NCLT Admits Insolvency Petition Against Royal Fantasy Constructions Pvt. Ltd.
Euro Corporate Services Pvt. Ltd. succeeds in initiating Corporate Insolvency Resolution Process over unpaid financial debt.
The National Company Law Tribunal (NCLT), Mumbai Bench, has admitted a petition filed by Euro Corporate Services Private Limited against Royal Fantasy Constructions Pvt. Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016. The tribunal, comprising Member (Technical) Prabhat Kumar and Member (Judicial) Sushil Mahadeorao Kochey, ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against Royal Fantasy Constructions Pvt. Ltd., a construction company based in Mumbai.
The case was brought before the NCLT by Euro Corporate Services, a financial creditor, seeking recovery of Rs. 2,02,05,153 (approximately 2.02 crores) plus interest, which the petitioner claimed was due from Royal Fantasy Constructions. The tribunal found that the financial debt exceeded the threshold limit prescribed under Section 4 of the IBC, confirming the existence of a default.
Euro Corporate Services argued that the debt arose from loans disbursed to Royal Fantasy Constructions over several financial years, with the most recent disbursement occurring in the 2021-2022 financial year. The tribunal noted that the loans were disbursed for the time value of money, thus constituting financial debt under Section 5(8) of the IBC. Despite the corporate debtor's contention that repayment was contingent upon the availability of surplus funds from its projects, the tribunal found this defense without merit. The tribunal observed that financial statements indicated the loans as repayable on demand and noted that the corporate debtor had generated surplus revenue in preceding financial years.
The NCLT ordered a moratorium under Section 14 of the IBC, halting any suits or proceedings against Royal Fantasy Constructions, and any transfer or disposal of its assets. Mr. Raj Kumar Dad was appointed as the Interim Resolution Professional (IRP) to manage the corporate debtor during the CIRP period, with the management of the company to vest in the IRP as per Section 17 of the IBC.
This decision underscores the NCLT's commitment to upholding the provisions of the Insolvency and Bankruptcy Code and ensuring that financial creditors can pursue insolvency proceedings when debts are not repaid. The tribunal's order marks the commencement of the CIRP, with Royal Fantasy Constructions now facing the possibility of resolution or liquidation depending on the outcome of the process.
Bottom Line:
Insolvency and Bankruptcy Code - Financial debt exceeding the threshold limit prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016 was found in default - The petition for initiating Corporate Insolvency Resolution Process (CIRP) admitted - Moratorium granted under Section 14 of the Code.
Statutory provision(s): Section 4, Section 7, Section 14, Section 5(8), Sections 17-21 of the Insolvency and Bankruptcy Code, 2016.
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