NCLAT Dismisses 'BABA' Promoter Dharampal Premchand's Plea To Reopen Trimurti Foodtech Insolvency Plan

The National Company Law Appellate Tribunal (NCLAT) at Delhi has dismissed the challenge by Dharampal Premchand Ltd, the company behind the BABA brand, to reopen Trimurti Foodtech Ltd's approved insolvency resolution plan over the treatment of its disputed ₹6.81 crore claim.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Indevar Pandey held that Dharampal Premchand's claim was never treated as an admitted, crystallised operational debt but was consistently classified as contingent because of reciprocal contractual disputes and counterclaims raised by the corporate debtor.

“The Resolution Professional never treated the Appellant as an Operational Creditor having an unconditional and crystallized payable debt. The claim always remained disputed because of the counter-claims asserted by the Corporate Debtor. Once such reciprocal claims and allegations of breach existed, the Resolution Professional was justified in classifying the claim as contingent pending adjudication of disputes between the parties.”

The dispute arose from a contract manufacturing and packaging arrangement executed in August 2014 under which Trimurti Foodtech was engaged to manufacture fruit bars for Dharampal Premchand.

Dharampal Premchand said it had extended financial assistance of around ₹6.25 crore to Trimurti Foodtech, including mobilisation advances, security deposits and funds for procurement of raw materials and packaging material. It also purchased machinery worth around ₹3.6 crore and leased it to the company.

Dharampal Premchand claimed it terminated the agreement in December 2017 over alleged defaults by Trimurti Foodtech. The corporate debtor, however, disputed the validity of that termination, contending that the agreement continued and that Dharampal Premchand had failed to meet production commitments, causing significant losses.

After Trimurti Foodtech entered the corporate insolvency resolution process in August 2021, Dharampal Premchand filed a claim of ₹6.81 crore as an operational creditor. The resolution professional informed it in December 2021 that the claim did not tally with the company's books and remained under verification.

In April 2022, the resolution professional issued a legal notice asserting a counterclaim of about ₹55.68 crore against Dharampal Premchand for alleged contractual losses. Dharampal Premchand argued that despite this, its own claim had been admitted and that it had been wrongly denied participation in the creditors' process. It also contended that the resolution professional could not rely on an unadjudicated counterclaim to convert its claim into a contingent one.

The company further argued that machinery leased by it remained its property and could not have been treated as part of the insolvency estate.

The respondents argued that Dharampal Premchand's claim was never admitted as a crystallised debt and was consistently treated as contingent because of long-standing contractual disputes. They also pointed out that the company had been aware of this classification during the insolvency process but did not challenge it at the time.

Agreeing with the respondents, the appellate tribunal held that the resolution professional's role during insolvency is limited to claim verification and not final adjudication of complex contractual disputes. It held that the existence of serious reciprocal claims justified treating Dharampal Premchand's claim as contingent.

The tribunal also rejected allegations of suppression, fraud and collusion in the insolvency process, holding that Dharampal Premchand had failed to establish any material illegality warranting interference with the approved plan.

“Once a Resolution Plan has been approved and implemented, judicial interference must remain extremely limited. The Hon'ble Supreme Court has repeatedly emphasized the importance of certainty and finality in the insolvency process. Endless reopening of approved Resolution Plans on the basis of disputed contractual claims would defeat the very object of the Code.”, the tribunal observed.

Holding that Dharampal Premchand's grievances arose out of pre-existing contractual disputes that could be pursued independently in appropriate proceedings, the tribunal dismissed the appeal.