NCLAT rejects insolvency proceedings plea against Aditya Birla Fashion

The National Company Law Appellate Tribunal (NCLAT) on Tuesday dismissed a plea of an operational creditor to initiate insolvency proceedings against Aditya Birla Fashion and Retail Ltd (ABFRL).

The appellate tribunal upheld the order of the Mumbai bench, which had on October 11, 2023, dismissed the plea of In Style Fashion on the ground of pre-existing dispute.

"Considering the overall facts and circumstance of the present case and in view of the foregoing discussion, we are satisfied that the Adjudicating Authority (NCLT) did not commit any error in rejecting the Section 9 Application filed by the Appellant on the ground of pre-existing dispute," said the NCLAT.

In Style Fashion was a franchisee and commission agent for running the showroom of ABFRL.

However, the NCLAT also said, "We do not agree with the finding of the Adjudicating Authority that the Section 9 application was time-barred and hit by limitation".

Meanwhile, the appellate tribunal said the operational creditor has the liberty to seek remedy of its contractual disputes before any other appropriate forum.

It entered into an agreement to run showrooms for Planet Fashion and Allen Solly in 2011. However, it was closed in February 2016.

Following the closure of the showroom, the stock in trade was sent back to ABFRL by the Operational Creditor. However, it made only part payment of Rs 51,283.28 on April 28, 2017.

Aggrieved by this, it sent a demand notice of Rs 1.05 crore and moved the NCLT.

However, the NCLT dismissed it, which was later challenged before the appellate tribunal NCLAT.