The NCLAT Delhi recently overturned an NCLT Ahmedabad ruling in Shiv Glitz Hotels and Resorts LLP v. Oravel Stays Ltd. The NCLT had dismissed an application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, without addressing its merits. Shiv Glitz Hotels and Resorts LLP, the operational creditor, appealed after the NCLT did not allow a chance to rectify defects in the application, as mandated by the IBC.
The NCLT had rejected the Section 9 application of the operational creditor, under the Insolvency and Bankruptcy Code (IBC), 2016, as defective, and the appellant challenged this decision, arguing it was dismissed without considering the merits.
On October 7, 2017, the appellant and respondent signed a Merchant Agreement guaranteeing a monthly revenue of Rs. 40 lakhs. The appellant provided services such as boarding, lodging, social events, and F&B through the OYO platform, and raised various invoices. After issuing a demand notice under Form-3 on March 29, 2023, and receiving a denial from the respondent, the appellant filed a Section 9 IBC application on December 10, 2023, to initiate the corporate insolvency resolution process.
At the initial hearing on January 2, 2024, the NCLT dismissed the application, noting defects such as missing explanations for the invoice date, date of default, limitation period, and the issuance of invoices to two different entities without segregation. The NCLT deemed the application defective and did not allow the appellant a seven-day period to rectify these issues as required by Section 9(5)(ii)(a) of the IBC. Consequently, the operational creditor appealed to the NCLAT Delhi.
The NCLAT overturned the NCLT Ahmedabad's order that had dismissed the appellant's Section 9 application as defective. The NCLAT ruled that the NCLT should have granted the appellant a seven-day period to rectify the application’s defects, as required by the proviso to Section 9(5)(ii)(a) of the Insolvency and Bankruptcy Code (IBC).
Shiv Glitz Hotels and Resorts LLP v. Oravel Stays Ltd.
Company Appeal (AT) (Insolvency) No.577 of 2024
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