The National Company Law Appellate Tribunal (NCLAT) on October 20 dismissed a plea to initiate insolvency process against wind energy service provider Inox Wind.
Dismissing the plea filed by a company called GRI Towers India Private Limited, NCLAT said " Insolvency proceedings are not for
recovery of contractual dues, it is apparent from the facts of the present case that the company has initiated proceeding for recovery of its
contractual dues."
GRI had initially approached the National Company Law Tribunal (NCLT) at Chandigarh to initiate insolvency resolution process against Inox alleging that the latter had defaulted in making payments of Rs. 1.7 crore, which included an interest for delaying the payments. However the NCLT refused the entertain the plea, since the principle amount due is less the Rs. 1 crore. According to the Insolvency and Bankruptcy Code (IBC), 2016, plea to initiate insolvency can be filed only if the amount outstanding is Rs 1 crore or more.
Upon the plea being dismissed, GRI approached NCLAT at Delhi.
GRI was engaged by Inox between 2013 and 2017 for providing equipment and manpower. The company alleged that it had not been paid by Inox for the work it did and the dues amounted to over Rs. 90 lakhs, however if an interest of 12 percent per annum was to be added, it would cross the threshold of Rs. 1 crore.
GRI had also initiated a civil suit in 2017 to recover the amount due to them. However in 2022, GRI withdrew the suit and chose to pursue the litigation under IBC at NCLT.
NCLAT's judgment:
NCLAT in its judgment noted that GRI had filed and suit and withdrew it without getting the court's permission to pursue a litigation elsewhere. Furthermore, since the amount fell due six years old it could be barred by the law of limitation as the suit was withdrawn without a permission to pursue fresh litigation.
IBC proceedings cannot be initiated for amounts that have been due for more than three years.
Unless a party is granted permission by a court to pursue fresh litigation elsewhere, the period for which they pursue other litigation cannot be exempt. For instance, if party pursues a suit in a civil court for six years, then chooses to withdraw it to pursue litigation elsewhere, it has to necessarily obtain the permission of the court to do so if the period of the suit is to be exempted from the law of limitations.
NCLAT also noted that GRI had initiated these proceedings only to recover their dues and the intent of IBC is not recovery of dues but reviving companies in financial distress. Thus, NCLAT upheld NCLT's order.
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