Tribunal Upholds Committee of Creditors' Commercial Wisdom in Settling Estate Office Dues Under Protest as Part of CIRP Cost in Garib Nawaz Hotels Pvt. Ltd. Case
In a landmark decision dated 10th September 2026, the National Company Law Tribunal (NCLT), Chandigarh Bench, in the case of Hemanshu Jetley v. Punjab National Bank and others, allowed the Resolution Professional (RP) to raise interim finance from the Successful Resolution Applicant (SRA) as part of the Corporate Insolvency Resolution Process (CIRP) cost. The finance was sought for settling outstanding dues payable to the Estate Office, thereby protecting the sole asset of the Corporate Debtor, M/s Garib Nawaz Hotels Private Limited.
The corporate debtor was admitted into CIRP in February 2024, with the RP appointed shortly thereafter. The Punjab National Bank, as the sole member of the Committee of Creditors (CoC), approved a resolution plan submitted by a consortium led by Mr. Karan Grover and Mr. Akshay Grover, which included payment of government dues amounting to approximately Rs. 66.20 crore. A critical issue arose regarding outstanding dues payable to the Estate Office related to conversion fees and leasehold rights on an industrial plot converted to commercial use.
Despite pending legal challenges against the demand and cancellation of the lease, the CoC approved the RP's proposal to raise interim finance up to Rs. 10 crore (later crystallized to Rs. 10.23 crore) from the SRA to settle these dues under protest. This was considered essential to prevent resumption or cancellation of the lease, which constituted the Corporate Debtor's only asset, and was necessary to preserve the company as a going concern.
Respondents including the Estate Office and a suspended director opposed the application, raising objections regarding the absence of fresh CoC approval for the enhanced amount, the lapse of the stipulated payment period, and jurisdictional issues relating to the statutory authority's powers. The suspended director also objected to the inclusion of certain disputed components such as the "anticipated unearned increase" chargeable on future transfer of lease rights.
The Tribunal, after careful examination, held that:
- The CoC's approval for raising interim finance was valid and covered the crystallized amount;
- Delay caused due to pendency of the application for approval did not render the application infructuous;
- The RP's simultaneous approach of paying dues under protest while legally contesting disputed components was a legitimate commercial strategy;
- The NCLT had jurisdiction to permit raising of interim finance as an internal CIRP measure without interfering with the statutory public-law functions of the Estate Office;
- The disputed components relating to interest rates and unearned increase were to be determined in separate ongoing litigation before the Punjab and Haryana High Court;
- The decision to settle outstanding dues to secure the sole asset fell within the commercial wisdom of the CoC, which is ordinarily not open to judicial interference unless statutory infirmity is shown.
Consequently, the Tribunal allowed the RP to raise interim finance from the SRA, treating it as part of the CIRP cost under Sections 20(2)(c), 25(2)(c), and 28(1)(a) of the Insolvency and Bankruptcy Code, 2016. The order emphasized the importance of protecting the corporate debtor's asset to enable successful resolution and implementation of the resolution plan.
This judgment reinforces the principle that the CoC's commercial decisions during CIRP must be respected and that interim finance can be raised from the SRA to meet pressing obligations essential for preserving the company's assets and ensuring the CIRP's success. It also clarifies the jurisdiction of the NCLT in regulating internal CIRP measures without encroaching upon the statutory functions of public authorities.
Bottom Line:
Insolvency and Bankruptcy Code - Resolution Professional can raise interim finance from the Successful Resolution Applicant as part of Corporate Insolvency Resolution Process (CIRP) cost to secure the Corporate Debtor's sole asset, even if it includes contested dues, provided it aligns with the commercial wisdom of the Committee of Creditors (CoC).
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 20(2)(c), 25(2)(c), 28(1)(a), 60(5)
Hemanshu Jetley v. Punjab National Bank, (NCLT)(Chandigarh Bench) : Law Finder Doc Id # 2976569
