NCLT admits CIRP Application of Canara Bank Citing Default payment of a debt amount beyond Rs, 1 Crore [Read Order]

The National Company Law Tribunal ( NCLT) Cuttack Bench admitted the application filed by Canara Bank citing the default payment of a debt amount beyond Rs, 1 Crore as evident from the Form-C and Form-D of the NeSL certificate, from the loan account statement of the respondent maintained by the Financial Creditor and from the acknowledgement of debt instrument executed by the respondent.

The present application was filed on 10.04.2024 by Canara Bank ('Petitioner/ Financial Creditor') under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('the Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution process ('CIRP') against S.S. Aluminium Private Limited ('Respondent/ Corporate Debtor') for default amount of Rs.15,88,33,394.26/- (Fifteen Crores Eighty-Dight Lakhs Thirty-Three Thousand Three Hundred and Ninety Four Rupees and Twenty Six Paise).

The Financial Creditor sanctioned credit facilities, including a Cash Credit of and a Term Loan-I of Rs.

in favour of the respondent for the modernisation and expansion of the existing aluminium plant at Haldiapada, as the respondent was in the process of starting a project for an aluminium extrusion manufacturing unit. The objective was to produce aluminium solid and hollow extrusion profiles used in commercial, automobile, and industrial products.

Subsequently, the respondent sought an additional loan from the financial creditor to finance modernisation and expansion of the existing plant, which required higher capital expenditures. As a result, the Financial Creditor approved a further credit of Rs. 88,64,000/- vide its sanction letter dated 11.07.2025, as Term LoanIl, to support the expansion of the plant at Haldiapada.

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The respondent failed to pay the instalments and also defaulted in payment of the interest The Financial Creditor, vide letters dated 25.02.2021, 25.03.2021, and 10.04.2021, called upon the respondent to settle the arrears. Upon continued default, the loan accounts were classified as "Non-Performing Asset" on 11.0502021 in accordance with the Reserve Bank of India's Prudential Accounting Norms.

The Financial Creditor, in the meantime, initiated proceedings under the SARFAESI Act, 2002 and after that the Respondent sought One Time Settlement (OTS) of Rs, 4 crores, Rs. 5 crores, and IRS. 6 crores, respectively, thereby admitting liability towards the outstanding debt. The Financial Creditor issued a notice under Section 13(4) of the SARFAESI Act, followed by a Sale/ Auction Notice of the mortgaged properties, which failed due to a lack of bidders, Subsequently, a second notice under Section 13(2) was issued on 26004.2022, and a second notice under Section 13(4) was issued on 16.072022.

The applicant submitted that there is an existence of financial debt disbursed by it, and the default of the respondent in relation to such debt is apparent and stands established from the aforesaid OTS communications. As regards the plea raised by the respondent relating to the alleged disbursement, the same is a matter to be examined by the Resolution Professional at the stage of claim verification and not at the stage of admission of the Corporate Insolvency Resolution Process before this Adjudicating Authority,

The applicant further argued that, according to the Framework for Revival and Rehabilitation of MSMEs, it is the respondent's responsibility to provide authenticated and verifiable documents proving its status as an MSME under the MSMED Act, 2006, at the time of classifying the account as NPA, as held by the Supreme Court in Pro Knits (supra).

In this case, the respondent failed to disclose or prove its MSME status when its account was classified as NPAo The claim of being an MSME, raised belatedly in these proceedings, is therefore unfounded and appears to be an attempt to hinder the process under the Insolvency and Bankruptcy Code, 2016,

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The total amount of loans defaulted by the respondent, exceeding Rs 1 Crore after the time limit specified in Section IOA of the Code, meets the minimum requirement for initiating proceedings under Section 7 of the Code. Additionally, although the initial defaults in the remaining loan accounts occurred within the Section IOA period of the IBC, 2016, this is irrelevant since the defaults continued beyond that Section IOA period.

It was evident from Form-C and Form-D of the NeSL certificate and from the loan account statement from 01.01.2021 to 16.03.2024, maintained by the Financial Creditor, and from the Debt Restructuring Agreement dated 29,06.2019 executed between the Financial Creditor and the respondent, that the respondent has defaulted on the payment of the borrowed amount. This was never disputed by the respondent during the pendency of the matter. Therefore, it is conclusively established that the default occurred regarding the financial debt extended by the Financial Creditor to the respondent.

It is conclusively established that the Respondent has in fact defaulted in payment of a debt amount i.e. beyond Rs, 1 Crore as evident from the Form-C and Form-D of the NeSL certificate, from the loan account statement of the respondent maintained by the Financial Creditor and from the acknowledgement of debt instrument executed by the respondent dated 13.07.2021 and the present application has been filed within the period of limitation as per Section 18 of the Limitation Act, 1963.

A two member bench of Deep Chandra Joshi, Member (Judicial) and Banwari Lal Meena, Member (Technical) allowed the application filed under Section 7 of the Code read with Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP of S.S. Aluminium Private Limited, Corporate Debtor.

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