without any demur but made only part payment.
On being aggrieved, the Operational creditor issued a demand notice. The Corporate debtor, on the other hand, did not reply to the same.

NCLAT Held

Despite service of notice regarding Corporate Insolvency Resolution Process (CIRP) application filed by the operational creditor, corporate debtor failed to appear before NCLT either in person or through its representatives. In such a case, the NCLT noticed that the corporate debtor willfully avoided payment of its liability.

Instead of admitting application to initiate CIRP against corporate debtor, NCLT disposed of application with a direction to corporate debtor to settle claim within a period of 3 months. Consequently, said order was illegal without application of mind and therefore, the same was to be set aside and the application of operational creditor was to be admitted.

Case Review

• • Dyanamic Engineers Ltd. v. Muhlenbau Equipments (P.) Ltd. [2021] 131 taxmann.com 235 (NCLT – Bengaluru) (para 18) reversed.