Karnataka High Court stays NCLT order initiating insolvency proceedings against Mantri Developers

The Karnataka High Court on Wednesday granted an interim stay on a recent order of the National Company Law Tribunal (NCLT) at Bengaluru initiating the corporate insolvency resolution process (CIRP) against Mantri Developers..The NCLT had also appointed an Interim Resolution Professional (RP) to take over the affairs of the real estate company. Appearing for Mantri before the High Court, Senior Advocate Shashikiran Shetty submitted that the RP was in the process of taking control of affairs before the National Company Law Appellate Tribunal (NCLAT) could hear the appeal. He thus sought a stay on the NCLT order..Noting that Mantri had filed an appeal before the NCLAT on March 30, Justice M Nagaprasanna ordered,"In these peculiar circumstances, I deem it appropriate to grant an interim order of stay of any further action, pursuant to the order of NCLT for a period of three weeks."The matter will be heard next on April 20..On March 28, NCLT had admitted an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) by Indiabulls Housing Finance, which claimed that Mantri defaulted on an amount of over ₹450 crore..The application was filed against Mantri (the corporate debtor) on the allegation that it failed to comply with the loan agreement and make timely payments to Indiabulls on the specified due dates. Despite multiple notices, neither the debtor nor the co-borrowers made any payment of the outstanding amounts, the financial creditor Indiabulls contended.On the other hand, Mantri contended that there was an inordinate delay on the creditor's part in disbursement of the loan amount, and therefore, their project timelines were severely affected and they also faced cash flow issues.Additionally, it was stated that the creditor was providing further financial facilities after filing of these proceedings and are by their own conduct admitting that the Mantri conglomerate was not in any financial distress..On examining the facts, NCLT found that Mantri availed loan facilities from Indiabulls and defaulted in repayment, and thus, the first ingredient of debt was satisfied.Since default of payment was established and the amount of default was above ₹1 crore, the petition was admitted.The Tribunal also appointed Ahsan Ahmad as the Interim Resolution Professional and directed the creditor to deposit ₹2 lakh with him to meet the expenses arising out of issuing public notice and inviting claims.