Authority: National Company Law Appellate Tribunal Principal Bench, New Delhi

Order Date: 09.09.2026

Case Overview

The appeal arose from an order dated 19.08.2025 passed by the National Company Law Tribunal (NCLT), Mumbai Bench in C.P. (IB) No. 576 (MB) of 2025. Dalal Family Private Trust (Respondent) had filed a Section 7 petition under the Insolvency and Bankruptcy Code, 2016 against North Life Spaces LLP (Appellant), claiming a financial debt of ₹4,15,19,943 (inclusive of principal plus interest and tax penalty) while reserving its claim for default interest.

The Appellant contested the petition, questioning its maintainability, the authority of the person instituting the proceedings on behalf of the trust, and the existence of debt and default. The Appellant also filed an interlocutory application seeking production of relevant documents. During hearings, the Respondent withdrew its claim towards tax penalty of ₹26.80 lakh.

After the matter was reserved for orders on 12.08.2025, the Appellant deposited two demand drafts aggregating ₹3,49,55,172 with the NCLT Registry on 18.08.2025, expressly stating this was done "without prejudice to its rights, remedies and contentions" and as a gesture of bona fide conduct to demonstrate solvency.

The NCLT, through its impugned order dated 19.08.2025, directed release of the demand drafts to the Respondent, recorded payment of principal and interest, noted withdrawal of tax penalty and default interest claims, and closed the Company Petition without adjudicating the Appellant's objections. Liberty was granted to the Respondent to pursue other legally maintainable claims.

Subsequently, the Respondent issued a Demand Notice dated 19.09.2025 claiming ₹2,77,72,206 towards interest, default interest and legal expenses, which the Appellant disputed.

Final Outcome

The NCLAT allowed the appeal and set aside the NCLT order dated 19.08.2025. The Tribunal held that a deposit made expressly "without prejudice" after the matter was reserved for orders cannot be treated as an unconditional admission of liability. The NCLT should have adjudicated the Appellant's objections regarding maintainability, debt, and default before closing the Section 7 proceedings.

The matter was remanded back to the NCLT for fresh consideration of the petition under Section 7 of the IBC. The Respondent was directed to re-deposit the amount of ₹3,49,55,172 to the credit of the case before the Adjudicating Authority. The NCLAT clarified that nothing prevents the Respondent from pursuing any amount otherwise legally due, but expressed no opinion on the merits of the subsequent claim.

Topics: Insolvency Proceedings, Judicial Remand, Debt Dispute