Supreme Court sets aside NCLAT order in Anjani Technoplast Ltd v Shubh Gautam, holds insolvency process cannot be invoked as a recovery mechanism where decretal dues are disputed and execution remedies exist
The Supreme Court has held that a decree holder cannot use the Insolvency and Bankruptcy Code, 2016 as a substitute for execution of a money decree.
The Court set aside the NCLAT order that had directed admission of insolvency proceedings against Anjani Technoplast Ltd.
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe passed the ruling in Anjani Technoplast Ltd v. Shubh Gautam, Civil Appeal No. 8247 of 2022.
The Court decided the matter on April 23, 2026.
The Supreme Court allowed the appeal filed by Anjani Technoplast Ltd.
It restored the NCLT order dated June 20, 2022, which had dismissed the application under Section 7 of the IBC.
The Court held that the respondent had used the IBC as a recovery tool.
Therefore, it found the initiation of CIRP to be an abuse of the insolvency process.
The respondent, a money lender, had advanced loans to the appellant in 2010.
The loans were for ₹2.5 crore and ₹2 crore.
The parties executed agreements that carried interest.
Later, security cheques were dishonoured.
Consequently, the respondent initiated proceedings under Section 138 of the Negotiable Instruments Act.
The parties then entered into a compromise in 2013.
Thereafter, the respondent filed a summary suit before the Delhi High Court.
The suit resulted in a decree dated January 11, 2018.
The decree was for ₹4.38 crore with 24% interest.
The decree later attained finality.
The appeal and Special Leave Petition against it also failed.
Despite having a decree, the respondent did not initiate execution proceedings.
Instead, he filed a Section 7 IBC petition before the NCLT in December 2021.
He claimed the decretal amount as a financial debt.
The NCLT dismissed the petition on June 20, 2022.
It held that the IBC could not operate as a recovery mechanism.
It also noted that the appellant was a solvent company.
However, the NCLAT reversed this decision on November 1, 2022.
It directed admission of the insolvency petition.
Senior Advocate Mukul Rohatgi appeared for the appellant.
Advocate Gaurav Singh represented the respondent.
The appellant argued that it had already made substantial payments.
It also disputed the actual outstanding amount.
Further, it pointed to pending proceedings before the Delhi High Court on computation of decretal dues.
On the other hand, the respondent claimed that the decretal amount remained unpaid.
He relied on Dena Bank v. C. Shivakumar Reddy and Kotak Mahindra Bank Ltd. v. A. Balakrishnan.
He argued that a decree gives rise to a fresh cause of action under Section 7 of the IBC.
The Supreme Court said the issue was not merely whether a debt existed.
Rather, the key question was different.
The Court examined whether a creditor could use insolvency proceedings instead of executing a civil court decree.
The Bench relied on several precedents.
These included Swiss Ribbons Pvt Ltd v. Union of India, Pioneer Urban Land and Infrastructure Ltd v. Union of India, GLAS Trust Co LLC v. BYJU Raveendran, and Tottempudi Salalith v. State Bank of India.
The Court reiterated that the IBC does not serve as a debt recovery mechanism.
Instead, it provides a framework for resolution of insolvency.
The Bench noted that the respondent had an effective remedy under the Code of Civil Procedure.
He could have executed the decree.
However, he chose not to pursue that remedy.
The Court also noted that the appellant was a solvent and functioning company.
It had already deposited substantial amounts.
It had also expressed willingness to pay lawful dues.
Moreover, the Court found serious dispute over the quantum of debt.
The respondent had placed inconsistent figures before different forums.
In addition, proceedings on computation of the decretal amount were already pending before the Delhi High Court.
The Supreme Court held that the respondent had invoked the IBC as a recovery mechanism.
It termed this an abuse of process.
Accordingly, the Court allowed the appeal.
It set aside the NCLAT order dated November 1, 2022.
It restored the NCLT order dated June 20, 2022, dismissing the Section 7 application.
The Court also granted liberty to the respondent to execute the decree dated January 11, 2018, in accordance with law.
Further, it awarded costs of ₹5,00,000 to the appellant.
The respondent must pay the costs within five weeks.
The Court also disposed of all pending interlocutory applications.
