Rejection of Section 7 Application - NPA - Corporate Debtor ...

Insolvency and Bankruptcy

April 25, 2024

Rejection of Section 7 Application - NPA - Corporate Debtor unable to de-risk the live BGs within the time allowed - A settlement was reached between the parties, where the Corporate Debtor agreed to pay a certain amount and de-risk live Performance Bank Guarantees (PBGs) within specified timelines. - The Appellate Tribunal observed that the entire settlement amount had been paid by the Corporate Debtor within the specified timeline. The NCLAT acknowledged the Corporate Debtor's efforts to de-risk BGs, attributing any shortcomings to the Financial Creditor's refusal to accept CBGs or counter-guarantees. Since the BGs were not invoked, the Tribunal ruled that no debt had become due, and failure to de-risk BGs did not constitute default under the IBC. - In light of the above findings, the Appellate Tribunal directed the Corporate Debtor to deposit a specified amount with the Financial Creditor to clear any outstanding liabilities related to live PBGs.

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