Anjani Technoplast Ltd v. Subh Gautam

What happened

The respondent lent ₹2,50,00,000 on 24 February 2010 and ₹2,00,00,000 on 31 March 2010 to the appellant, taking cheques as security. After the cheques were dishonoured, a settlement of 31 August 2013 provided for ₹3,22,02,660, and the appellant paid ₹3,53,51,520 by 31 July 2014. A summary suit filed on 1 February 2016 led to a decree of the Delhi High Court on 11 January 2018 for ₹4,38,00,617 with interest at 24% per annum from 1 February 2016, which was upheld in appeal on 27 July 2018, and the Special Leave Petition was dismissed on 22 October 2021. On 13 December 2021 the respondent filed a section 7 petition. The NCLT dismissed it on 20 June 2022, noting that the appellant is a solvent business with revenue of about ₹35 crores, profits of ₹8 crores and 95 employees, and that the IBC is not a recovery mechanism. The NCLAT reversed on 1 November 2022, relying on Dena Bank v. C. Shivakumar Reddy and Kotak Mahindra Bank v. A. Balakrishnan. Meanwhile, the appellant filed IA No. 17634 of 2022 before the High Court to redetermine the decretal amount and deposited ₹3,00,00,000, and later ₹60,98,847 (together ₹3,60,98,847) with the Registrar General. In proceedings before the ITAT, the respondent had himself shown the balance outstanding as only ₹96,48,480 as on 31 March 2012, while in this Court he claimed ₹12,51,18,074.49 as on 28 February 2026.

Questions before the court

• Can a decree-holder use a section 7 IBC petition against a solvent company, instead of executing a money decree, where the amount due is seriously disputed?

Why the court ruled this way

The central question was not whether money is owed but whether the CIRP could be used as a substitute for execution of a civil decree (paragraph 18). The Code is not a debt recovery law; it aims at reorganisation and resolution in a time-bound manner and revival of the corporate debtor as a going concern, as seen in Swiss Ribbons, Pioneer Urban Land and GLAS Trust Co. v. BYJU Raveendran, and recovery of creditors' claims is only a by-product (paragraphs 19 to 23). Section 65 of the IBC penalises initiating insolvency for purposes other than resolution (paragraph 24). The respondent had the ordinary remedy of executing the decree under the Code of Civil Procedure but filed a section 7 petition two months after the Special Leave Petition was dismissed (paragraph 26). The appellant is solvent and, by depositing money and undertaking to pay, behaved like an earnest judgment debtor disputing only the quantum (paragraph 27). The respondent had taken three inconsistent positions on the amount due before the ITAT, the High Court and the Supreme Court, which raised serious questions about the reliability of the claim, and computation was a matter for execution or the pending High Court application (paragraphs 28 to 30). The Court did not doubt the proposition in Dena Bank that a decree can give a fresh cause of action, but said that does not remove the question of misuse in each case (paragraph 31).

Controlling point

Using the IBC in these circumstances was an abuse of process and the section 7 petition was rightly dismissed by the NCLT.

Order and next steps

The appeal was allowed, the NCLAT order of 1 November 2022 was set aside and the NCLT order of 20 June 2022 restored. The respondent is at liberty to pursue execution of the decree of 11 January 2018 in accordance with law, and all pending applications were disposed of. The appellant is entitled to costs of ₹5,00,000 to be paid by the respondent within five weeks.

Practical implications

A creditor holding a money decree against a running company should file execution proceedings, and a company facing a section 7 petition on a decree can point to its solvency, deposits and the disputed amount to show misuse.

Limits of this ruling

• The Court did not decide the amount payable under the decree, which it left to the pending High Court application and execution; it also did not hold that a decree-holder can never invoke section 7.