Kavish Gupta & Vs. Yes Bank Ltd. and Ors.- This Appellate Tribunal held that the mere filing of a counterclaim or money suit does not negate the existence of financial debt and default. In the present case also, the pendency of OA No. 571/2023 and the Counter Claim before the DRT did not affect the Financial Creditor’s right to maintain the application under Section 7.

 NCLAT (2026.07.17) in Kavish Gupta & Vs. Yes Bank Ltd. and Ors. [(2026) ibclaw.in 889 NCLAT, Company Appeal (AT) (Ins.) No. 1015 of 2025 Ors.] held that;

• In these circumstances, the Adjudicating Authority proceeded to consider the Section 7 Application on the basis of the financial debt and default placed before it and did not find it appropriate to await the outcome of the pending DRT proceedings. We find no error in the approach adopted by the Adjudicating Authority.

• The Appellant has relied upon Vidarbha Industries Power Limited v. Axis Bank Limited, [(2022) ibclaw.in 91 SC] : (2022) 8 SCC 352. However, the said judgment was rendered in exceptional facts where the Corporate Debtor had a crystallised and enforceable claim in its favour. In the present case, the proposed Scheme under Section 230, the settlement discussions and the pending Counter Claim before the DRT had not attained finality and did not displace the established financial debt and default.

• This Appellate Tribunal held that the mere filing of a counterclaim or money suit does not negate the existence of financial debt and default. In the present case also, the pendency of OA No. 571/2023 and the Counter Claim before the DRT did not affect the Financial Creditor’s right to maintain the application under Section 7.

• This Appellate Tribunal held that equitable considerations cannot override the statutory mandate of the Code. The Appellant’s reliance on the Corporate Debtor’s ongoing projects, payments to suppliers and commercial viability cannot, therefore, constitute valid grounds to postpone the insolvency proceedings once the requirements of Section 7 stand satisfied.

Excerpts of the Order; 

This appeal CA (AT) (Ins.) No. 1015 of 2025 has been preferred under Section 61 of the Code by Mr. Kavish Gupta, Suspended Director of KKSPUN India Limited, and it arises from the judgment and order dated 11.07.2025 passed by the National Company Law Tribunal, New Delhi Bench-IV (Adjudicating Authority), in CP (IB) No. 36/ND/2024. The Adjudicating Authority vide the impugned order admitted the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’) by Yes Bank Limited/ Respondent No.1 and Financial Creditor, against KKSPUN India Limited/Corporate Debtor and initiated the Corporate Insolvency Resolution Process (CIRP). Mr. Harvinder Singh, was appointed as the Interim Resolution Professional (IRP) of KKSPUN India Limited/Corporate Debtor, by the Adjudicating Authority and he is the Respondent No.2 here. The State Bank of India (SBI), which is the lead bank of consortium of lenders, who have extended credit facilities to CD has been arrayed as Respondent No.3 and IndusInd Bank another member of the same consortium is the Respondent No.4. This appeal would henceforth be referred to as First Appeal/Main Appeal.

# 2. The Appellant contends that the impugned order was passed without affording an effective opportunity of hearing; without considering the pending applications seeking deferment of the proceedings; and despite the fact that a comprehensive settlement and compromise scheme under Sections 230-232 of the Companies Act, 2013 had reached an advanced stage of approval before the consortium of lenders. According to the Appellant, the admission of the Section 7 application rendered the ongoing settlement process infructuous and caused irreparable prejudice to an otherwise commercially viable MSME company.

Company Appeal (AT) (Ins.) No. 812 of 2025

# 3. The CA (AT) (Ins.) No. 812 of 2025 (hereinafter referred to as ‘Second Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against State Bank of India (Respondent/Financial Creditor) challenging the order dated 14.05.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 326/ND/2024. The appeal arises from the dismissal of the New Restoration Application bearing RA No. 36/ND/2025, which was filed by the Corporate Debtor seeking restoration of its earlier Recall Application bearing IA No. 1916/ND/2025. The said Recall Application was preferred for recalling the orders dated 19.03.2025 and 02.04.2025, whereby the Corporate Debtor contended that vide order dated 19.03.2025 the Ld. Adjudicating Authority closed its right to advance arguments in the Section 7 proceedings filed by State Bank of India and further vide the order dated 02.04.2025 the Ld. AA reserved the orders in Sec 7 petition, without granting it an effective opportunity of hearing. The Corporate Debtor has challenged the said order on the ground that the Adjudicating Authority ought to have restored the Recall Application and considered its submissions on merits.

Company Appeal (AT) (Ins.) No. 813 of 2025

# 4. The CA (AT) (Ins.) No. 813 of 2025 (hereinafter referred to as ‘Third Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against State Bank of India (Respondent/Financial Creditor) challenging the order dated 28.04.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 326/ND/2024. The appeal arises from the dismissal of the Corporate Debtor’s Recall Application bearing IA No. 1916/ND/2025, which was filed seeking recall of the orders dated 19.03.2025 and 02.04.2025 passed in the Section 7 proceedings initiated by State Bank of India. The IA No. 1916/ND/2025 was dismissed by the Ld. Adjudicating Authority for ‘want of prosecution’ by the Appellant. The grievance raised by the Corporate Debtor is that while the settlement process between the Corporate Debtor and consortium lenders was progressing and the application seeking abeyance of the Section 7 proceedings was pending, the Adjudicating Authority closed the Corporate Debtor’s right to argue on 19.03.2025 and thereafter reserved the Company Petition for final orders on 02.04.2025. The present appeal, therefore, primarily concerns the issue of denial of opportunity of hearing and the refusal to recall the procedural orders passed during the pendency of the insolvency proceedings.

Company Appeal (AT) (Ins.) No. 815 of 2025

# 5. The CA (AT) (Ins.) No. 815 of 2025 (hereinafter referred to as ‘Fourth Appeal’) has been preferred by KKSPUN India Limited (Corporate Debtor/Appellant) against Yes Bank Limited (Respondent/Financial Creditor) challenging the order dated 28.04.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 36/ND/2024. The present appeal arises from the dismissal of the Corporate Debtor’s Recall Application bearing IA No. 1913/ND/2025, which sought recall of the orders dated 19.03.2025 and 02.04.2025 passed during the pendency of the Section 7 application filed by Yes Bank Limited, for ‘want of prosecution’. The Corporate Debtor submitted that the order dated 19.03.2025 resulted in closure of its right to advance oral arguments and the subsequent order dated 02.04.2025 resulted in the Section 7 Petition being reserved for final orders, despite the pendency of its application seeking deferment of proceedings due to the ongoing settlement discussions and the Scheme of Compromise and Arrangement under Sections 230-232 of the Companies Act, 2013. The appeal has accordingly been preferred seeking restoration of the opportunity to address arguments and contest the Section 7 proceedings on merits before any final adjudication.

Company Appeal (AT) (Ins.) No. 816 of 2025

# 6. The CA (AT) (Ins.) No. 816 of 2025 (hereinafter referred to as ‘Fifth Appeal’) has been preferred by KKSPUN India Limited/Corporate Debtor against Yes Bank Limited (Respondent/Financial Creditor) challenging the order dated 14.05.2025 passed by the Ld. Adjudicating Authority in CP (IB) No. 36/ND/2024. The appeal arises from the dismissal of the New Restoration Application bearing RA No. 37/ND/2025, filed by the Corporate Debtor for restoration of its earlier Recall Application bearing IA No. 1913/ND/2025. The Recall Application sought recall of the orders dated 19.03.2025 and 02.04.2025, whereby the Corporate Debtor’s right to argue the Section 7 Petition filed by Yes Bank Limited was closed and the matter was reserved for final orders. According to the Corporate Debtor, dismissal of the Restoration Application prevented consideration of its grievance regarding lack of effective hearing. The present appeal therefore seeks restoration of the Recall Application and an opportunity to place its submissions before adjudication of the insolvency proceedings.

# 7. The First appeal is the Main Appeal among the five connected appeals arising out of the same insolvency proceeding i.e. CP (IB) No. 36/ND/2024, vide which the CD was admitted in CIRP. The other 4 appeals are challenges to procedural orders passed by Ld. Adjudicating Authority during the CIRP proceedings of the same Corporate Debtor. Since all the appeals arise from the same set of facts and interconnected proceedings, before the Ld. Adjudicating Authority, they are being considered together. The First appeal challenges the final order dated 11.07.2025 passed in CP (IB) No. 36/ND/2024, whereby the Adjudicating Authority admitted the application under Section 7 of the Code and initiated the Corporate Insolvency Resolution Process against the Corporate Debtor.

Facts of the Case

# 8. The brief facts of the case relevant to the disposal of these appeals are as follows: –

i. The Corporate Debtor, KKSPUN India Limited, is engaged in the business of manufacturing precast concrete products and supplying the same to large Engineering, Procurement and Construction (EPC) companies, particularly Larsen & Toubro. The company is registered as a Micro, Small and Medium Enterprise (MSME) and claims to be a commercially solvent, profit-making concern employing more than 235 persons. Being an EPC contractor, its principal commercial assets consist of ongoing work orders, skilled manpower and engineering expertise rather than tangible immovable assets.

ii. The Yes Bank Limited/ Respondent No.1 Bank sanctioned various credit facilities to the Corporate Debtor over a period of time since 2016. The Corporate Debtor failed to maintained financial discipline and defaulted in payment to the Financial Creditor. Subsequently, the loan account of the Appellant/ Corporate Debtor was classified as NPA w.e.f. 05.08.2022. Yes Bank also recorded the default of the Appellant with the NeSL portal on 05.08.2022. The Respondent No.1, thereafter on 07.03.2023 issued loan recall notice to Corporate Debtor for the entire outstanding amount of all facilities, amounting to Rs.32.13 crores, which was due as on 01.03.2023, together with interest and other charges etc. and requested the payment within seven days of receipt of the loan recall notice.

iii. As the Corporate Debtor did not make outstanding payment, the Respondent No.1/Yes Bank filed application under Section 7 of the Code for total outstanding dues of Rs.32.57 cr. on 14.12.2023. The same was registered on 24.01.2024 as CP (IB) No.36/ND/2024. The Corporate Debtor filed its detailed reply on 09.05.2024.

iv. Parallelly, The CD had also availed credit facilities from Respondent No.3/SBI, which were granted way back in 2011 amounting to Rs.69.50 cr. These facilities were subsequently enhanced/ renewed/ modified over a period of time. The last such renewal took place on 18.02.2022 for Rs.169.88 cr. The CD also committed default in repayment of SBI Loan Account also and it was declared as NPA w.e.f. 10.08.2022. SBI also filed its own Section 7 petition, which was listed as CP (IB) No. 326/2024 for a default of Rs.190.49 cr. Later on, several banks, which had provided credit facilities to the CD, formed a consortium of which SBI was the lead member. The CD filed its Reply dated 28.08.2024 to the Section 7 IBC Petition of the SBI.

v. The Ld. NCLT on 18.12.2024 heard the Ld. Counsel for the SBI and asked the Respondent to come forth for arguments, as the present application had been pending for long. However, as the Debt and default was crystal clear, the CD sought an opportunity to get the matter settled. Therefore, the Ld. NCLT, on 06.01.2025, 20.02.2025 and on 30.01.2025 granted several opportunities to the CD to settle the matter with the Applicant and also to argue the matter on merits, but in vain.

vi. A Joint Lenders Meeting (JLM) was conducted on 10.02.2025 to discuss the revised Settlement Proposal dated 30.01.2025 of Rs. 83.00 Crores of the CD, however, the CD did not make payment of any upfront amount, thus, the said Settlement Proposal could not proceed at all even for consideration of the lenders, hence, was deemed as failed.

vii. The above fact of non-consideration of the Settlement Proposal of the CD was informed to the Ld. NCLT during hearing on 19.03.2025, whereafter, the Ld. NCLT re-heard the arguments on behalf of the Applicant-Bank, and on failure to argue the matter, the respondent’s right to argue was closed, while the Ld. NCLT granted liberty to both the parties to file a brief note and listed the matter for compliance to 02.04.2025. The brief notes were duly filed by all concerned, and on 02.04.2025 the Ld. NCLT reserved the matter for orders.

viii. The CD filed an LA. No. 1916/2025 seeking recall of Orders dated 19.03.2025 and 02.04.2025, however, the CD did not appear before the Ld. NCLT to prosecute the said LA. No. 1916/2025 on 28.04.2025, thus, on the 2nd call, the said I.A. was dismissed for ‘want of prosecution’. The Restoration Application No. 36/2025 of the CD seeking to restore LA. No. 1916/2025 was also dismissed by the Ld. NCLT by its Order dated 14.05.2025 holding that the appellant failed to point out any valid reasons for restoration.

ix. The CD filed CA (AT) (INS.) Nos. 812/2025 and 813/2025 challenging the Orders dated 14.05.2025 and 28.04.2025 which was listed for hearing on 27.05.2025, however, no interim relief was granted in favour of the CD. Having failed to obtain any interim Order from the NCLAT on 27.05.2025, the CD again moved the Ld. NCLT by filing LA. No. 3136/2025 seeking abeyance of pronouncement of Order in the Section 7 IBC Petition, This IA. No. 3136/2025 was dismissed by the Ld. NCLT by its Order dated 04.07.2025.

x. During the pendency of the Section 7 proceedings, the Corporate Debtor, on 07.12.2024, initiated an independent process under Sections 230-232 of the Companies Act, 2013 by filing CA (CAA) No.114/ND/2024, proposing a comprehensive Scheme of Compromise and Arrangement before the consortium of lenders with the objective of settling the outstanding debts outside insolvency proceedings. The proposed scheme envisaged a negotiated restructuring with all consortium banks, including Yes Bank.

xi. The Corporate Debtor thereafter filed IA No.5985/ND/2024 on 16.12.2024 under Rule 11 of the NCLT Rules, requesting the Adjudicating Authority to keep the Section 7 proceedings in abeyance, until consideration of the compromise scheme under Sections 230-232. The said application was ultimately dismissed as infructuous simultaneously with the admission of the Section 7 petition on 11.07.2025.

xii. While these negotiations continued, the first motion application filed under Sections 230-232 came to be reserved for orders on 11.02.2025, and thereafter, on 20.02.2025, the Corporate Debtor placed before the Adjudicating Authority the minutes of the Joint Lenders Meeting reflecting that the settlement proposal was proposed to be put to voting on 10.03.2025. In view thereof, the Section 7 proceedings were adjourned to 19.03.2025 for reporting the status of settlement or for hearing arguments.

xiii. Shortly thereafter, on 20.03.2025, the Adjudicating Authority allowed the first motion application in CA (CAA) No.114/ND/2024, thereby approving the initial stage of the proposed Scheme of Compromise and Arrangement under Sections 230-232 of the Companies Act.

xiv. When the matter again came up on 02.04.2025, the Corporate Debtor had engaged a Senior Counsel to argue the Section 7 petition. However, the Adjudicating Authority reserved orders without hearing arguments either on the pending Rule 11 application, on the merits of the Section 7 petition, or on the progress of the compromise scheme and the Joint Lenders Meetings. Aggrieved thereby, the Corporate Debtor filed IA No.1913/ND/2025 on 16.04.2025 seeking recall of the orders dated 19.03.2025 and 02.04.2025, alleging that those orders had been obtained due to serious misrepresentations made by Yes Bank before the Adjudicating Authority. The recall application, however, came to be dismissed on 28.04.2025 for non-appearance of counsel.

xv. Finally, while the clarification applications came up before this Appellate Tribunal on 11.07.2025, the Adjudicating Authority pronounced the impugned order on the very same day admitting the Section 7 petition and initiating CIRP against the Corporate Debtor. Ld. Adjudicating Authority took a view that the loan account(s) of the CD having turned NPA on 10.08.2022 and the debts and default being clear in view of the NESL Certificates as also the CD having admitted the debts and defaults in the Letter dated 24.11.2021; Balance Sheet as at 2022 & 2023; and the Settlement Proposals dated 08.01.2024, 06.07.2024, 24.09.2024 and 30.01.2025; it was a fit case for admission in CIRP.

xvi. Both the CP (IB) No. 36/2024 of the Yes Bank Ltd. and the CP (IB) No. 326/2024 of the SBI were listed for pronouncement of Orders on 11.07.2025. However, since the Section 7 IBC Petition of the Yes Bank Ltd. was filed prior in time, the Ld. NCLT passed the Admission Order in CP (IB) No. 36/2024 of Yes Bank Ltd., while the CP (IB) No. 326/2024 of the Respondent No.3/SBI was disposed of in view of Admission Order and Appointment of the RP in Yes Bank’s CP (IB) No. 36/2024. This appeal arises from the aforesaid impugned order dated 11.07.2025.

Analysis and Findings

# 53. We have gone through the documents on record and have heard the parties at length.

# 54. The Appellant’s challenge in the present appeal is mainly on two grounds. Firstly, it has been argued that the Corporate Debtor was denied an effective opportunity of hearing and that the Adjudicating Authority ought to have deferred the proceedings in the interest of revival of the Corporate Debtor. The applications filed by Appellant at various stages were not decided or summarily rejected by the Adjudicating Authority and the Section 7 petition was admitted. Further the Appellant’s lawyer was not allowed to argue his case before the Adjudicating Authority. These events are clear violation of Principles of Natural Justice and based on this ground alone the impugned order needs to be set aside. Secondly, he challenges the admission of the Section 7 Application by contending that the Adjudicating Authority ought not to have initiated the Corporate Insolvency Resolution Process, when the Corporate Debtor was pursuing a Scheme of Compromise under Section 230 of the Companies Act, 2013 and negotiations for a One-Time Settlement (“OTS”) were actively underway with the Consortium of Lenders.

# 55. On the other hand, the Respondents contend that the financial debt and default stand admitted and duly established; that the requirements of Section 7 of the Code stood fully satisfied; and that neither the pendency of a proposed settlement nor the existence of a Scheme under Section 230 could prevent the Adjudicating Authority from exercising its jurisdiction under the Code. The Respondents further submit that the Corporate Debtor had been afforded sufficient opportunity during the proceedings and that the Impugned Order does not suffer from any legal or factual infirmity.

# 56. We have carefully considered the record in this regard in light of the proceedings before the Adjudicating Authority. The record indicates that the Corporate Debtor was granted several opportunities to place its case and advance submissions. The Section 7 Application was first listed before the Adjudicating Authority on 05.04.2024, when notice was issued to the Corporate Debtor. Thereafter, vide order dated 19.04.2024, the Corporate Debtor was granted time to file its reply. On 10.05.2024, when further time was sought on account of delay in filing, the Adjudicating Authority directed the Corporate Debtor to upload its reply on the DMS portal, thereby providing an opportunity to bring its defence on record.

# 57. The proceedings further demonstrate that the matter remained pending for a considerable period thereafter. The arguments on behalf of the Financial Creditor were heard on 14.10.2024. Subsequently, on 13.11.2024, the Corporate Debtor again sought an adjournment on the ground that its counsel was engaged before the Hon’ble Delhi High Court. The Adjudicating Authority, while granting the said opportunity, specifically recorded that the Corporate Debtor should address arguments on the next date, failing which the matter would proceed on the basis of the material already available on record.

# 58. Despite the aforesaid opportunity, on 13.12.2024, the Corporate Debtor again sought deferment of the proceedings on the ground that IA/5985/ND/2024 had been filed on 11.12.2024 and was listed on the same day. The Adjudicating Authority noticed that sufficient opportunities had already been granted and that the Financial Creditor had already concluded its arguments. Accordingly, the Adjudicating Authority declined further adjournment and closed the opportunity of the Corporate Debtor to advance arguments.

# 59. It is also significant that even thereafter, the Corporate Debtor was afforded another opportunity. On 19.03.2025, considering the change in the composition of the Bench, the Adjudicating Authority again called upon the Corporate Debtor to advance its submissions. However, the counsel appearing for the Corporate Debtor expressed inability to argue the matter. It was only thereafter that the right to advance oral arguments was closed. The Adjudicating Authority took the written submissions filed by the appellant on record.

# 60. The above sequence of proceedings shows that the Corporate Debtor was not denied an opportunity to present its case. The record reflects that the Corporate Debtor participated in the proceedings, filed its pleadings, placed its defence before the Adjudicating Authority and was repeatedly granted opportunities to advance submissions. The closure of the right to argue was not an immediate consequence but followed only after several opportunities had already been provided.

# 61. Further, even after reserving the matter, the Adjudicating Authority continued to seek necessary clarifications. On 23.05.2025, directions were issued to both parties to file status reports indicating the stage of proceedings in OA No.571/2023 and the Counter Claim. Further directions were also issued regarding submission of a valid Authorisation for Assignment (AFA), declaration regarding non-initiation of disciplinary proceedings and details of assignments undertaken by the proposed Resolution Professional. This further indicates that the Adjudicating Authority proceeded after examining the relevant material and ensuring procedural compliance.

# 62. The principles of natural justice require a fair and reasonable opportunity of hearing. They cannot be interpreted to mean that proceedings must continue indefinitely despite repeated opportunities being granted. A party which has participated in the proceedings and has been provided sufficient opportunity to place its case cannot subsequently contend that there has been denial of natural justice merely because further adjournment was not granted.

# 63. It is also pertinent to note that the Corporate Debtor had sufficient opportunity to place its case before the Adjudicating Authority. The pleadings, documents, replies, applications and written submissions filed by the parties were already available on record. The Corporate Debtor had also placed its objections regarding the Section 7 Application, proposed Scheme under Section 230 of the Companies Act, settlement discussions and pending DRT proceedings before the Adjudicating Authority. Therefore, it cannot be said that the Corporate Debtor was deprived of an opportunity to present its case.

# 64. In view of the above factual position, we find that the proceedings before the Adjudicating Authority do not suffer from violation of principles of natural justice. The Corporate Debtor had adequate opportunity to present its defence, and the Adjudicating Authority committed no error in proceeding to decide the Section 7 Application on the basis of the pleadings, documents and material available on record. We are also cognizant of the fact that the proceedings under the Code are summary proceedings and need to be finalized in a time bound manner. The appellant was given several opportunities for making its submissions before the Adjudicating authority which it failed to utilize. In spite of that, Adjudicating Authority did not decide the matter ex-parte but passed the order after considering the reply filed by the appellant as well as its written submissions.

# 65. The Appellant has also sought to contend that the orders dated 19.03.2025 and 02.04.2025 were illegal and therefore the admission order based upon those proceedings must automatically fail. This contention is equally without merit. As noted earlier, we did not find any irregularity in the procedure adopted by the Adjudicating Authority. The matter was decided on merit based on the documents submitted by the appellant and respondents including their written submissions. Once the main petition has been decided on merits by the Adjudicating Authority, those procedural orders become part of the decision in the main appeal. Mere pendency of such proceedings cannot automatically invalidate the admission order passed by the Adjudicating Authority.

# 66. We are also unable to accept the submission that the Adjudicating Authority ought to have exercised its inherent powers to postpone the decision on the Section 7 Application. Inherent powers are intended to advance the cause of justice and cannot be exercised in a manner that defeats the statutory scheme of the Code. Once debt and default stood established, the Adjudicating Authority was justified in proceeding to decide the application in accordance with law. Accepting the Appellant’s submission would virtually permit insolvency proceedings to remain pending for an indefinite period on the basis of negotiations which may or may not ultimately succeed.

# 67. In addition to that, it is necessary to examine the scope of jurisdiction of the Adjudicating Authority while dealing with an application under Section 7 of the Code. The jurisdiction under Section 7 is limited. The Adjudicating Authority is required to examine whether a financial debt exists, whether a default has occurred and whether the application is otherwise complete in terms of the Code. Once these requirements are satisfied, the Adjudicating Authority is ordinarily required to admit the application. The insolvency process under the Code is triggered by the occurrence of default and not by the commercial strength or future prospects of the Corporate Debtor.

# 68. In the present case, the existence of financial facilities extended by the lenders to the Corporate Debtor is not in dispute. The material placed on record shows that substantial credit facilities had been sanctioned by the consortium of banks from time to time. The loan accounts were classified as Non-Performing Assets and recall notices were issued. The Banks have specifically pointed out that the Corporate Debtor committed default in repayment of the financial facilities and that the outstanding dues exceeded Rs.190 Crores. These facts form part of the record and have not been effectively disputed by the Appellant. Instead, the challenge is primarily directed against the timing of the admission of the Section 7 petition rather than the existence of debt or default itself.

# 69. It is an admitted position that several OTS proposals were submitted by the appellant on 08.01.2024, 06.07.2024 and 24.09.2024, which were all rejected by the lenders. This itself is an admission and acknowledgment of ‘debt’ and ‘default’ on its part.

# 70. The principal argument advanced by the Appellant is that the Adjudicating Authority ought to have deferred the Section 7 proceedings because the Corporate Debtor had initiated a Scheme of Compromise under Section 230 of the Companies Act, 2013 and the Consortium of Lenders was considering the same. According to the Appellant, the proposed Scheme had reached an advanced stage and the Consortium had resolved to vote upon the proposal during the period from 14.07.2025 to 14.08.2025. It has also been argued that the Corporate Debtor had agreed to deposit a portion of the settlement amount to demonstrate its bona fides.

# 71. The Respondent banks, on the contrary, have submitted that in the Joint Lenders Meeting conducted on 10.02.2025, a revised settlement proposal of the CD for Rs.83 crores was considered. However, the CD did not make payment of any upfront amount due to which settlement proposal could not reach the consideration stage by the lending banks. Consequent to the non-consideration of the settlement proposal of the CD, the lending banks informed the Adjudicating Authority during the hearing on 19.03.2025 that the settlement proposal could not be considered by the banks. Thereafter, the Adjudicating Authority re-heard the arguments on behalf of Applicant banks. The respondent failed to argue the matter on the said date and its right to argue was closed. At the same time, Ld. Adjudicating Authority granted liberty to both the parties to file written submissions. Matter was listed for compliance on 02.04.2025 and as the notes of submission were filed by the parties, the Ld. Adjudicating Authority reserved the matter for orders.

# 72. The submission of appellant that the orders under section 7 should not have been passed during the pendency of a Scheme under Section 230 of the Companies Act, in our view, does not prevent the Adjudicating Authority from exercising its jurisdiction under Section 7 of the IBC. Until such Scheme under section 230 is approved in accordance with law and becomes binding upon all stakeholders, it remains only a proposal. The Court cannot refuse to admit a Section 7 application merely because settlement negotiations are taking place or because there exists a possibility that the parties may arrive at a future settlement. Judicial decisions must be based on existing legal rights and obligations and not on uncertain future events. We have already noted that the settlement proposal had failed and banks had duly informed the Ld. Adjudicating Authority about such failure. It’s only after the failure of settlement that the Ld. Adjudicating Authority decided the matter on merits.

# 73. The Appellant has repeatedly emphasised that the Corporate Debtor is a commercially viable company executing public infrastructure projects, that it possesses substantial receivables, and that admission into CIRP would adversely affect its business operations and future contracts. The facts on the contrary show that CD failed repeatedly to make payments to its Financial Creditors. In case of OTS proposals, it failed to deposit even earnest money. Which commercially viable and solvent company would not be able to pay even working capital loan? We find no merit in this submission of CD. While these submissions may indicate that the Corporate Debtor intended to revive its business, they do not alter the legal position under the Code. The object of the IBC is itself the resolution of financially distressed companies. Admission into CIRP does not amount to liquidation, on the contrary, the Code provides a structured mechanism for resolution, while preserving the Corporate Debtor as a going concern. Therefore, the possibility of commercial hardship cannot by itself constitute a legal ground to refuse admission under Section 7.

# 74. The Appellant has also relied upon the observations made by this Appellate Tribunal in the earlier proceedings that settlement negotiations may continue in parallel with the pending insolvency proceedings. In our view, the said observation has been correctly understood by the Adjudicating Authority. The observation merely recognised that parties were free to continue negotiations, even while the statutory proceedings remained pending. It did not direct the Adjudicating Authority to indefinitely postpone the adjudication of the Section 7 petition until the settlement discussions concluded. It,s only after all efforts at settlement failed and the Banks reported the same to the Ld. Adjudicating Authority the AA moved ahead with Sec 7 proceedings. Had such an interpretation been accepted, every Corporate Debtor could indefinitely delay insolvency proceedings merely by initiating negotiations with its lenders. Such an interpretation would be contrary to the scheme and timelines prescribed under the Code.

# 75. The Appellant has further argued that the Section 7 petition was filed only as a recovery mechanism and therefore ought not to have been entertained. This contention also deserves to be rejected. It is well settled that a Financial Creditor is entitled to invoke the provisions of Section 7 once the statutory requirements are fulfilled. Merely because the Financial Creditor seeks recovery of its legitimate dues cannot lead to the conclusion that the insolvency process has been misused. In the absence of any material demonstrating abuse of process or lack of jurisdiction, such a contention cannot invalidate the proceedings initiated under the Code.

# 76. It is further relevant to notice that the Corporate Debtor had relied upon the pendency of proceedings before the Debt Recovery Tribunal, including OA No.571/2023 and the Counter Claim filed by it, to seek deferment of the Section 7 proceedings. The Adjudicating Authority, before passing the Impugned Order, had also sought clarification from the parties regarding the status of the said proceedings. From the status placed on record, it was noticed that the matter before the DRT was still pending and the Corporate Debtor had not filed its written submissions therein. Therefore, the Counter Claim was yet to be adjudicated and no determination had been made in favour of the Corporate Debtor which could have any bearing on the proceedings under Section 7 of the Code.

# 77. It is also pertinent to note that the Counter Claim relied upon by the Corporate Debtor arose at a later stage during the pendency of proceedings. The same remained pending adjudication before the DRT and no final determination had been made in favour of the Corporate Debtor. Therefore, the mere filing of the Counter Claim could not be treated as a ground to defer adjudication of the Section 7 Application.

# 78. In these circumstances, the Adjudicating Authority proceeded to consider the Section 7 Application on the basis of the financial debt and default placed before it and did not find it appropriate to await the outcome of the pending DRT proceedings. We find no error in the approach adopted by the Adjudicating Authority.

# 79. The Appellant has relied upon Vidarbha Industries Power Limited v. Axis Bank Limited, [(2022) ibclaw.in 91 SC] : (2022) 8 SCC 352. However, the said judgment was rendered in exceptional facts where the Corporate Debtor had a crystallised and enforceable claim in its favour. In the present case, the proposed Scheme under Section 230, the settlement discussions and the pending Counter Claim before the DRT had not attained finality and did not displace the established financial debt and default. The decision in Vidarbha Industries is applicable only in specific circumstances and not universally. Therefore, it does not assist the Appellant.

# 80. The Respondents have also relied upon the judgment of this Appellate Tribunal in Grand Developers Pvt. Ltd. v. Nitin Batra & Ors. [(2024) ibclaw.in 317 NCLAT], Company Appeal (AT) (Insolvency) No. 899 of 2024, wherein it was held that proceedings under Section 230 of the Companies Act, 2013 are independent of proceedings under the Insolvency and Bankruptcy Code. The said principle squarely applies to the present case. The mere pendency of the proposed Scheme under Section 230 did not create any legal bar to the admission of the Section 7 Application.

# 81. They have also relied upon Vijay Kumar Singhania v. Bank of Baroda & Ors. [(2023) ibclaw.in 787 NCLAT], Company Appeal (AT) (Insolvency) No. 1058 of 2023, wherein this Appellate Tribunal held that the mere filing of a counterclaim or money suit does not negate the existence of financial debt and default. In the present case also, the pendency of OA No. 571/2023 and the Counter Claim before the DRT did not affect the Financial Creditor’s right to maintain the application under Section 7.

# 82. Reliance has further been placed on Sunil Gutte v. Avil Menezes & Ors. [(2025) ibclaw.in 412 NCLAT], Company Appeal (AT) (Insolvency) No. 515 of 2025, wherein this Appellate Tribunal held that equitable considerations cannot override the statutory mandate of the Code. The Appellant’s reliance on the Corporate Debtor’s ongoing projects, payments to suppliers and commercial viability cannot, therefore, constitute valid grounds to postpone the insolvency proceedings once the requirements of Section 7 stand satisfied.

# 83. It is equally important to note that the Appellate jurisdiction under Section 61 of the Code is limited. We do not sit in appeal over every finding merely because another view may also be possible. Interference is warranted only when the impugned order suffers from patent illegality, material irregularity, perversity or jurisdictional error. After carefully examining the Impugned Order as well as the material placed on record, we find that the Adjudicating Authority correctly examined the requirements of Section 7, considered the relevant material and admitted the application only after recording its satisfaction regarding the existence of financial debt and default. No material has been shown before this Court to establish that the findings recorded by the Adjudicating Authority are contrary to law or unsupported by the record.

# 84. In view of our findings recorded hereinabove, we find no legal or factual infirmity in the Impugned Order dated 11.07.2025 passed by the Adjudicating Authority admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The admission of the Corporate Debtor into Corporate Insolvency Resolution Process has been found to be in accordance with law.

# 85. Consequently, Company Appeal (AT) (Ins.) No. 1015 of 2025 is dismissed. Company Appeal (AT) (Ins.) Nos. 815 of 2025 and 816 of 2025 are also dismissed as they arise out of procedural orders passed during the same proceedings. The Company Appeal (AT) (Ins.) Nos. 812 of 2025 and 813 of 2025, which arise out of CP (IB) No. 326 of 2025, which has been disposed of by the Adjudicating Authority in view of the admission of CP (IB) No. 36 of 2024 and accordingly are dismissed being infructuous. All pending Interlocutory Applications, if any, also stand disposed of. There shall be no order as to costs..

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Mr. Anil Kumar Ojha, Vs. Ms.Revathi S Raghunathan. & Anr. - We are of the view that this Tribunal has no jurisdiction to direct the Liquidator / Respondent No.1 to keep the claim of SFC abeyance pending decision of DRT on the counter claim.

 NCLT Chennai-1(2025.02.19) in Mr. Anil Kumar Ojha, Vs. Ms.Revathi S Raghunathan. & Anr. [IA/725/CHE/2024 in CP/IB/1264/2018], held that; 

• We are of the view that this Tribunal has no jurisdiction to direct the Liquidator / Respondent No.1 to keep the claim of SFC abeyance pending decision of DRT on the counter claim. 

• As regards other prayers, the moratorium under Section 14 does not bar the SFC to initiate wilful defaulter proceedings. 

• The Liquidator has been appearing in the proceedings before the DRT as evident from the report filed. There is no bar to initiate proceedings under IBC pending DRT proceedings. These proceedings are parallel and the independent proceedings.

Excerpts of the order; 

This application has been filed under Section 60(5), 35(1)(A), 65 & 74 of the Insolvency and Bankruptcy Code, 2016 r/w Regulations 16 to 30A of IBBI Liquidation Process) Regulations, 2016 by Shri. Anil Kumar Ojha, the Promoter and the Managing Director (Suspended) of the Corporate Debtor, SLO Industries Limited seeking the following reliefs:

• i. To direct the 1st Respondent/Liquidator to keep the claim of the 2nd Respondent Bank, in abeyance pending decision of DRT in counter claim of CD in TA/1/2017 of Union Bank of India and accordingly update the details of stakeholders on the website of IBBI.

• ii. To take cognisance of the fact that the 2nd Respondent, Union Bank of India, Secured Financial Creditor (SFC), filed Insolvency Application under Section 7 for the purpose other than resolution of the insolvency of the CD and in consequence to impose suitable penalty on the 2nd Respondent Union Bank of India, Secured Financial Creditor, under section 65 and compensate the CD for the depletion of the value of assets of the CD after 04.11.2019.

• iii. To take cognisance of the fact that the 2nd Respondent Union Bank of India, Secured Financial Creditor, violated the provisions of Moratorium under section 14 and refer the matter to IBBI (Insolvency & Bankruptcy Board of India) for initiating prosecution of SFC under section 236 r/w section 74 of IBC.

• iv. To direct the 1st Respondent to periodically apprise this Hon’ble Tribunal regarding steps taken by the 1st Respondent in the proceedings in IA/1/2017 pending before DRT, Chennai.

• v. Pass any other order or orders as this Hon’ble Tribunal may deem fit under that circumstances of this case and thus render justice. 

# 2. The case of the Applicant in brief is that the Corporate Debtor was admitted into CIRP on an application filed under Section 7 of IBC, 2016 by the Corporation Bank nowUnion Bank of India vide order dated 04.11.2019. Shri. C. Ramasubramaniam was appointed as the RP. He invited the claims and constituted the CoC in which the Financial Creditor was the sole member. Since no viable Resolution Plan came, the CoC resolved to liquidate the Corporate Debtor.This Tribunal ordered for the liquidation of the Corporate Debtor vide dated 21.01.2022 and appointed Shri. S. Palaniappan as the Liquidator. A Resolution was passed in the 2nd SCC held on 16.10.2023 where the Secured Financial Creditor / Union Bank of India having voting share of 89.175% approved for the change of the Liquidator. The Tribunal thereafter vide its order dated 28.11.2023, appointed Ms. Revathi S Raghunathan as the new Liquidator.

# 3. It is stated that Union Bank of India prior to initiating CIRP against the Corporate Debtor, filed a recovery petition in O.A. No.105 of 2017 for recovery of Rs.236,35,93,324.86/- before the DRT, Chennai against the Corporate Debtor and its suspended directors. On 19.09.2017, the Applicant along with others, filed the written statement before the DRT which also included a counterclaim for Rs.342.04 Crores. However, the DRT ordered that the counterclaim be numbered separately as C.C. No. 1 of 2017 as a separate action and not as a part of the written statement. The Applicant preferred W.P. No. 325 & 326 of 2018 before the Hon'ble High Court of Judicature at Madras where the Hon'ble High Court recognizing the counterclaim of the Applicant and others as part of the written statement in O.A. No. 105 of 2017 vide dated 07.08.2018 ordered as under:  

•  “42. Bare reading of the Rule 12 of the Rules, which has come into force on 04.11.2016, is also indicative that suffice for the defendant to file set off, including claim or counter claim, if any, along with documents in a paper book form.

• 43. For all the reasons, proceedings dated 02.01.2018, passed in T.A.No.01 of 2017, on the file of the DRT-I, Chennai, directing the defendants to file separate counter claim/proof affidavit, are set aside. Tribunal is directed to take on record, the pleadings and proof affidavit submitted by the petitioners, without insisting for filing separate paper book, one for defence of the claim and another for counter claim, and separate affidavit and proceed with the merits of the case.” 

# 4. It is stated that subsequently, the counter claim was entertained by the DRT and OA was re-numbered as TA 1 of 2017. It is alleged that feeling frustrated with the orders of the Hon'ble High Court, the SFC/Union Bank of India filed an insolvency application in CP/1264/2018 under Section 7 of IBC on 10.10.2018. 

# 5. It is stated that post-initiation of CIRP, the Applicant informed the RP several times about the counter claim of the Corporate Debtor against the SFC and requested him to pursue the same before the DRT in the interest of the Corporate Debtor, however, the RP did not bother to pursue the counter claim. It is stated that this was against the objects of the CIRP. It is stated that after the liquidation order, he again requested the erstwhile Liquidator to pursue the counter claim of the Corporate Debtor before the DRT but he also did not pay any heed. It is stated that on 14.06.2023, he requested the erstwhile Liquidator to keep the claim of SFC in abeyance till the counter claim of the Corporate Debtor against the SFC is adjudicated. Since the erstwhile Liquidator was not showing any inclination to pursue the counter claim, he filed an application IA/1009/CHE/2023 before the Tribunal. It is stated that on 01.02.2024, the Counsel for the new Liquidator informed the Tribunal that the Liquidator has been impleaded in the matter and participating in the proceedings. The Application was

accordingly disposed of by the Tribunal. 

# 6. It is stated that it is a well settled law that the claim of the Claimant cannot be determined till the decision is taken on the counter claim by the Appropriate Authority. It is stated that if the counter claim of the Corporate Debtor is adjudicated in its favour, the Corporate Debtor would be eligible to receive much higher amount from the SFC than the amount claimed by the SFC.

# 7. Reference is made of the cases where :

19.3 The Hon’ble NCLAT (12.06.2023) in Anheuser Busch Inbev India Ltd. Vs. Mr. Pradeep KumarSravanam RP, [Comp.App (AT) (CH) (INS.) No. 12 / 2023] held:

• # 40. As far as the present case is concerned, this `Tribunal’, on a careful consideration of the contentions advanced on behalf of the `Appellant / Petitioner’, and also this `Tribunal’, keeping in mind of the stand taken by the `Respondent / Resolution Professional’, before the `Adjudicating Authority’, vide its `Counter’ to the IA (IBC) No. 155 / 2022 in CP (IB) No. 58 / 9 / AMR / 2021, comes to a consequent conclusion that the action of the `Resolution Professional’, in keeping the `Claims’, in `abeyance’, because of the pending `Arbitration Proceedings’, in regard to the `counterclaim’ of the `Corporate Debtor’, only after which, the `Claim Sum’ of the `Appellant’, can be determined with certainty, the `Reliefs’, prayed for, by the `Appellant / Petitioner’, pertaining to `admission’ of the `Claim’, cannot be `acceded to’, in the `eye of Law’. Viewed in that perspective, the `impugned order’, dated 02.12.2022 in IA (IBC) No. 155 / 2022 in CP (IB) No. 58 / 9 / AMR / 2021, passed by the `Adjudicating Authority’ (`National Company Law Tribunal’, Amaravati Bench), in `dismissing’, the `Interlocutory Application’, is free from any flaw. Accordingly, the instant `Appeal’, fails.  

19.2.The Hon’ble High Court of Delhi (18.07.2019) in SSMP Industries Ltd. vs. Perkan Food Processors Pvt. [CS (COMM] 470/2016 & CC[COMM] 73/2017] recovery suit filed by the CD, held as under:

• # 9. The nature of a counter claim is such that it requires proper pleadings to be filed, defences and stands of both parties to be considered, evidence to be recorded and then issues have to be adjudicated. The proceedings before NCLT are summary in nature and the RP does not conduct a trial. The RP merely determines what payment can be made towards the claims raised, subject to availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the Defendant which are completely uncertain, undetermined and unknown. Moreover, the question as to whether the Defendant is in fact entitled to any amounts, if determined by the NCLT, prior to the adjudication of the plaintiff’s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. Under these circumstances, this court is of the opinion that the Plaintiff’s and the defendant’s claim ought to be adjudicated comprehensively by the same forum. At this point, till the defence is adjudicated, there is no threat to the assets of the corporate debtor and the continuation of the counter claim would not adversely impact the assets of the corporate debtor. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered. At this stage, due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court.

# 8. Reference is also made of the case where

19.3 The Hon’ble NCLAT (03.08.2018) in Jharkhand Bijli Vitran Nigam Ltd. vs. IVRCL Ltd. [Corporate Debtor] &Anr. [Company Appeal (AT) (Insolvency) No. 285 of 2018] held :

• # 3. As the claim of the Corporate Debtor can be determined only after determination of counter claim made by the Appellant in the same very arbitral proceeding and if counter claim or part of it is set off with the claim made by the Corporate Debtor, we are of the view that both the claim and the counter claim of parties should be heard together by the Arbitral Tribunal in absence of any bar under Insolvency and Bankruptcy Code, 2016.

• # 4. However, on determination, if it is found that the Corporate Debtor is liable to pay certain amount, in such case, no recovery can be made during the period of moratorium.

# 9. It is stated that in view of the above legal position and the fact that counter claim is pending adjudication against the SFC, the claim of the SFC be kept in abeyance and the status of the claim be changed to “Kept in Abeyance” from “Admitted”.

# 10. It is stated that SFC in order to prevent the resolution of insolvency of the Corporate Debtor continued with the willful defaulter proceedings and declared the Corporate Debtor and its Promoters Directors as wilful defaulter on 30.03.2020 while there was a moratorium qua the Corporate Debtor. It is alleged that the procedure followed by SFC in wilful defaulter proceedings is in violation of law laid down by the Hon'ble Supreme Court in the case of “State Bank of India Vs. M/s. Jah Developers Pvt Ltd & Ors (Civil Appeal No. 4776 of 2019).

# 11. It is stated that the Corporate Debtor was not provided any opportunity to represent before the Review Committee.It is stated that the motive of SFC in declaring the Corporate Debtor and Suspended Directors as wilful defaulters was to prevent them from taking part in the resolution of the insolvency of the Corporate Debtor though they were eligible to do so as the Corporate Debtor was MSME unit. It is stated that the said act was in contravention of the moratorium which is punishable under Section 74 of the IBC.It is stated that the SFC did not keep a check on the RP who defrauded the Corporate Debtor during his tenure. The Applicant then made a complaint to CBI on which a case was registered. It is stated that at the time of initiation of CIRP when the RP took the charge, there was a liquidity of Rs.24.92 Crores but while handing over the charge to the 1stLiquidator, the Corporate Debtor had a liability of Rs.53.13 Crores.It is stated that during the CIRP period, the plants were shut down. It is alleged that both RP and the 1st Liquidator acted in a manner which was detrimental to the interest of the Corporate Debtor. It is stated that it is a case of fraudulent and malicious initiation of CIRP proceedings against the Corporate Debtor and the SFC is liable for penalty. It is stated that the 1st Liquidator in his reply dated 08.09.2023 in IA/1009/CHE/2023, had stated that he is not interested in pursuing the counter claim against the SFC. It is alleged that the 1st Liquidator had been working in an arbitrary manner conniving with the SFC, which had been regularly paying his fee in violation of Regulation 4(2) of IBBI (Liquidation Process) Regulations, 2016. It is stated that he did not include the supplies of goods and services during the CIRP period as the CIRP cost and categorize them as Operational Creditors.

# 12. On getting notice of the application, only Respondent No.1 filed the reply. R1/Liquidator denied the averments made in the application and stated that she has been contesting the proceedings before the DRT in TA/1/2017.Respondent No.1 has nothing to do with the averments made against the SFC/Union Bank of India. It is stated that the erstwhile Liquidator had admitted the claim of the SFC for a sum of Rs. 441,39,22,366/- and she is not in a position to revise/or keep it in abeyance.It is stated that the Liquidator had entered appearance before the DRT, Chennai on 21.04.2024 and has been getting along with the matter.

 

# 13. We have heard the Applicant in person and Ld. Counsel for the Respondent No.1.

# 14. In the instant case, the recovery proceedings against the Corporate Debtor and its Directors were initiated before the DRT, Chennai in TA/1/2017. In the said proceedings, the Corporate Debtor and its Directors had filed the counter claim.The counter claim in that petition is more than the claim of the SFC. In terms of the order of the Hon'ble High Court, the DRT took up the claim and the counter claim together. Thereafter, the SFC filed the application under Section 7 of IBC for initiating CIR Process against the Corporate Debtor. This Tribunal allowed the application and initiated the CIRP vide order dated 04.11.2019. Since no viable Resolution Plan came, liquidation was ordered vide order dated 21.01.2022.

# 15. In the instant case, the Applicant during the adjudication of Application CP/1264/IB/2018 for initiating CIRP against the Corporate Debtor in his reply had highlighted that a counter claim has been filed by the Corporate Debtor by virtue of Writ Petition No.325 and 326/2018 before the Hon'ble High Court of Judicature at Madras and the order passed thereunder dated 07.08.2018 and the counter claim has been taken on file to be considered by the DRT and taking into consideration the above counter claim by the Corporate Debtor, the application as filed is likely to be rejected.

# 16. The Tribunal on considering the submissions vide order dated 04.11.2019, held that they are not convinced by the above ground, namely, that a counter claim of the Corporate Debtor as against the Financial Creditor is pending adjudication. As rightly pointed out by the Financial Creditor, nowhere, has the Corporate Debtor denied the existence of debt and its default.

# 17. The above order initiating the CIRP has not been challenged by the Corporate Debtor and has attained finality.

# 18. It is true that during the CIRP, the moratorium was in force but the said moratorium does not restrict the SFC to initiate the proceedings of wilful defaulter against the Corporate Debtor and its Directors. In Gouri Prasad Goenka Vs. State Bank of India (2021) ibclaw.in 13 HC, the Hon'ble Court held that the moratorium envisaged in section 14 of IBC, 2016 creates no hindrance to a wilful defaulter declaration proceeding. The Hon’ble Supreme Court in the case of “P. Mohanraj and Others v. Shah Brothers Ispat Pvt Ltd (2021) ibc law.in 24SC, held that willful defaulter proceedings is excluded from section 14 moratorium. In the case of “Atibir Industries Company Ltd. and others v. Indian Bank (2024) ibc law.in 245 HC”, it was held that the yardsticks for declaration of wilful defaulter under the Master Circular are different from a recovery proceeding or a relatable proceeding; such declaration is merely to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them.

# 19. A wilful defaulter proceeding is thus not for recovery of debt. It does not directly make a claim for a particular asset or for recovery of any debt. The object and purpose of the Master Circular for wilful default is to inform the other creditors and lenders about the credit information of the wilful defaulter so that other creditors are cautioned and do not lend any further money. The aim of the declaration of wilful defaulter is to prevent fraud and loss of public money.

# 20. It is seen from the reply of the Respondent No.1/Liquidator that Respondent No.1 has been appearing before the DRT, Chennai for the Corporate Debtor in respect of the claim / counter claim before the DRT. Till date, the TA/1/2017 has not been adjudicated. Section 33(5) of the Code provides that the bar/moratorium is only in respect of fresh suits or legal proceedings. The words “continuation of pending suits or proceedings” have been consciously omitted from Section 33(5) of the Code. However, Section 14 explicitly provides for the application of moratorium to the institution of lawsuits or the continuation of pending lawsuits or proceedings against the CD in contrast to Section 14 of the Code, where it is explicitly stated that the  moratorium applies to the institution of lawsuits or the continuation of pending lawsuits or proceedings against the CD. To summarize the position, it can be said that the moratorium during liquidation is partial in nature. In the present case, the DRT proceedings were initiated prior to initiation of CIRP where parties had filed the claims and counter claims. Since no viable Resolution Plan came, the Corporate Debtor was liquidated.

# 21. The Hon'ble High Court in the case of “SSMP Industries Ltd.”supra has held that the proceedings before the NCLT are summary in nature and the RP does not conduct a trial. The RP merely determines what payment can be made towards the claim raised, subject to availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the defendant which are completely uncertain, undetermined and unknown. The question as to whether the defendant is in fact is entitled to any amounts, if determined by the NCLT, prior to the adjudication of the Plaintiff’s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. The nature of a counter claim is such that it requires proper pleadings to be filed, defences and stands of both parties to be considered, evidence to be recorded and then issues have to be adjudicated. It was held that under these circumstances, the Plaintiff and the Defendant’s claim ought to be adjudicated comprehensively by the same forum and the counter claim does not deserve to be stayed under Section 14 of the Code. 

# 22. In the case of “Jharkhand Bijli Vitran Nigam Ltd. vs. IVRCL Ltd. (Corporate Debtor) &Anr. supra, it was held that both the claim and the counter claim of the parties should be heard together by the Arbitral Tribunal in the absence any bar under IBC. In the present case, the Liquidator has been appearing before the DRT in respect of the counter claims filed by the Corporate Debtor/Suspended Directors which are being heard together by the DRT. In the case of “Anheuser Busch Inbev India Ltd. Vs. Mr. Pradeep Kumar Sravanam RP” supra, it was held by the Tribunal that the action of the RP in keeping the claims in abeyance because of the pending arbitration proceedings in regard to the counterclaim of the Corporate Debtor, only after which, the claim sum of the Appellant can be determined with certainty, the reliefs prayed for, by the Appellant/Petitioner pertaining to admission of claim cannot be acceded to, in the eyes of law. The Hon'ble NCLAT also dismissed the appeal against the order of the Tribunal.

# 23. Further, this Tribunal has no jurisdiction to review its own order qua initiating CIRP / liquidation proceedings against the Corporate Debtor. No appeal was preferred by the Applicant against the order of the Tribunal initiating CIRP or the liquidation process against the Corporate Debtor. It is also to be noted that the CIRP in the present case was initiated on 04.11.2019. This application has been filed on 13.03.2024 i.e. after about four years of initiation of CIRP. The application also suffers from laches, acquiescence and delay.

# 24. We are of the view that this Tribunal has no jurisdiction to direct the Liquidator / Respondent No.1 to keep the claim of SFC abeyance pending decision of DRT on the counter claim. As regards other prayers, the moratorium under Section 14 does not bar the SFC to initiate wilful defaulter proceedings. The Liquidator has been appearing in the proceedings before the DRT as evident from the report filed. There is no bar to initiate proceedings under IBC pending DRT proceedings. These proceedings are parallel and the independent proceedings.

# 25. In the light of above discussions, we do not find any merits in the application. The application is dismissed with no orders as to Costs. 

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