Syska vs. Sunstar: NCLT Orders CIRP, NCLAT Reviews Settlement

12 November 2024

• NCLT Proceedings and Initiation of CIRP

Sunstar Industries brought a case before the NCLT against Syska LED Lights, seeking recovery of an outstanding amount totaling Rs. 7.7 Cr (Principal amount of Rs. 7.2 Cr + interest amount of Rs. 0.5 Cr). Sunstar alleged that Syska repeatedly delayed payments for goods supplied, ultimately defaulting despite multiple reminders and assurances of payment. Syska’s defense centered on claims of defective goods; however, the NCLT found insufficient evidence to support this and dismissed their argument. Consequently, the tribunal initiated the Corporate Insolvency Resolution Process (CIRP) for Syska LED Lights. An Interim Resolution Professional (IRP) has been appointed to oversee the process, which includes managing Syska’s operations during insolvency proceedings.

• Escalation to NCLAT and Payment Settlement

Following the NCLT’s decision on October 8, 2024, to admit the Section 9 application and initiate CIRP for an outstanding debt of Rs. 7.8 Cr (decided by appellant), Syska appealed to the National Company Law Appellate Tribunal (NCLAT). Syska’s representative, Rajesh Uttamchandani, informed the appellate tribunal that Rs. 4 Cr had already been paid and presented an additional Rs. 1 Cr bank draft to Sunstar’s counsel. Justice Ashok Bhushan, presiding over the NCLAT hearing, directed that Syska clear the remaining balance by November 11, 2024, and submit a compliance affidavit. To provide Syska time to complete the settlement, the tribunal temporarily stayed the formation of a Committee of Creditors (CoC) until the next hearing.