India: NCLT cannot give the debtor company time to repay its debt once it is satisfied that the default has occurred and the debt is due – NCLAT
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National Company Law Appeal Tribunal, Chennai (“NCLAT”) reversed the decision of the National Company Law Tribunal, Bengaluru (“NCLT”) that the NCLT had determined that the respondent/debtor company had sufficient income and assets to repay its debt and therefore could not be characterized as “insolvent”.
This happened in the case of Drip Capital Inc. v. Concord Creations (India) P. Ltd. (Company Action (AT) (CH) (Ins.) No. 167 of 2021) ruled on 8and November 2021
The NCLAT observed that NCLT had exceeded its jurisdiction by defending the Debtor Company, in particular in the absence of any “Response” or objection proposed by the Debtor Company and by finding that the Respondent was not an “insolvent company” and that the Respondent should be granted additional time to repay the Debt, and ordered the Respondent to repay the balance of the Debt or the amount settled with the appellant within six months, failing which the Appellant/claimant would be free to file a new claim. The NCLAT was of the view that this would run counter to the principles set out by the Honorable Supreme Court in paragraph 30 of Innovative Industries Ltd. Vs. ICICI Bank (2018) 1 SCC page 407.
Accordingly, the NCLAT found that the challenged order suffered from manifest legal defects and ordered the NCLT to restore the company’s motion to its file, “admit” it, and proceed according to law.
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