NCLT Delhi Rules, Corporate Applicant Can't Take Shield Of CIRP To Avoid Legally Recoverable Government Dues
Pranav B Prem
The National Company Law Tribunal (NCLT), New Delhi Bench, comprising Shri Mahendra Khandelwal (Judicial Member) and Shri Atul Chaturvedi (Technical Member), dismissed a petition filed under Section 10 of the Insolvency and Bankruptcy Code, 2016, by M/s Imperial Banquets & Dining Private Limited. The Tribunal held that the initiation of the Corporate Insolvency Resolution Process (CIRP) cannot be used as a device to evade payment of legally recoverable government dues, and found that the application lacked bona fide intent to resolve insolvency.
The Corporate Applicant, M/s Imperial Banquets & Dining Private Limited, was incorporated on 09.06.2015 as a private limited company and formed as a Special Purpose Vehicle (SPV) exclusively for operating, managing, and transferring a fine dining restaurant and banquet facility under a Concession Agreement with Delhi Tourism and Transportation Development Corporation Limited (DTTDC). The agreement, dated 11.12.2015, was executed for a 10-year term at Delhi Haat, Janakpuri, New Delhi.
The company operated profitably until early 2020, when the COVID-19 pandemic and the resultant lockdown severely impacted its business. The operations were shut down, but DTTDC continued to impose Annual Concession Fees and other statutory charges such as property tax and GST. Despite the continued closure of business and verbal assurances allegedly given by DTTDC officials, no formal waiver of dues was granted.
In an effort to resolve the mounting liabilities, the Corporate Applicant submitted a request for waiver of all dues from 01.09.2021 to 31.03.2022 and subsequently proposed a repayment schedule. In accordance with this proposal, it made an initial payment of ₹20,00,000 on 29.04.2023. However, DTTDC, after accepting the payment, issued a demand letter dated 04.05.2023, raising a claim of ₹5,63,35,760.
Aggrieved by this demand, the Corporate Applicant filed a writ petition before the Delhi High Court (W.P. (C) No. 9639/2023), which was later withdrawn on 21.07.2023 with liberty to approach the authorities for a sympathetic consideration of the case. However, prior to the withdrawal of the petition, DTTDC issued a notice of intent to terminate the Concession Agreement on 20.07.2023. This was followed by a termination letter on 25.09.2023.
Faced with this termination, and with prior bookings already made for the upcoming festive season, the Corporate Applicant initiated civil proceedings by filing CS SCJ No. 1508/2023 before the District Court at Tis Hazari, seeking permanent and mandatory injunction against DTTDC. On 09.10.2023, the Civil Judge passed a status quo order, temporarily restraining DTTDC from taking adverse action.
Subsequently, another settlement proposal was presented by the Corporate Applicant, along with a payment of ₹25,00,000. However, this offer too was rejected by DTTDC. On 06.12.2023, DTTDC demanded that physical possession of the project facilities be returned and initiated eviction proceedings under Sections 4 and 7 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 by filing two petitions—Petition Nos. 10/2024 and 11/2024—before the Estate Officer.
By separate orders dated 07.03.2024, the Estate Officer ruled against the Corporate Applicant. In Petition No. 10/2024, the Estate Officer ordered return of possession of the premises. The Corporate Applicant complied and handed over the premises on 27.03.2024. In Petition No. 11/2024, the Estate Officer directed the Corporate Applicant to pay a sum of ₹7,72,12,314 along with 18% annual interest until realization.
Despite the termination of the project and the order of eviction, the Corporate Applicant did not satisfy the dues owed. Instead, it resolved, by way of a special resolution passed in an extraordinary general meeting on 31.05.2024, to initiate insolvency proceedings against itself by filing an application under Section 10 of the Code before the NCLT.
The Tribunal scrutinized the application and observed that although the Corporate Applicant had suffered losses over the past three financial years, it had disclosed assets worth ₹5,57,92,526 as on 31.05.2024. The Tribunal noted that this asset base was sufficient to discharge a substantial portion of the dues owed to DTTDC. However, instead of using those assets for repayment, the Applicant sought protection under CIRP.
The Tribunal emphasized that the liabilities in question—including concession charges, license fees, property tax, and similar obligations—constitute government dues, and as such, cannot be ignored or circumvented. It held that the filing of the insolvency application appeared to be a strategic move aimed at escaping liability rather than genuinely attempting to resolve insolvency.
The Bench observed: “The intent of the Corporate Applicant is not to seek resolution... but to evade the liability owed towards the DTTDC.” Accordingly, the NCLT concluded that the application was liable to be dismissed, as the Corporate Applicant could not be permitted to take refuge under the IBC framework to frustrate recovery of legitimate government dues.
Also Read: NCLT Hyderabad Rejects Insolvency Petition Over Procedural Lapse in Serving Demand Notice
The NCLT, New Delhi, rejected the Section 10 application filed by Imperial Banquets & Dining Private Limited for initiation of CIRP. It found that the petition was not filed with the objective of resolving insolvency, but rather as a mechanism to avoid payment of dues owed to a government entity. The Tribunal held that the IBC cannot be used to shield a corporate entity from its lawful obligations, particularly in respect of recoverable government dues.
Appearance
For the Applicant: Mr. Abhishek Taneja, Mr. Sahil Sharma, Mr. Surya Sirohi, Advs.
For the RP: Adv. Adil Khan
Cause Title: M/S Imperial Banqeuts & Dining Pvt. Ltd.
Case No: Company Petition IB/370/ND/2024
Coram: Shri Mahendra Khandelwal [Hon’ble Member (Judicial)], Atul Chaturvedi [Hon’ble Member (Technical)]
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