NCLAT Overturns Penalty on Mudra Denim's Creditors: A Victory for Due Process

The National Company Law Appellate Tribunal (NCLAT) has overturned a penalty imposed on the Committee of Creditors (COC) of Mudra Denim. The tribunal concluded that there was no negligence by the creditors during the insolvency process and the penalty was uncalled for.

The National Company Law Appellate Tribunal (NCLAT) recently quashed a penalty levied on the lenders of financially troubled Mudra Denim, determining that they were not at fault for the delay in the insolvency proceedings.

Initially, the National Company Law Tribunal's Mumbai bench had imposed a penalty of Rs 55,000 on the Committee of Creditors (COC). This decision, declared on November 11 of the previous year, was contested by the COC through IDBI Bank as they had already decided to liquidate Mudra Denim on December 13, 2023, before the expiration of the Corporate Insolvency Resolution Process (CIRP) period.

The NCLAT, agreeing with the COC's arguments, concluded that the penalty was unwarranted and set aside the cost. The Insolvency & Bankruptcy Code (IBC) stipulates the completion of CIRP within 330 days, including time taken during legal proceedings.

(With inputs from agencies.)