Case Law Details
New Era Propcon Private Limited Vs SREI Equipment Finance Limited (NCLAT Delhi)
The case of New Era Propcon Private Limited vs. SREI Equipment Finance Limited, heard before the National Company Law Appellate Tribunal (NCLAT) in Delhi, revolves around an appeal challenging the admission of a Section 7 application filed against Varutha Developers Private Limited (Corporate Debtor). This appeal raises significant legal issues regarding locus standi, debt, and default under the Insolvency and Bankruptcy Code, 2016 (IBC). The judgment provides insights into the interpretation of relevant provisions of the IBC and the rights of stakeholders in insolvency proceedings.
Background: New Era Propcon Private Limited (the Appellant) entered into a Share Purchase Agreement with Vision India Fund (VIF) and Infra Resurrection Fund (IRF), the shareholders of Varutha Developers Private Limited (the Corporate Debtor). The agreement obligated the Appellant to pay a sum of Rs.1 crore towards share purchase consideration to VIF and IRF and Rs.299 crore to the Corporate Debtor for the repayment of debt owed to SREI Equipment Finance Limited (the Respondent). However, due to various legal complications, including the provisional attachment of land by the Enforcement Directorate (ED), the transaction did not materialize.
Key Legal Arguments: The Appellant challenges the admission of the Section 7 application, contending that it had the intention and capability to fulfill its obligations under the Share Purchase Agreement. They argue that the loan transaction between the Corporate Debtor and the Respondent was a sham, citing pending applications under Section 66 of the IBC seeking to avoid the loan transaction. Additionally, the Appellant highlights a Settlement Award wherein they acknowledged the debt liability and committed to repay the amount owed to the lenders.
On the other hand, the Respondent asserts that the Appellant lacks locus standi to challenge the admission of the Section 7 application since they are not shareholders of the Corporate Debtor. They argue that the existence of debt and default is undisputed, as evidenced by the terms of the Share Purchase Agreement and the Settlement Award. The Respondent contends that the pendency of a Section 66 application does not preclude the initiation of insolvency proceedings under Section 7 of the IBC.
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