NCLAT HOLDs CLAIM UNDER SEC 138 & 141 OF NI ACT AMOUNTS TO ADMISSION OF DEBT, NOT THE EXISTENCE OF DISPUTE

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NCLAT HOLDs CLAIM UNDER SEC 138 & 141 OF NI ACT AMOUNTS TO ADMISSION OF DEBT, NOT THE EXISTENCE OF DISPUTE.

The National Company Law Appellate Tribunal (NCLAT) has held that pendency of proceedings under Section 138/441 of the Negotiable Instruments Act, 1881 cannot be considered as a dispute pending before a court of law, and hence, cannot be used as a reason for rejection of an application under Section 9 of the Insolvency and Bankruptcy Code.

“The pendency of the case under Section 138/441 of the Negotiable Instruments Act, 1881, even if accepted as recovery proceeding, it cannot be held to be a dispute pending before a court of law. Thereby we hold that the pendency of the case under Sec.138/441 of Negotiable Instruments Act, 1881 actually amounts to admission of debt and not an existence of dispute.” .

As such NCLAT admitted the application under sec.9 and issued the Order for moratorium.

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