The words “Due and Payable” used in definition of “default” in section 3(12) of IBC means that the default debt must be subsisting debt – JC Flowers Asset Reconstruction Pvt. Ltd. Vs. Laxmi Oil and Vanaspati Pvt. Ltd. – NCLAT New Delhi

In this important judgment, Hon’ble NCLAT held that:

(i) Bar on the filing of application for the commencement of CIRP during stipulated period u/s 10A of IBC does not extinguish the debt owed by the Corporate Debtor and creditors/lenders may continue to exercise their rights to pursue their legal remedies under Section 7,9 and 10.
(ii) Section 3(12) of IBC contains the word “Due and Payable” and not ‘Due or Payable’.
(iii) The words “Due and Payable” used in definition of “default” in section 3 (12) means that the default debt must be subsisting debt.
(iv) A creditor is not only required to establish the existence of a debt but is also required to prove that the corporate debtor has defaulted in payment of the debt and if he fails to establish the same, the CIRP cannot be initiated by the Adjudicating Authority
(v) The mere fact of a debt being due and payable is not adequate to justify the initiation of CIRP at the instance of the creditor, unless the default on the part of the Debtor is established.
(vi) The default is required to take place with reference to debt which is outstanding and become payable.

The words “Due and Payable” used in definition of “default” in section 3(12) of IBC means that the default debt must be subsisting debt – JC Flowers Asset Reconstruction Pvt. Ltd. Vs. Laxmi Oil and Vanaspati Pvt. Ltd. – NCLAT New Delhi Read Post »