Raising Interim Finance to Discharge Estate Dues Falls Within CoC's Commercial Wisdom: NCLT Chandigarh

The Chandigarh bench of the National Company Law Tribunal (NCLT) has held that the decision to raise interim finance for discharging disputed Estate Office dues falls within the commercial wisdom of the Committee of Creditors (CoC).

The bench of Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal observed,

“The decision to discharge the Estate Office dues under protest through interim finance provided by the SRA, while simultaneously contesting the disputed components before the Hon'ble High Court, was taken by the sole financial creditor holding 100% voting share after deliberation in the 12th to 15th CoC meetings. Such a decision falls within the commercial wisdom of the CoC, which is ordinarily not open to judicial substitution except on the limited grounds…”

The application was filed by Resolution Professional (RP) Hemanshu Jetley in the insolvency of Garib Nawaz Hotels Pvt. Ltd and it sought permission to raise interim finance from the Successful Resolution Applicant (SRA) to settle dues payable to the Chandigarh Estate Office.

Garib Nawaz Hotels Pvt. Ltd. was admitted into CIRP on 9 February 2024. Punjab National Bank (PNB) was the sole financial creditor and member of the Committee of Creditors (CoC).

The consortium of Karan Grover and Akshay Grover emerged as the SRA, with its Resolution Plan approved unanimously in the 11th CoC meeting. The plan contemplated a total outlay of Rs 66.20 crore, including settlement of Estate Office dues.

The dispute with the Estate Office arose from conversion of the industrial plot to commercial use. Conversion charges of Rs 57.94 lakh upfront and Rs 5.21 crore in instalments were imposed, with interest at 8.25%.

Upon default, the lease was cancelled in 2018 and penal interest at 18% levied. Though appellate and revisional proceedings ensued, the Adviser to the Administrator, UT Chandigarh, by order dated 26 December 2024, conditionally restored the lease subject to payment of all dues with 18% interest within 45 days.

The RP sought permission to raise approximately Rs 10.23 crore as interim finance from the SRA to discharge the Estate Office dues. He argued that settlement was essential to preserve the Corporate Debtor's sole asset and enable implementation of the Resolution Plan and that the amount would consequently form part of CIRP cost.

The CoC had approved raising interim finance up to Rs 10 crore or the actual obligation in its 14th meeting. He further prayed that an amount of approximately Rs 10.23 crore be permitted to be raised from the SRA as interim finance.

Respondent No. 2, SRA, supported the application, offering to provide up to Rs 10 crore as interim finance, to be treated as CIRP cost, with interest at 12% only in the event of liquidation.

Respondents 3 & 4, Estate Office and Adviser, opposed extension of time, contending that the lease stood cancelled. They argued that the order of 26 December 2024 was conditional and could not be revived.

Suspended Director, Sunil Bansal also objected that CoC approval was limited to Rs 10 crore, alleged exclusion from deliberations, and challenged inclusion of “anticipated unearned increase” as debtor's liability. He argued that interim finance increased CIRP cost.

The Bench noted that the 14th CoC meeting had authorised interim finance up to Rs 10 crore or actual obligation, and the enhanced figure of Rs 10.23 crore was merely the quantified demand.

It was noted that delay due to pendency of the application did not render it infructuous. Payment under protest while contesting disputed components was held to be a legitimate two‑pronged strategy reflecting commercial wisdom. The bench observed,

“We see no reason to depart from this reasoning. Payment under protest, coupled with a simultaneous challenge to the correctness of specific heads of the demand, is a well-recognised protective measure and does not amount to the adoption of legally inconsistent positions.”

Regarding the “anticipated unearned increase” component, the Bench held that the correctness of this demand was sub judice in another matter and best left to the High Court. The Bench further noted that the leasehold plot was the Corporate Debtor's sole valuable asset, and when the resolution plan itself provided for full settlement of the Estate Office dues, clearing title to this one asset was unavoidable.

The Tribunal concluded that interim finance of Rs 10.23 crore fell within CoC approval, objections on efflux of time, alleged inconsistency, jurisdictional bar, and operational handover did not survive scrutiny and disputes over unearned increase and interest rate were appropriately left for High Court determination.

Accordingly, the application was allowed.

For Applicants: Senior Advocate Anand Chhibbar with Advocates G.S. Sarin & Narsingh Chauhan

For Respondents: Senior Advocate Manish Jain, with Advocates Divya Sharma, Siddhant Jain, Manan Jain & D.K. Gupta for CoC; Advocate Shikhar Sarin for SRA