NCLT initiates Insolvency Proceedings against Nirmal Lifestyle

NCLT initiates Insolvency Proceedings against Nirmal Lifestyle

The NCLT bench comprising of Mr. Kishore Vemulapalli (Judicial Member) and Mr. Rajesh Sharma (Technical Member) adjudicated the present application.

The Mumbai bench of the National Company Law Tribunal (“NCLT”) on 16 June 2022 initiated Corporate Insolvency Resolution Process (CIRO) against Nirmal Lifestyle (Kalyan) Pvt Ltd (Corporate Debtor).

The Company is engaged in the business of real estate and availed financial assistance from Srei Equipment Finance Ltd. (Financial Creditor) amounting to Rs. 84,23,75,000/- vide a Loan Agreement dated 05 August 2019. The repayment of the loan amount was due from 05 February 2020.

However, upon failure to pay the said amount, the Financial Creditor initiated the CIRP process under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), claiming an amount of Rs. 7,87,50,000 /-

The Corporate Debtor contended that it had requested the Financial Creditor to restructure the loan amount and moratorium on all payments for the following six months due to the economic and financial disruptions caused by COVID’19.

It was further contended that part of the default is hit by Section 10A of the IBC and is liable to be dismissed. Defaults which occurred between 05 April 2020 to 05 September 2020 was the prohibited period for initiation of CIPR.

Given the submissions, the NCLT held that two defaults between 05 February 2020 and 05 March 2020 amounted to Rs. 1,12,50,000/-. The remaining defaults between 05 April 2020 to 05 September 2020 were hit by Section 10A of the IBC, and therefore could not be considered as defaults.

It was further held that the actual default amount is Rs.1,12,73,387/- plus interest. Therefore, a CIPR could be initiated since the default amount meets the minimum threshold of Rs. 1 Crore.

Accordingly, the bench ordered Mr. Dilip Kumar Natvarlal Jagad as the interim Resolution Professional to carry out the functions as mentioned under the IBC.

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