NCLT admits Kotak Mahindra Bank's Insolvency Petition against Inditrade Business Consultants

Kotak Mahindra Bank Limited filed a petition under Section 7 of the IBC, seeking initiation of Corporate Insolvency Resolution Process against Inditrade Business Consultants Limited for a claimed default of Rs. 6,67,07,194.21 as of June 2, 2025. The bank had sanctioned working capital and overdraft facilities initially amounting to Rs. 20 crores in 2018, which was enhanced to Rs. 25,00,00,000 in September 2023, secured through various agreements including a Master Facility Agreement dated December 18, 2018, and a Pledge Agreement.

The corporate debtor defaulted on repayments, with its account classified as a Non-Performing Asset on February 18, 2024. Despite recall notices issued on July 3, 2024, and April 29, 2025, the debtor failed to repay the outstanding amount.

The petitioner produced Master Facility Agreement, Sanction Letters, Demand Promissory Note, Deed of Hypothecation, Guarantee Deeds, and Pledge Agreement as evidence of the financial debt and default. The corporate debtor challenged the maintainability of the petition, arguing that the pledged cotton bales (valued at Rs. 8,92,46,684) were destroyed in a fire on May 14, 2023, while under the bank's control through its appointed collateral management agency. The debtor further contended that the bank had suppressed material facts regarding ongoing civil proceedings and that the insurance claim for the destroyed goods was pending.

The Bench of Shri. Vinay Goel, Member (Judicial) and Smt. Madhu Sinha, Member (Technical) examined the provisions of Section 7 and relied on Supreme Court precedents including M. Suresh Kumar Reddy vs. Canara Bank, Narendrabhai vs. PNB Housing Finance Ltd., and Vidarbha Industries Power Limited vs. Axis Bank Limited.

The Tribunal held that the Pledge Agreement clearly stipulated that the risk of loss or destruction of pledged goods rested with the pledgor, not the pledgee. It noted that clauses XII and XIII of the Pledge Agreement expressly stated that the pledgee shall not be liable for any involuntary loss or destruction of the pledged securities.

The Tribunal emphasized that the Bombay High Court had already examined this issue in Commercial Appeal (L) No. 9 of 2024 between the same parties and had held that the destruction of goods by fire does not discharge the Corporate Debtor's liability towards repayment under the credit facility.

The Tribunal further held that under Section 7 of the IBC, it is only required to determine the existence of a financial debt and the occurrence of default, not to adjudicate ancillary civil or insurance disputes. It noted that while the petitioner had not initially disclosed the pendency of civil proceedings and had filed only selective pages of the Pledge Agreement, these omissions were not fatal to the petition's maintainability since the respondent had placed the relevant facts and documents on record.

Accordingly, the Tribunal admitted the petition, initiated CIRP, and appointed Mr. Vibin Vincent as Interim Resolution Professional with requisite directions including public announcement, document handover within one week, and periodic progress reports.

The NCLT imposed a moratorium under Section 14, prohibiting legal proceedings, asset transfers, and recovery actions. Additionally, the Tribunal directed the financial creditor to deposit Rs. 2,00,000 with the Interim Resolution Professional to meet expenses related to issuing public notice and inviting claims.

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