Threshold Defence on Defaulted Instalment Fails: NCLAT Upholds S7 Application of Tata Capital Against CD [Read Order]

In a recent ruling, the National Company Law Appellate Tribunal (NCLAT), Bench justice Ashok bhushan (Chairman)and Barun mitra (technical member) held that default of a single instalment, even if the amount of that instalment is below the statutory threshold and does not bar the beginning of insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), where the default relates to the entire financial debt.

Karan Bhatia, the appellant, challenged the order of the National Company Law Tribunal (NCLT) dated 11 September 2025, by which a Section 7 application filed by Tata Capital Financial Ltd. against the Corporate Debtor was admitted by the tribunal.

The appellant argued that the date of default mentioned in the Section 7 application was 5 September 2024, and on that date, only one instalment of ₹41 lakh had fallen due. Since this amount was below 1crore, the minimum threshold prescribed under the IBC, it was argued that the insolvency application was not maintainable, particularly in the absence of any amendment to the date of default in the application.

Respondent, Tata Capital, submitted that the default was a continuing one, as the Corporate Debtor had subsequently defaulted on instalments due in October and November 2024. It was further argued that a loan recall notice had been issued before the filing of the Section 7 application, making the entire outstanding financial debt immediately due and payable.

The NCLAT Bench justice Ashok Bhushan (Chairman)and Barun Mitra (technical member)observed that once a default occurs in payment of any instalment, it constitutes a default in respect of the entire financial debt, in terms of the definition of “default” under the IBC.

The tribunal has provided clarity about the IBC, defining “default” broadly, and even a single missed instalment can cause default of the entire financial debt.

The Tribunal noted that the Section 7 application itself clearly pleaded multiple instalment defaults and that the recall notice issued before filing of the application rendered the full loan amount payable.

Finding that the existence of debt and default exceeding the statutory threshold was clearly established, the NCLAT found no infirmity in the order of the Adjudicating Authority and dismissed the appeal, thereby affirming the admission of the Section 7 application filed by Tata Capital.