NCLT Dismisses Insolvency Petition by Samridhi Realty Homes Against Nexgen Infracon

Tribunal Rules Compromise Deed Breach Does Not Constitute a Financial Debt Under IBC

In a significant ruling, the National Company Law Tribunal (NCLT), New Delhi Bench, dismissed an insolvency petition filed by Samridhi Realty Homes Private Ltd against Nexgen Infracon Pvt. Ltd. The tribunal concluded that the alleged breach of a compromise deed does not amount to a "financial debt" as defined under the Insolvency and Bankruptcy Code, 2016 (IBC), thus preventing the initiation of Corporate Insolvency Resolution Process (CIRP).

The case originated from a loan agreement dated March 30, 2021, wherein Samridhi Realty Homes disbursed Rs. 1 Crore to Nexgen Infracon at a 9% annual interest rate, repayable within 36 months. Despite acknowledging the debt and making a partial repayment, Nexgen Infracon defaulted on the extended deadline for repayment, leading Samridhi Realty Homes to issue a demand notice.

In response to the default, both parties executed a compromise deed on April 11, 2025, agreeing on a repayment schedule. However, Nexgen Infracon failed to adhere to this schedule, prompting Samridhi Realty Homes to file a petition under Section 7 of the IBC, seeking CIRP against Nexgen Infracon.

The tribunal, comprising Member (Judicial) Shri Manni Sankariah Shanmuga Sundaram and Member (Technical) Shri Atul Chaturvedi, ruled that the obligation to pay under a compromise deed does not constitute a "financial debt" under Section 5(8) of the IBC. The tribunal emphasized that for a debt to be considered a financial debt, it must involve disbursement against consideration for the time value of money. The compromise deed lacked such disbursement, leading to the dismissal of the petition.

The tribunal also noted discrepancies in the loan agreement and the absence of documentary proof to substantiate the debt and default, further undermining the petition's maintainability.

While dismissing the petition, the tribunal advised Samridhi Realty Homes to seek remedies under other applicable laws, suggesting that the parties could explore legal avenues in civil courts or other forums.

This ruling underscores the stringent criteria under the IBC for qualifying a debt as a financial debt, impacting the ability of financial creditors to initiate insolvency proceedings based solely on breaches of settlement agreements.

Bottom Line:

Obligation to pay under a Compromise Deed does not constitute a "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, 2016, in the absence of disbursement against consideration for the time value of money.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 5(8), Section 7, Section 60(1).

Samridhi Realty Homes Private Ltd v. Nexgen Infracon Pvt. Ltd., (NCLT)(New Delhi Bench) : Law Finder Doc Id # 2810698