Case Note & Summary
The appeal arose from an order dated 19.08.2025 by the National Company Law Tribunal, Mumbai, which disposed of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, directing the release of a deposited amount to the Respondent without adjudicating the existence of financial debt, default, and maintainability of the petition. The Appellant, M/s. North Life Spaces LLP, had entered into a Facility Agreement with the Respondent, which claimed a debt of ₹4.15 crores due to default in repayment. The Appellant contested the petition, questioning its maintainability and the authority of the person instituting the proceedings. After the petition was reserved for orders, the Appellant deposited two demand drafts totaling ₹3,49,55,172, expressly stating it was without prejudice to its rights. The Adjudicating Authority subsequently directed the release of the demand drafts and closed the petition, which the Appellant challenged on the grounds that its objections were not adjudicated. The Respondent issued a Demand Notice claiming additional amounts, which the Appellant disputed. The court analyzed whether the deposit justified the closure of the proceedings without addressing the Appellant's objections. It concluded that the deposit did not constitute an admission of liability and that the objections raised by the Appellant remained unaddressed. The court found the closure of the petition without adjudication unsustainable and remanded the matter back to the Adjudicating Authority for fresh consideration, allowing the appeal and setting aside the impugned order.
Headnote
A) Insolvency Law - Closure of Petition - Adjudication Requirement - Insolvency and Bankruptcy Code, 2016, Section 7 - The closure of the Company Petition without adjudicating the objections raised by the Appellant regarding maintainability, debt, and default was found to be unlawful. The court held that the deposit made by the Appellant, expressly without prejudice, did not extinguish the objections already on record and the Adjudicating Authority failed to consider the controversy argued before it (Paras 5-11).
Issue of Consideration
Whether the deposit made by the Appellant after the Company Petition had been reserved for orders justified closure of the Sec. 7 proceedings without adjudicating the objections raised by the Appellant.
Final Decision
The appeal was allowed, the impugned order dated 19.08.2025 was set aside, and the matter was remanded back to the Adjudicating Authority for fresh consideration of the petition under Section 7 of the Code. The Respondent was required to re-deposit the amount to the credit of the case before the Adjudicating Authority.
Law Points
- Insolvency proceedings
- maintainability
- financial debt
- default
- adjudication
- deposit without prejudice
