Application u/s 7 of IBC Admissible even in Absence of NeSL Certificate if Loan Disbursal & Default Proved with Relevant Documents : NCLT allows application of Canara Bank [Read Order]
The Tribunal came to the conclusion that the application was filed within the allotted time frame and that it was established by the review of the record and the documents the applicant had cited that there had been a financial debt for which the corporate debtor had defaulted.
![Application u/s 7 of IBC Admissible even in Absence of NeSL Certificate if Loan Disbursal & Default Proved with Relevant Documents : NCLT allows application of Canara Bank [Read Order]](https://images.taxscan.in/h-upload/2025/06/19/2050471-nclt-canara-bank-taxscan.webp "Application u/s 7 of IBC Admissible even in Absence of NeSL Certificate if Loan Disbursal & Default Proved with Relevant Documents : NCLT allows application of Canara Bank [Read Order]")
In a ruling that admits the application of Canara Bank, the National Company Law Tribunal (NCLT) has held that even in the absence of a NeSL certificate, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be admitted if the disbursal of the loan amount and occurrence of default are established through other reliable and relevant documents. The...
In a ruling that admits the application of Canara Bank, the National Company Law Tribunal (NCLT) has held that even in the absence of a NeSL certificate, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be admitted if the disbursal of the loan amount and occurrence of default are established through other reliable and relevant documents.
The Corporate Debtor is registered with the Registrar of Companies, Pune, and was established on October 1, 2015, in accordance with the terms of the Limited Liability Partnership Act, 2008. 5. As authorized by the letter dated August 24, 2022, the corporate debtor obtained many credit facilities from Canara Bank for trade activities under the heading of Advances against Supply Bills.
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In order to safeguard the loan facilities obtained from the consortium banks and financial creditors, the corporate debtor established a security interest in the form of charges on supply bills and hypothecation of commodities. This charge has been filed under CERSAI. The Corporate Debtor received the loan amount on a number of dates in accordance with the loan that the Financial Creditor had approved.
According to Part IV of Form 1, the loan account of the corporate debtor was designated as non-performing on November 21, 2023, the date of default. On December 16, 2023, a notice of loan recall was sent, but no payment was received. The Guarantors also received a Section 13(2) SARFAESI notice on the same day. On April 8, 2024, the Financial Creditor subsequently filed O.A. NDN 1721 of 2024 before the DRT-II, Delhi; this case is still pending.
As the Power of Attorney attached to the application was executed on April 12, 2011, by the Financial Creditor in favor of Mr. Paritosh Kumar, before the Corporate Debtor was incorporated and the Insolvency andBankruptcy Code, 2016 was enacted, the Corporate Debtor responded that the current application is not maintainable due to a lack of proper authorization or a valid Power of Attorney.
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The Financial Creditor's total claim in Part IV of the application was further argued to be inconsistent with the NeSL data annexed to the application and the statement of dues. The Corporate Debtor has not received any notification or correspondence designating the account as non-performing assets (NPAs), nor has it been included in the application.
The Tribunal pointed out that the grantee is permitted to start bankruptcy and winding-up procedures against the Bank's creditors under Clause 10 of the Power of Attorney dated 12.04.2011. Therefore, even if the POA was signed before to the Debtor's incorporation or the IBC's passage, Mr. Paritosh Kumar is legally permitted to submit the current application.
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The Mumbai bench of Justice V.G Bisht, (Retd) and Prabhat Kumar (Technical Member ) observed that the NESL certificate attests to a ₹26,84,191.26 default in the current account as of August 26, 2022. As of March 28, 2024, the application shows ₹26,33,315.99 still owed. Four loan accounts do not have a NESL certificate submitted, but loan agreements, account statements, and the recall notice all support defaults. For NPA classification, no notice is needed. The Corporate Debtor just mentioned a forthcoming OTS plan that has not been accepted by the Financial Creditor and made no substantial concerns.
The Tribunal came to the conclusion that the application was filed within the allotted time frame and that it was established by the review of the record and the documents the applicant had cited that there had been a financial debt for which the corporate debtor had defaulted. As a result, the application made in accordance with section 7 of the Code merits admission.
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