J U D G M E N T

(Hybrid Mode)

[Per: Ajai Das Mehrotra, Member (Technical)]

The present appeal has been filed by Mr. Ashutosh Majumdar, who is the ex-director of Chemstar Organics (India) Limited (hereinafter referred to as the ‘Corporate Debtor’ or ‘CD’) against the order dated 20.02.2025 of National Company Law Tribunal, Mumbai Bench in CP (IB)-1028 (MB)/C- III/2022 wherein the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC, 2016’) filed by Omkara Asset Reconstruction Pvt. Ltd. & Anr. (hereinafter referred to as the ‘Financial Creditor’) was admitted and Corporate Insolvency Resolution Process (hereinafter referred to as the ‘CIRP’) was initiated against Corporate Debtor.

The brief facts of the case as noted in the impugned order as under:

“i. The Gujrat Industrial Investment Corporate Limited (“GIIC”) had sanctioned and disbursed term loan facilities to the Corporate Debtor under Loan Cum Agreement backed by Deed of Hypothecation. Bank of Baroda being a lead Bank to the Consortium while acting for itself and an agent of GIIC was holding all the original title deeds in respect of the mortgaged securities under joint Equitable Mortgage created on 28.07.1998 and 01.07.1999.

ii. According to the reply, Rs. 625 lakhs was granted to the Corporate Debtor as Term loan for setting up its expansion project for manufacture of MPB chemical at Vadodara.

iii. Subsequently the Corporate Debtor defaulted in payment of interest and repayment instalment and GIIC initiated action to recover dues from the Corporate Debtor by taking possession of mortgaged properties at Nandesari Unit on 0 1.10.2002 and Umaraya Unit on 23.06.2004.

iv. Thereafter the Corporate Debtor referred the matter to Board of Industrial and Financial Reconstruction ("BIFR") wherein litigation continued till dissolution of BIFR i.e. 30.11.2016.

v. On 19.08.2017 GIIC granted one-time settlement ("OTS") under the OTS Scheme 2015-III of GIIC for an amount of Rs. 987 Lakhs. In terms of the above sanction letter, the Corporate Debtor made payment of Rs. 94 lakhs.

vi. In the meantime, the Government of Gujarat issued a Government Resolution dated 11.09.2017 to provide relief and concessions to viable sick industrial enterprises in the State of Gujarat. The scheme was availed by the Corporate Debtor. Further the Industries Commissionerate also issued a Sanction Letter for settling dues of the Corporate Debtor at 717 Lakhs therefore GIIC approved one-time settlement proposal under its letter dated 15.02.2018. Accordingly, the Corporate Debtor made part payment of Rs. 71. 7 lakhs and the balance amount payable to GIIC stood at Rs. 587 Lakhs (including certain expenses that were incurred by GIIC for completion of transaction).

vii. Subsequently, GIIC vide Tripartite Agreement dated 14.08.2018 assigned its Loan to Omkara Asset Reconstruction Private Limited. The Terms and conditions of Tripartite Agreement were as follows:

a) Financial Creditor (Omkara Asset Reconstruction Private Limited) to give a No-Objection Certificate to the Corporate Debtor for sale of the Nandesari factory;

b) Corporate Debtor to distribute proceeds of the sale consideration among secured creditors in proportion to their charge on the Respondent’s assets;

c) Loan amount will stand reduced from Rs. 587 Lakhs to the extent of the sale proceeds received by the Financial Creditor from such sale ("balance loan amount");

d) On receipt of balance loan amount, along with interest as per agreed terms, the Financial Creditor to vacate its charge on the orporate Debtor’s assets and return all security documents forthwith;

e) On receipt of balance loan amount, the Financial Creditor shall have no further claims against the Corporate Debtor and/ or its Promoters.

f) Assignment is restricted to prime security only.

”

The Ld. NCLT further notes that the Corporate Debtor, after No- Objection Certificate (NOC) from the Respondent and Financial Creditor, sold its