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Priyal Kantilal Patel vs. Irep Credit Capital Private Limited And Anr. - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (01 Feb 2023)

Mere fact that majority debenture holders have not initiated any application under Section 7 of IBC, shall not preclude financial creditor to initiate the same



Present Appeal has been filed against the Order by which order, the Adjudicating Authority has admitted Section 7 Application filed by the Financial Creditor under Insolvency and Bankruptcy Code, 2016 ( I and B Code, 2016).

An application under Section 7 was filed by the Financial Creditor- Debenture Holder on 20th December, 2019. In the company petition, the Financial Creditor has 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.

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.

It is relevant to notice that, in clause 9 of the consent terms, there was clear stipulation that financial creditor shall be entitled to revive the company petition, the mere fact that instead of reviving company petition, a fresh company petition has been filed under section 7 shall not be reason to reject the company petition and not to entertain the said company petition.

With regard to submission of Appellant that the application could not have been filed under section 7 by the financial creditor, there is no dispute that financial creditor has extended financial benefits to the corporate debtor. The mere fact that the majority debenture holders have not initiated any section 7 application shall not preclude the financial creditor who was entitled to initiate section 7 application on its own right. It shall be open for the appellant, in event, settlement is entered between the parties, to file Application under Section 12-A of the I&B Code, 2016. There is no error in the impugned order. Appeal is dismissed.


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