# In the matter of Leather Export House India Pvt. Ltd. CP-635-(IB)-2017

> NCLT judgment dated 2018-01-17. Citation: TCN-2018-NCLT-01923. The case involves an application filed by Operational Creditors under Section 9 of the…

- **Court:** NCLT
- **Order date:** 17 Jan 2018
- **Citation:** TCN-2018-NCLT-01923
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/leather-export-house-india-pvt-ltd-cp-635-ib-2017-1d087685

## Summary

### Background

The case involves an application filed by Operational Creditors under Section 9 of the Insolvency and Bankruptcy Code, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Operational Creditors and the Corporate Debtor had executed a Memorandum of Understanding (MoU) dated 09.08.2014 for the purchase of land/building. The Operational Creditors claimed that the Corporate Debtor defaulted in making payment of the outstanding debt.

## Facts

Three Operational Creditors filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against Leather Export House India Pvt Ltd. The Operational Creditors and the Corporate Debtor had entered into a Memorandum of Understanding (MoU) on 09.08.2014 for the purchase of land/building. The Operational Creditors advanced Rs. 1 Crore to the Corporate Debtor via cheque No. 000022 dated 09.08.2014. The Operational Creditors claimed an outstanding debt of Rs. 1,67,84,746/-. The MoU stipulated that if the balance amount was not paid by the Operational Creditors, 75% of the advance amount would be returned, and 25% would be retained by the Corporate Debtor as damages. Conversely, if the balance

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor committed a default in making payment of the outstanding debt claimed …

**Ratio:** Section 9 of the Insolvency and Bankruptcy Code, 2016, allows an operational creditor to

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**Reasoning:** The court observed that the Corporate Debtor had failed to fulfill its obligations under

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**Interpretation:** The term 'default' under the IBC is interpreted as non-payment of debt when due

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**Application:** The court applied the ratio to the facts, noting the MoU, the advance payment,

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## Parties

- **Judges:** Ch. Mohd Sharief…
- **Appellants:** CHAVA BHARA…
- **Respondents:** LEATHER EXPORT…

## Timeline

- **2014-08-09 — Execution…**: Memorandum of Understanding (MoU) executed between the Operational Creditors and the…
- **2014-08-09 — Advance P…**: Operational Creditors advanced Rs. 1 Crore to…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 9 — Application for initiation of corporate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-9)

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