Corporate Debtor Defaults in Repayment of Financial Debt over Minimum Threshold of Rs. 1 crore u/s 4 of IBC: NCLT admits CIRP Petition [Read Order]

The National Company Law Tribunal (NCLT) Mumbai Bench admitted the petition for Corporate Insolvency Resolution Process (‘CIRP’) on finding that the Corporate Debtor has defaulted in repayment of financial debt over minimum threshold of Rs. 1 crore under section 4 of the Insolvency & Bankruptcy Code 2016 (IBC).

The Applicant- JM Financial Credit Solutions Limited (“Financial Creditor” or “the Petitioner”), on 19.02.2025 against the Respondent- R.M. Bhuther and Company Limited (“Corporate Debtor”), under Section 7 of the Insolvency & Bankruptcy Code 2016 (‘the Code’) r/w Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, seeking commencement of the Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor, appointment of Interim Resolution Professional (‘IRP) and declaration of moratorium.

The amount claimed to be in default is INR 332,80,53,230/- (Rupees Three Hundred and Thirty-Two Crores, Eighty Lakhs, Fifty-Three Thousand, Two Hundred and Thirty Only). The date of default is stated to be 17th August, 2023. On perusal of Part-I of Form 1, it is seen that the present application is signed by one Ms. Reshma Davane in her capacity as Associate - Loan Risk and Controls. Further, an affidavit in support of the application is affirmed by the above-named signatory, who is authorised by the resolution passed by the Board of Directors of the Applicant Company at its meeting held on October 27, 2023.

A perusal of Part II of the application in Form 1 reveals that the Respondent/Corporate Debtor i.e. RM Bhuther and Company Limited, is a body corporate having its registered office at 104, Bajaj Bhawan, Nariman Point, Mumbai, Maharashtra 400021. The date of incorporation of the Corporate Debtor is 04th June, 2001. The Authorised Share Capital and the Paid-Up Share Capital of the Corporate Debtor, both, are INR 1,00,00,000/- (Rupees One Crore Only).

On perusal of Part-III of Form 1, it appears that the Applicant has proposed the name of Mr. Gajesh L. Jain to be appointed as the IRP of the Corporate Debtor in the event that the petition gets admitted. The Applicant has also obtained the Written Consent in Form 2 from the proposed IRP above-named, the Certificate of Registration and the Authorisation for Assignment (‘AFA’), the copies of which have been collectively annexed to this application as Annexure-F (Colly). Perusal of AFA shows that the authorisation is valid from 23.08.2024 to 31.12.2025.

A perusal of Part IV of the application vide Form 1 reveals that the amount claimed to be in default is INR 332,80,53,230/- and the date of default is stated to be 17th August, 2023. The Applicant i.e. JM Financial Credit Solutions Limited is a Non-Banking Financial Company incorporated on 15.05.1980. The Borrower i.e. M/s. HEM Bhattad, is an association of persons constituted by and under an Agreement dated 06th September, 2006 executed between (i) M.B. Development Corporation, (ii) M.B. Construction, (iii) R.M. Bhuther and Company Ltd (i.e. the Corporate Debtor herein), and (iv) HEM Infrastructure and Property Developers Pvt. Ltd.

The Financial Creditor has entered into six Loan Agreements and sanctioned six Loan Facilities aggregating to INR 288.20 crores to the Borrower (i.e. M/s. HEM Bhattad, an Association of Persons (‘AOP’) acting through its members which includes the Corporate Debtor). Out of the total sanctioned amount, a sum of INR 288,16,11,075/- was disbursed by the Financial Creditor to the Borrower.

In response to the order dated 02.07.2025 Applicant has filed an Additional Affidavit, which is dated 04.07.2025, annexing therewith an authenticated copy of the Ledger Account of the Borrower as maintained by the Financial Creditor, running from the Page Nos. 3 to 23.

Perusal of records indicate that HEM Bhattad AOP (“the Principal Borrower”) is an association of persons which was formed in order to develop certain parcels of land situated at Sewri, Mumbai. The Principal Borrower thereafter decided to develop the aforesaid parcels of land in phases. The Principal Borrower constructed the first phase of the project known as “Celestia Spaces”.

In view of the successful development of Phase I, the Principal Borrower approached Mr. Vishal Kampani, the Managing Director of the Petitioner, sometime in 2017, with an intent to finance and jointly develop the balance portions of land in Phase II of the Development Project. After discussions between the Principal Borrower and the Petitioner, it was agreed that they would jointly develop the balance portions of land with the Petitioner funding the Principal Borrower and the proposed developer will be introduced by the

Petitioner.

The Financial Creditor had entered into six Loan Agreements and sanctioned six Loan Facilities aggregating to INR 288.20 crores to the Principal Borrower (i.e. M/s. HEM Bhattad, an Association of Persons (‘AOP’) acting through its members which includes the Corporate Debtor). Out of the total sanctioned amount, a sum of INR 288,16,11,075/- was disbursed by the Financial Creditor to the Borrower.

In terms of the Loan Agreements and the Corporate Guarantees, by an email dated 10.08.2023, the Financial Creditor issued a Letter dated 10th August, 2023 to the Corporate Debtor enclosing six notices of demand dated 10.08.2023 with respect to each respective facility, calling upon the Corporate Debtor to forthwith and in any event not later than seven days, make payment of unpaid outstanding amounts under the Loan Agreements aggregating to INR 242,82,00,969/- accrued as on the date preceding the date of the said notice, in accordance with the terms of the Guarantees executed by the Corporate Debtor.

On 06th November, 2023, the Corporate Debtor had replied to the Letter dated 10.08.2023 along with the Notices of Demand enclosed therewith. In the said reply, the Corporate Debtor denied its liability and inter-alia, stated that the invocation of guarantee was motivated by mala fides for the reasons stated therein.

The two member bench of Sameer Kakar , Member (Technical) and Nilesh Sharma , Member (Judicial) viewed that the execution and invocation of the six corporate guarantees, which are referred to in the table hereinabove, are not in dispute. Further, the Respondent/Corporate Debtor has not produced any evidence to show that the guarantees were discharged or that the debt was paid in full. Thus, the existence of debt and default stand proven on record.

Counsel for the Respondent contends that the present application is barred by the principle of res judicata, on the ground that the corporate guarantee had been invoked in 2021 and a petition filed pursuant thereto had been settled. In response, the Applicant, in its rejoinder, has clarified that Company Petition No. 781 of 2021 (“2021 Petition”) was filed against the Respondent only in respect of outstanding interest under the Loan Agreements and Guarantees for Facility Nos. 01 to 03 for the period March 2021 to May 2021, together with default interest up to May 2021 and TDS amounts deducted by the Corporate Debtor from September 2020 to January 2021.

The records of the 2021 Petition also substantiate that the date of default therein was 31.03.2021. Further, it is evident from the record that vide Order dated 21.01.2022, CP(IB) No. 781(MB)/2021 was dismissed as withdrawn in view of an amicable settlement arrived between the parties.

The cause of action in the present petition is distinct from that in the 2021 Petition, and in any event, since the earlier petition was not adjudicated on merits, the tribunal viewed that the present application is maintainable and is not barred by the principle of res judicata. The plea of res judicata raised by the Respondent is, therefore, rejected.

Since the Applicant has been able to establish from the records that the financial debt is due and payable by the Respondent, the disputes raised by the Respondent qua the debt.

The Tribunal held that the Corporate Debtor has defaulted in repayment of financial debt to the Applicant and such default is well over the minimum threshold of Rs. 1 crore, as prescribed under section 4 of the Code. We are also satisfied that the application filed under section 7 of the Code is complete and there are no disciplinary proceedings pending against the proposed resolution professional.

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