Pranav B Prem

The National Company Law Tribunal (NCLT) at Bengaluru has dismissed an insolvency application seeking initiation of corporate insolvency resolution proceedings against Atria Brindavan Power Pvt. Ltd., holding that the petition was an attempt at debt recovery rather than a genuine invocation of the Insolvency and Bankruptcy Code (IBC). The Tribunal found that the insolvency mechanism was being employed as a pressure tactic against a solvent company. A Bench comprising Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada observed that the Code cannot be used as a substitute for recovery proceedings and reiterated that insolvency jurisdiction is meant to resolve financial distress, not to coerce repayment in disputed contractual matters.

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The application under Section 7 of the IBC was filed by Piramal Capital and Housing Finance Limited along with Omkara Assets Reconstruction Private Limited, claiming a default of approximately ₹428.39 crore by Atria Brindavan Power, a renewable energy company belonging to the Atria Group. The alleged default was stated to have arisen in December 2023 in connection with non-convertible debentures issued by the corporate debtor.

The Tribunal noted that the financial arrangement dated back to December 2016, under which the lenders had agreed to fund up to ₹750 crore in multiple tranches for renewable energy projects undertaken by Atria. However, the record showed that only about two and a half tranches, amounting to roughly ₹242.5 crore, were actually subscribed. Atria contended that the lenders’ failure to infuse the remaining tranches adversely impacted its projects and cash flows, thereby affecting its ability to meet repayment obligations.

Atria further submitted that the lenders were already pursuing parallel remedies through civil suits and enforcement of securities, including invocation of share pledges. It argued that complex questions concerning reciprocal contractual obligations, alleged breaches, and the validity of assignments were pending adjudication before civil courts and could not be decided in summary insolvency proceedings.

Accepting these submissions, the Tribunal held that the existence of a “debt due and payable” was not free from dispute. It observed that the insolvency process is intended for cases involving clear, undisputed defaults and cannot be invoked where the liability itself is contested and intertwined with contractual disputes requiring detailed examination of evidence.

The Bench remarked that “it is only as a secondary, albeit independent remedy available, measure that the Insolvency petition has been filed, probably to arm-twist the corporate debtor to cough up money more than a fair intention to seek resolution. We need not reiterate that resort to IBC is not a venture for debt recovery.”

The Tribunal also took note of the fact that Atria Brindavan Power was a going concern engaged in renewable energy projects supplying power to government and private entities across multiple States. It observed that the company had substantial assets, continued operations, and significant security already created in favour of the lenders, including first-priority charges and share pledges.

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In these circumstances, the NCLT concluded that the dispute could not be resolved within the framework of the IBC and that admission of the petition would be contrary to the objectives of the Code. The insolvency application was accordingly dismissed, while leaving the financial creditors at liberty to pursue their remedies before appropriate civil fora in accordance with law.

Appearance

For Petitioner: Advocate Diksha Garg

For Respondent: Advocate Vishnu Sharma

Cause Title: Piramal Capital & Housing Finance Ltd. & Anr. v. Atria Brindavan Power Pvt. Ltd.

Case Number: CP (IB) No. 185/BB/2024

Coram: Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada