White Water Hospitality CIRP Cannot Be Reopened for New Claims After Supreme Court-Backed Settlement: NCLT Chandigarh
Introduction
The National Company Law Tribunal, Chandigarh Bench, held that no new creditor claims can be entertained once the CIRP itself has been set aside and the initiating financial creditor has been paid pursuant to the Supreme Court’s directions. Deciding applications filed by Bharat Food and Agro Products and its partner Kamal Kant Dewan in the CIRP of White Water Hospitality Private Limited, the Bench comprising Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal ruled that once the admission order stood annulled and payment to the original financial creditor was recorded, the insolvency process came to an end and every step taken during CIRP, including constitution of CoC and filing of claims, lost its legal substratum. The Tribunal emphasized that allowing subsequent claims at that stage would impermissibly convert the insolvency forum into a debt recovery mechanism.
Factual Background
The dispute arose out of CIRP proceedings initiated in 2019 against White Water Hospitality Private Limited at the instance of V.I.R. Foods Pvt. Ltd., the original financial creditor. During the subsistence of CIRP, the present applicants, Bharat Food and Agro Products and Kamal Kant Dewan, filed their claims in Form C, asserted status as financial creditors, and were also part of the Committee of Creditors during the process.
Subsequently, the admission of CIRP was challenged and the matter eventually reached the Supreme Court, where the corporate debtor agreed to settle the dues of the initiating creditor. Pursuant to the settlement, an amount of approximately ₹52.64 lakh was paid to V.I.R. Foods Pvt. Ltd., and the same was formally recorded by the NCLT in its order dated 09 January 2024. Following this, the applicants sought directions from the Tribunal to recognize their claims and direct payment of their alleged dues along with interest.
Procedural Background
After the original CIRP admission was set aside by the Supreme Court and payment to the initiating creditor was recorded, the applicants moved interlocutory applications seeking continuation of consideration of their claims that had been filed during CIRP. Their plea was that since their claims had already been lodged before the IRP/RP and they had participated in the CoC, the Tribunal ought to direct admission and payment of such claims notwithstanding closure of the CIRP. The Chandigarh Bench was therefore called upon to determine whether any claims could survive after the CIRP itself had ceased to exist.
Issues
1. Whether claims filed by other creditors during CIRP survive after the admission order itself is set aside by the Supreme Court?
2. Whether the payment and settlement of dues of the initiating creditor results in complete termination of CIRP and extinguishes all steps taken during the process?
3. Whether the NCLT can entertain fresh or pending creditor claims after CIRP stands closed, in absence of any subsisting insolvency proceeding?
4. Whether entertaining such claims would convert the insolvency framework into an impermissible recovery forum?
Contentions of Parties
The applicants contended that their claims had been validly filed in Form C during the CIRP and that they had participated as financial creditors in the CoC. On this basis, it was argued that their claims ought to be taken on record and payment of their dues with applicable interest should be directed.
The erstwhile corporate debtor opposed the applications by contending that once the Supreme Court set aside the CIRP admission order and the initiating creditor’s dues stood settled, the insolvency proceedings came to a complete end. It was submitted that every procedural step taken during CIRP automatically lost legal efficacy, and no independent right survived before the insolvency forum for adjudication of claims by other creditors.
Reasoning and Analysis
The Tribunal held that the legal consequence of the Supreme Court setting aside the admission order was that the very foundation of CIRP ceased to exist. Once the principal insolvency petition stood disposed of upon payment to the initiating creditor, the CIRP could neither continue nor be revived for adjudication of collateral creditor claims.
The Bench specifically observed that all steps undertaken during CIRP derive their legal force solely from the subsistence of the admission order. Therefore, once the CIRP itself was annulled, the constitution of CoC, claim filings, verification exercises by the IRP/RP, and creditor participation all lost their legal basis.
A key aspect of the Tribunal’s reasoning was the object of the IBC as a resolution framework rather than a recovery mechanism. The Bench cautioned that permitting other creditors to press their claims after closure of CIRP would effectively reopen a dead insolvency process and convert the NCLT into a debt recovery forum, which is contrary to the structure and purpose of the Code.
The Tribunal also found that granting the relief sought would be inconsistent with the finality attached to the Supreme Court’s order and the settlement already acted upon before the Tribunal on 09 January 2024. Since there was no subsisting insolvency proceeding, the claims could not be examined within the IBC jurisdiction.
Decision
The NCLT, Chandigarh Bench, dismissed the applications filed by Bharat Food and Agro Products and Kamal Kant Dewan, holding that no claims remain maintainable after the CIRP itself has been set aside and the initiating creditor’s dues have been settled. However, liberty was granted to the applicants to pursue such remedies as may be available before the appropriate legal forum.