Recently the Principal Bench of the National Company Law Tribunal (NCLT) rejected a plea to initiate insolvency proceedings, against Orris Infrastructure, a real estate company. This plea was filed by two buyers who claimed that Orris Infrastructure owed them Rs 3.60 lakh. In its ruling the NCLT emphasized that the Insolvency & Bankruptcy Code (IBC) should not be used for debt recovery purposes.
The NCLT bench noted that the buyers had already received payment from Orris Infrastructure, which exceeded the amount in question as per their agreement. The tribunal acknowledged that demand drafts had been issued to the applicants for an amount than what was owed and therefore it deemed inappropriate to misuse the IBC for recovery when a settlement had already been reached between all parties involved.
This case originated from an agreement signed on April 24 2010 between the applicants and Orris Infrastructure. The agreement established returns during the first 36 months after completion of the building or, until leasing of office space took place—whichever occurred earlier.
The construction work, for the Floreal Tower Project was finished in December 2013. The authorities granted an occupation certificate on August 16 2017.
According to the NCLT a three-year period was given for fulfilling the return payment obligation, which aligned with the occupation certificate. This period ended on August 16 2020. Furthermore, the tribunal mentioned that previous settlement agreements had been made between the parties to address any defaults in paying returns.
Orris Infrastructure, the real estate company provided demand drafts totalling Rs 6.15 lakh and Rs 1.87 lakh as full and final payment for the assured return towards their assigned unit. Despite claims from buyers about a default amounting to Rs 3.60 lakh the NCLT ruling emphasized that IBC proceedings should not be misused and should instead focus on resolving insolvency issues, within business contexts.