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Mekaster Finlease's Appeal Against CIRP Rejection Held by NCLAT New Delhi
The delivered a significant ruling on , holding that an appeal filed against the rejection of a creditor’s application to initiate the becomes once CIRP has already commenced against the same corporate debtor in a subsequent proceeding. The decision reinforces the on and clarifies the rights of creditors who were not the successful applicants in the initial CIRP.
A Bench comprising Judicial Member Justice Sharad Kumar Sharma, along with Technical Members Arun Baroka and Indevar Pandey, dismissed the appeal filed by against an order of the , Jaipur. The NCLT had rejected Mekaster’s application under against , in which Mekaster claimed dues of Rs. 1.55 crore along with interest.
The Appeal Becomes
The core issue before the NCLAT was whether an appeal challenging the rejection of a Section 7 application could survive after CIRP had already been initiated against the same corporate debtor in a separate, later proceeding. During the pendency of the appeal, the NCLT admitted Prayag Polytech into CIRP based on a Section 7 application filed by . Subsequently, Mekaster submitted a claim of Rs. 2,97,43,803 before the Resolution Professional (RP), which was rejected based on the available material.
Mekaster sought to have its pending appeal adjudicated, arguing that the NCLT’s finding that its transaction did not constitute a could prejudice its claim in the ongoing CIRP. However, the NCLAT observed that the very relief sought by the appellant—commencement of CIRP—had already been effectuated through a subsequent proceeding. The Tribunal noted: “The very relief sought by the Appellant, namely, commencement of CIRP, has already been effectuated through a subsequent proceeding. The specifically bars institution of any proceeding against the Corporate Debtor after the commencement of . Thus, the initiation of a second and parallel CIRP against the same Corporate Debtor is not possible under the existing provisions of the code.”
Under Section 14
The Tribunal relied on the ’s judgment in P. Mohanraj & Ors. v. Shah Brothers Ispat Pvt. Ltd. (2021) to underscore the statutory consequences of CIRP commencement. The under prohibits the institution of any suit or proceeding against the corporate debtor, including the filing of a new CIRP application. Once a is in place, creditors must pursue their claims within the framework of the ongoing CIRP, rather than through independent proceedings.
The NCLAT clarified that Mekaster did not suffer any adverse consequence merely because ’s application led to the commencement of CIRP. The creditor whose application results in the initiation of CIRP does not receive any additional benefit in the distribution of assets under the . Therefore, the appeal had become , as the relief sought was already accomplished.
No Prejudice to the Creditor
The appellant contended that the NCLT’s finding regarding the nature of its debt could impact its claim in the ongoing CIRP. However, the NCLAT held that such a grievance arises subsequently within the ongoing CIRP and must be pursued through the remedies available under the IBC. The Tribunal observed that Mekaster could not convert the pending appeal into an independent proceeding for adjudication of its claim merely because both proceedings concerned the same underlying transaction.
The Bench emphasized that the insolvency process treats all creditors within the applicable framework, and the rejection of a claim by the Resolution Professional is a separate matter that must be challenged in accordance with the IBC, not by reviving an appeal that has become moot.
Legal Analysis and Implications
This ruling clarifies a critical procedural point under the IBC: once CIRP has commenced against a corporate debtor, any pending appeal seeking the same relief becomes . The decision prevents the and ensures that the under Section 14 is not undermined. It also reinforces the principle that creditors must participate in the ongoing CIRP rather than pursuing parallel litigation.
From a practical standpoint, the judgment serves as a reminder to financial creditors that the timing of their application matters. If another creditor successfully initiates CIRP before their appeal is decided, the appeal loses its purpose. Creditors in such a position must instead focus on submitting and contesting their claims before the Resolution Professional.
The NCLAT’s reliance on the ’s decision in P. Mohanraj further solidifies the legal framework governing and its sweeping effect on all proceedings against the corporate debtor.
Impact on Legal Practice
For insolvency practitioners, this ruling highlights the need to monitor the status of CIRP against a corporate debtor even while an appeal is pending. If CIRP commences from another application, the appeal should be withdrawn or rendered , and efforts should be redirected toward the claim process.
The decision also discourages strategic appeals that aim to delay or duplicate the insolvency process. By holding that a second, parallel CIRP cannot be initiated, the NCLAT has streamlined the insolvency regime and reduced the burden on tribunals.
Conclusion
The NCLAT’s dismissal of Mekaster Finlease’s appeal as underscores the IBC’s objective of timely and efficient resolution of corporate debt. The ruling reaffirms that once a corporate debtor is admitted into CIRP, all creditors—whether successful in their own application or not—must channel their claims through the single, ongoing process. The decision provides clarity and finality, preventing the fragmentation of insolvency proceedings and ensuring equitable treatment of creditors.
