CIRP Admission Upheld as Debt Exceeded Arbitral Award & Default Was Undisputed: NCLAT Delhi

Vikram Sharma Vs Canara Bank (NCLAT Delhi)

The NCLAT Delhi considered an appeal filed by the suspended director of the corporate debtor challenging the order of the National Company Law Tribunal (NCLT), Mumbai, which had admitted an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) and initiated the Corporate Insolvency Resolution Process (CIRP). The corporate debtor, a special purpose vehicle incorporated to execute a road project, had availed financial assistance from a consortium of lenders, including a term loan and additional facilities from the financial creditor. Due to default in repayment, the account was classified as a non-performing asset on 30.07.2017, followed by issuance of a recall notice and eventual filing of a Section 7 application claiming default of Rs.346.83 crore.

The corporate debtor contended that its inability to repay arose from factors beyond its control, including failure of the Public Works Department to issue a Provisional Completion Certificate and subsequent takeover of the project by the National Highways Authority of India. The debtor had initiated arbitration proceedings and was awarded Rs.318.94 crore with interest, which was under challenge and execution proceedings were pending. It was argued that the amount recoverable under the arbitral award exceeded the claim of the financial creditor and, relying on the Supreme Court’s decision in Vidarbha Industries Power Ltd., the CIRP should not have been initiated. It was also contended that the application was barred by limitation.