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NCLT Indore Rejects Rs 4.21 Crore IBC Plea, Says Code Cannot Settle Family Disputes
The has made it clear that the is not a for family feuds, dismissing a application filed by Prakash Chuhardas Khatri, Karta of , against .
The bench, comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta, rejected the claim of a Rs 4.21 crore , ruling that the applicant failed to establish the essential elements of a under the IBC. The tribunal observed that the underlying dispute was fundamentally a family matter best left to civil courts.
A Family Feud, Not a
The applicant had claimed that between , he advanced unsecured loans totalling Rs 2.85 crore (principal) to the for working capital, with 12% compounded interest, leading to an alleged outstanding of Rs 4.21 crore as of . He relied on bank transfers, the company's audited financial statements, and a reply from the acknowledging receipt of an .
However, the countered that the transfers were part of a family arrangement following the death of the patriarch, Late Shri Chuhardas Kukreja, and that no , , or interest rate was ever agreed upon. The company also pointed to an ongoing civil suit for partition (RCS-A/173/2025) filed by the applicant himself, where the was claimed as HUF property—a position fundamentally inconsistent with treating it as a defaulting corporate entity.
The ₹4.21 Crore Question: Loan or Family Transfer?
The tribunal found that the mere reflection of the amount in the balance sheet and the 's acknowledgment of receipt did not automatically transform the transfers into a "" under . A critical missing element was the ""—the commercial consideration for lending.
"The material on record therefore does not establish that the money was given for the
,"
the bench noted.
The court distinguished the 's ruling in , observing that in Orator, the character of the transaction as a loan was undisputed, with only interest being absent. Here, the very nature of the transfers—loan versus family accommodation—was hotly contested, and no written agreement, interest clause, or repayment date existed.
Furthermore, the bench questioned the claim of . Since no repayment date was fixed, the applicant had created a by issuing a legal notice and counting fourteen days. The tribunal held this was insufficient to establish a clear "" under .
IBC: A Shield for Creditors, Not a Sword in Family Wars
The tribunal strongly disapproved of using to exert pressure in family disputes. It emphasized that the IBC is designed for genuine cases where debt and are clearly established, not as a leverage tool.
"The real dispute between the parties is a
regarding the business and the properties left behind by their father. Such a dispute is to be decided by the civil court, where evidence can be led,"
the judgment stated.
The bench added:
"It is by now an established position of law that the Code is not meant merely for the recovery of money, nor can it be used as a tool to settle a
."
Key Takeaways
This ruling reinforces the principle that a petition cannot survive if the underlying transaction lacks the commercial character of a . Mere bank transfers between family members, without loan documentation, interest terms, or repayment schedules, will not suffice. The IBC is not a forum for resolving family disagreements over property and business.
Court's Decision
The NCLT Indore Bench dismissed CP(IB)/61/MP/2025, holding that no was established, and consequently no occurred. The petition was disposed of without any costs.
