NCLT Dismisses Application to Restore Withdrawn Insolvency Petition
Authority: National Company Law Tribunal, New Delhi Bench - Court III
Order Date: 17 July 2026
Case Overview
The application was filed by financial creditor Shashi Bhushan Nagar seeking recall of the order dated 19 January 2024 that had dismissed his Section 7 insolvency petition (IB-517/2023) against corporate debtor Sri Ganraj Buildcon Pvt Ltd. The original petition was withdrawn based on the parties' submission that the matter had been settled out of court.
The financial creditor had advanced a loan of Rs 1,86,95,051 to the corporate debtor between 17 March 2015 and 31 August 2020, which was due for repayment by 31 March 2021. After default, the creditor initiated insolvency proceedings under Section 7 of the IBC.
The creditor alleged that after the petition was admitted for hearing on 27 September 2023, the corporate debtor persuaded him to enter into a settlement agreement dated 19 January 2024 (Ikrarnama), whereby the debtor promised to clear all dues by 31 July 2024. As part of this settlement, the corporate debtor allotted an additional residential flat (Unit No. 405) in their "Golden Bells" project in Jaipur as security, in addition to two existing units (302 and 303). The creditor also made payments of Rs 76,60,000 through banking channels at the debtor's suggestion, despite most original loan payments being in cash.
The corporate debtor paid only Rs 1,53,000 as partial payment and subsequently defaulted on the 31 July 2024 deadline. After a meeting on 6 August 2024, the repayment deadline was orally extended to 30 September 2024, but the debtor again defaulted. The total amount claimed due as of 30 September 2024 was Rs 3,64,62,813 (principal Rs 1,86,95,051 + interest Rs 1,77,67,762 at 1.75% monthly rate).
The respondent corporate debtor contested the application, arguing that the withdrawal was unconditional with no settlement terms placed on record. They denied the cash transactions alleged by the creditor and stated that no liberty to revive the petition was granted in the withdrawal order. They cited NCLAT judgments in Krishna Garg vs Pioneer Fabricators and SRLK Enterprises vs JALAN Transolutions to argue that IBC cannot be used as a recovery mechanism for breach of settlement terms.
Final Outcome
The NCLT bench comprising Judicial Member Bachu Venkat Balaram Das and Technical Member Reena Sinha Puri dismissed the restoration application. The tribunal found that the agreement dated 19 January 2024 was essentially a sale agreement for Flat No. 303 with no default clause or liberty to revive the insolvency proceedings. The tribunal held that seeking recovery based on breach of a sale agreement does not constitute a valid ground for restoration under IBC, which cannot be used as a recovery mechanism. The financial creditor was advised to pursue alternative legal remedies available under law.
Topics: Insolvency Proceedings, Settlement Breach, NCLT Jurisdiction