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National Company Law Tribunal (NCLT) ordered the initiation of insolvency proceedings against a Mumbai based real estate company - Lokhandwala Infrastructure. Insolvency proceedings are mandated under Section 7 of the Insolvency and Bankruptcy Code 2016 (IBC 2016). Insolvency in India is governed primarily by the Insolvency and Bankruptcy Code 2016 (IBC 2016) and allied rules and legislations.
The Mumbai Bench of the National Company Law Tribunal comprising by Hon'ble Mr. Justice VP Singh and Hon'ble Mr. Justice Amit Kumar also barred the Company from creation of any third party rights or disposal of any assets of the company. This is a good interim step taken by the National Company Law Tribunal as many companies seek to escape the insolvency proceedings by creation of subsidiaries and new third party rights. Previous cases include the cases of Sterling Biotech , Jignesh Shah to name a few.
The insolvency proceedings were initiated against Lokhandwala Infrastructure by one of its investors. Dalmia Group submiited before the Court that - Lokhandwala Infrastructure did not make a quarterly payment to Dalmia Group according to a buyback agreement signed between them. Dalmia Group had invested almost 41 Crores Rupees in a ongoing property of Lokhandwala in the Business Bay at Mumbai. Dalmia Group seeks almost 36 Crores as damages arising out of the buyback agreement.
The current case is just one of the growing number of cases in the subject of insolvency which are on the rise in India. According to official data by the statutory authority if the Insolvency and Bankruptcy Board of India (IBBI), there have been 2,162 cases filed in the subject of insolvency since the start of the Insolvency and Bankruptcy Code 2016 (IBC 2016). Whether this number is a sign of growing reflection of investor faith in judicial recourse or the growing impunity of corporates to violate law is a larger question that seems unanswered.
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