Corporate Applicant Can't Take Shield Of CIRP To Avoid Legally Recoverable Government Dues: NCLT Delhi
The National Company Law Tribunal Bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) dismissed a Section 10 application filed under the Insolvency & Bankruptcy Code, 2016 (“the code”) holding that the Corporate Applicant cannot take the shield of CIRP to avoid the legally recoverable government dues. Background Facts: M/s...
The National Company Law Tribunal Bench of Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member) dismissed a Section 10 application filed under the Insolvency & Bankruptcy Code, 2016 (“the code”) holding that the Corporate Applicant cannot take the shield of CIRP to avoid the legally recoverable government dues.
Background Facts:
M/s Imperial Banquets & Dining Private Limited ('Corporate Applicant') was set up in the form of a Special Purpose Vehicle to operate, manage, and transfer a fine dining restaurant with banquet facilities at Delhi Haat, Janakpuri, New Delhi.
On 11.12.2015, it entered into a Concession Agreement with Delhi Tourism and Transportation Development Corporation Limited (DTTDC) for a 10-year period for the operation, management, and transfer of the fine dining restaurant with Banqueting facilities.
The business was running profitably until early 2020 when it was severely impacted by the COVID-19 lockdown, eventually leading to its closure. The business of the Corporate Applicant remained affected even after lifting of the lockdown yet DTTDC did not stop levying Annual Concession Fees.
Unable to meet its financial obligations, the Corporate Applicant requested for waiver of annual concession charges including property tax, GST, etc. Even though The officials of the DTTDC verbally accepted the request of the Corporate Applicant, however, the same was not acted upon.
The Corporate Applicant proposed a repayment schedule and paid Rs. 20 lakhs on 29.04.2023. Despite accepting the payment, DTTDC issued a demand letter on 04.05.2023 for Rs. 5.63 crores.
Aggrieved by the Demand Letter, the corporate applicant filed a writ petition before the Delhi High Court but was withdrawn on 21.07.2023 with liberty to approach authorities for a sympathetic consideration. Thereafter, DTTDC issued a termination notice on 20.07.2023 and subsequently terminated the Concession Agreement on 25.09.2023.
The Corporate Applicant, had already made bookings for the upcoming ceremonies season. Accordingly, the Corporate Applicant filed a Civil Suit before the Tis Hazari District Court seeking a permanent and mandatory injunction against the DTTDC and vide order dated 09.10.2023, the Ld. Civil Judge passed a status quo order against the defendants.
Subsequently, the Corporate Applicant presented another proposal to settle the disputes and paid Rs. 25,00,000/-, however, the same was rejected by the DTTDC. The, DTTDC then initiated eviction proceedings under the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 before the Estate Officer.
On 07.03.2024, the Estate Officer ordered the Corporate Applicant to evict the premises and directed payment of Rs. 7.72 crores with 18% annual interest. The Corporate Applicant handed over the premises, but the dues remain unpaid.
Subsequently, the Corporate Applicant filed the Application u/s 10 of the Code for initiation of Corporate Insolvency Resolution Process.
Findings:
The Tribunal Observed that the Corporate Applicant had defaulted in the payment of Rs. 7,72,12,314/. It noted that the Corporate Applicant entered into a 10-year Concession Agreement with DTTDC to operate and manage a fine dining restaurant and banquet facility.
However, The Corporate Applicant shut down its business due to the COVID-19 lockdown but Delhi Tourism and Transportation Development Corporation Limited continued levying Annual Concession Fees and other charges. Despite proposing a settlement, the DTTDC rejected the proposal and issued a demand for Rs. 5.63 crores on 04.05.2023.
The Tribunal held that the dues owed to DTTDC comprise government dues (Concession Charges, License Fees, Property Tax, etc.) and cannot be disregarded. The List of Assets and Liabilities shows assets worth Rs. 5.57 crores, indicating sufficient value to partially satisfy the dues, yet the applicant chose to file for CIRP instead.
The Tribunal concluded that the intent behind filing the Section 10 application appears to be to evade legally recoverable government dues, rather than genuine resolution of insolvency. Therefore, the application is liable to be dismissed on the ground of attempting to misuse CIRP to avoid payment of government dues.
The application under Section 10 of the IBC was dismissed, as the tribunal held that the Corporate Applicant was misusing the insolvency process to escape liability for government dues owed to DTTDC.
Case Title: M/S Imperial Banqeuts & Dining Pvt. Ltd.
Case Number: Company Petition IB/370/ND/2024
Judgment Date: 09/05/2025
For the Applicant : Mr. Abhishek Taneja, Mr. Sahil Sharma and Mr. Surya Sirohi, Advs.
For the RP : Adv. Adil Khan