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The NCLAT set aside the insolvency proceedings against ansal Properties and Infrastructure Ltd

The NCLAT set aside the insolvency proceedings against ansal Properties  and Infrastructure Ltd

The petition was filed by the two flat buyers who had jointly booked a unit in APIL Sushant Golf City Lucknow and one of them has also booked separate unit in same project, against the Ansal Properties and Infrastructure Ltd (APIL), In the said petition It admitted the insolvency plea against APIL based on the recovery certificate which was issued by the Uttar Pradesh Real Estate regulatory Authority (UP RERA) because as per the agreement between them, the APIL undertook to complete it within two years from the date of commencement of construction on receipt of sanction plan from the authority and give them the possession within 2 years but he failed to do so. NCLT gave its judgment on 17th march to initiate the resolution process and appointed an interim resolution professional replacing the board of the company. When the petition was filed by Sushil Ansal, a director and shareholder of the company who challenged the NCLT order, the three member NCLAT bench gave its judgment that-

  • Order given by the NCLT to be set aside
  • The management of the company to be handed back to its board.

The NCLAT has observed that a decree-holder cannot be treated as a financial creditor for the purpose of triggering insolvency proceedings against a company. It states that NCLT should not admit the application of home buyers who claim to be financial creditors but as a decree holder on account of non-payment of the amount due under the recovery certificate issued by UP RERA. Although it has been said that the decree holder is covered by the definition of creditor under S.3 (10) of the IBC but such entity would not fall in the definition of financial creditor unless the debt was disbursed against the consideration for the time value of money or falls within any of the clauses in the definition of financial debt. Conclusion The order given by the NCLAT is justified because to initiate the insolvency process against an estate firm by a financial creditor as a decree holder is not sufficient and valid, it is true that as per Sec.3 (10) the decree holder do come as a creditor but it does not fall under definition of financial creditor and because he has execution decree/ recovery amount due mentioned in certificate does not mean it is enough to initiate the insolvency proceedings.

 

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