Skip to main content

Nature of Financial Debt does not change on account of breach of consent terms

Cause Title : Priyal Kantilal Patel vs IREP Credit Capital Pvt. Ltd. & Anr., Company Appeal (AT) (Insolvency) No. 1423 of 2022, National Company Law Appellate Tribunal Principal Bench, New Delhi

Date of Judgment/Order : 01.02.2023

Corum : Justice Ashok Bhushan (Chairperson) & Barun Mitra, Member (Technical)

Citied: 

  1. Amrit Kumar Agrawal Vs. Tempo Appliances Pvt. Ltd. [2020 SCC OnLine NCLAT 1202] 
  2. Dr. Gopal Krishnan MS & Anr. Vs. Mr. Ravindra Beleyur & Anr. [CA(AT)(CH)(INS) No. 316 of 2022]

Background

An application under Section 7 was filed by the Financial Creditor- Debenture Holder. Subsequently, a consent terms was entered between the parties with other stakeholders. According to the consent terms, the Financial Creditor-Respondent herein agreed to withdraw the Company Petition. When the consent terms was defaulted, the cheques which were issued by the Corporate Debtor were dishonored. The Financial Creditor instead of reviving earlier company petition, filed a fresh company petition and based his claim on the basis of the initial financial debt as was claimed in the original application and in the application has also given the details of the consent terms and the subsequent event which took place. When the said company petition was admitted by the Adjudicating Authority, appeal was filed against the Impugned Order.

The primary objection of the Appellant was that there being breach of the consent terms, Section 7 application filed by the Financial Creditor was not maintainable since breach of consent terms does not furnish any right to initiate Section 7 Application, since breach of consent terms can not be treated to be financial debt.

Judgment

The NCLAT opined that the judgement  “Amrit Kumar Agrawal” (supra) was a case where section 7 application was filed on the ground of default in payment of settlement agreement where the court held that default in payment of settlement agreement does not constitute a financial debt. The facts of the present case are clearly distinguishable. Present is not a case where Section 7 Application has been filed only on the ground of default in the settlement agreement rather section 7 application has been filed on the basis of original financial debt which was extended by the Financial Creditor to the Corporate Debtor. The mere fact that in earlier company petition, consent terms was arrived, which consent terms was breached by the corporate debtor, the financial debt which was claimed by the financial creditor would not be wiped out nor the nature and character of financial debt shall be changed on account of breach of the consent terms. Permitting such interpretation shall be giving premium to the corporate debtor who breach the consent terms. Another judgement which has been relied on by Learned Counsel for the Appellant is “Dr. Gopal Krishnan MS”, (supra) which is also judgement relying on “Amrit Kumar Agrawal”. The court in the facts of the said case came to the conclusion that debt is not a financial debt. The above judgement is also clearly distinguishable.

Comments

Most viewed this month

Partition proceedings are vitiated even if single co-sharer is not made party or is not served in accordance with law

Cause Title :  Bhagwant Singh vs  Financial Commissioner (Appeals) Punjab, Chandigarh,  CWP-2132-2018 (O&M), High Court Of Punjab & Haryana At Chandigarh Date of Judgment/Order : 31.08.2022 Corum : Hon’ble Mr. Justice Sudhir Mittal Background A large parcel of land was owned by the Nagar Panchayat. Thereafter, some of the co-sharers sold their shares to third parties including the petitioners herein. On 22.11.1995, respondents No.3 to 5 filed an application for partition of the land. The petitioners were not impleaded as parties.  On completion of proceedings, sanad was issued on 28.08.1996. Vide two separate sale deeds dated 28.05.2008 respondents No.3 and 5 sold some portion in favour of respondent No.6 and 7. These respondents sought implementation of the sanad resulting in issuance of warrants of possession dated 05.06.2008. Allegedly, it was then that the petitioners realized that joint land had been partitioned and that proceedings h...

Power of Attorney holder can also file cheque bounce cases: Supreme Court

The Supreme Court has held that a criminal complaint in a cheque bounce case can be filed and pursued by a person who holds a power of attorney (PoA) on behalf of the complainant. A three-judge bench headed by Chief Justice P Sathasivam gave the "authoritative" pronouncement on the issue, referred to it by a division bench in view of conflicting judgements of some high courts and the apex court. "We are of the view that the power of attorney holder may be allowed to file, appear and depose for the purpose of issue of process for the offence punishable under Section 138 of the Negotiable Instruments Act (which deals with cheque bounce cases)," the bench, also comprising justices Ranjana Prakash Desai and Ranjan Gogoi, said. The bench, in its judgement, said, "...we clarify the position and answer the questions in the following manner: "Filing of complaint petition under Section 138 of Negotiable Instruments Act through PoA holder is perfectly legal...

Christian who reconverts as Hindu SC will get quota benefits

Amid the controversy over “ghar wapsi”, the Supreme Court on Thursday ruled that a person who “reconverts” from Christianity to Hinduism shall be entitled to reservation benefits if his forefathers belonged to a Scheduled Caste and the community accepts him after “reconversion”. Citing articles by B R Ambedkar and James Massey, and reports by Mandal Commission and Chinappa Commission, the court said: “There has been detailed study to indicate the Scheduled Caste persons belonging to Hindu religion, who had embraced Christianity with some kind of hope or aspiration, have remained socially, educationally and economically backward.” The bench of Justices Dipak Misra and V Gopala Gowda held that a person shall not be deprived of reservation benefits if he decides to “reconvert” to Hinduism and adopts the caste that his forefathers originally belonged to just because he was born to Christian parents or has a Christian spouse. Expanding the scope of a previous Constitution benc...