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Financial Creditor who is also shareholder can file under Insolvency Act

In URBAN INFRASTRUCTURE TRUSTEE LTD. V/s. NEELKANTH TOWNSHIP AND CONSTRUCTION PVT. LTD (Corporate Debtor), the THE NATIONAL COMPANY LAW TRIBUNAL while deciding on the objection of the Corporate Debtor that the applicant herein cannot file this application as a financial creditor when the applicant is continuing as one of the shareholders of the Company replied that since this court has not said anywhere if the financial creditor happens to be shareholder as well, the shareholder in the capacity of financial creditor cannot initiate insolvency resolution process, since it is the case of the financial creditor that 90% of the funding arisen by the company is only through this claim, this applicant claim cannot be shut on the ground the applicant continuing as shareholder. As there is no legal bar against this applicant to make his claim as a financial creditor, this Bench cannot read into such proposition to deprive the right of this applicant. Therefore, we do not find any merit in the argument of the corporate debtor.

The Ld. Tribunal also said that when a Company is unable to pay the debt or refuse to pay the debt, the financial creditor or the operational creditor, as the case may be, can initiate insolvency proceedings since the corporate debtor defaulted in repaying the debt admittedly showing in the financial statement of the debtor Company, this application deserves admission.

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