No New Claims Maintainable After CIRP Settled In White Water Hospitality Case: NCLT Chandigarh

The National Company Law Tribunal at Chndigarh has held that in the case of a company whose insolvency process was set aside by the Supreme Court and whose dues to the initiating financial creditor were paid, the insolvency process comes to an end and all steps taken during it lose their legal basis.

The order was passed by a coram of Judicial Member Khetrabasi Biswal and Technical Member Shishir Agarwal while deciding pleas filed by Bharat Food and Agro Products and its partner, Kamal Kant Dewan in the CIRP of White Water Hospitality Private Limited

The tribunal said that once the process ends, there is no subsisting insolvency proceeding in which claims of other creditors can be considered. Entertaining such claims would turn the insolvency framework into a recovery mechanism, which is not permissible under law.

The Bench observed:

“Since the admission Order initiating CIRP against the Respondent was finally set aside by the Hon'ble Supreme Court and the main Company Petition consequently stood disposed of on payment being made by the Respondent to VIR Foods Pvt Ltd as recorded by this Tribunal vide order dated 09.01.2024 in compliance of Hon'ble Supreme Courts Order and thus insolvency proceedings came to an end. Therefore, all steps undertaken during the CIRP, including the constitution of the CoC and the filing or verification of claims before the IRP/RP, lose their legal base. In the present case, the Respondent has already settled its claim with the VIR Foods Pvt Ltd, the initiating creditor before the Hon'ble Supreme Court, and the payment has been made as recorded in the Order dated 09.01.2024 before this Tribunal. In such circumstances, there remains no subsisting insolvency proceeding in the said case. The relief sought by the Applicants for taking on record the claims filed by them in Form C before the IRP cannot be granted at this stage, particularly when the CIRP itself has been set aside. The present Applications seeking further directions for payment of the claimed amounts would convert the insolvency forum into a recovery mechanism, which is beyond the scope and object of the Code.”

They had sought recognition of their claims as financial creditors and payment of their dues with interest. These claims had been filed during the insolvency process of White Water Hospitality and the applicants were part of the Committee of Creditors at that stage.

The case goes back to 2019, when insolvency proceedings were initiated at the instance of V.I.R. Foods. The admission was later set aside. When the matter reached the Supreme Court, the company agreed before the Court to pay the initiating creditor. An amount of about Rs 52.64 lakh was paid and recorded before the tribunal in January 2024.

The tribunal noted that after this payment, the insolvency process could not continue or be revived.

It declined to entertain the claims, noting that there was no subsisting insolvency proceeding where they could be examined. Granting such relief would reopen a closed process and run contrary to the Supreme Court's order.

The applications were dismissed, with liberty to the applicants to pursue remedies before the appropriate forum.