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2026 Supreme(Online)(NCLAT) 842
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Mohammad Faiz Alam Khan, Judicial Member, Naresh Salecha, Technical Member
Panshul Agro Food LLP – Appellant
Versus
State Bank of India – Respondent
Comp. App. (AT) (Ins) No. 1301 of 2026
For the Appellants/Petitioners: Keith Varghese
For the Respondents: Siddharth Sangal, Richa Mishra, Kashish Tewatia, Mrinalini Tandon
The Adjudicating Authority under Section 10 of the IBC can reject an application if it is found to be a malicious attempt to obtain a moratorium to defeat recovery proceedings, particularly when the corporate debtor has removed hypothecated assets from the site.
Headnote:(A) Corporate Insolvency Resolution Process - Section 10 IBC - Admissibility - The Adjudicating Authority is not a rubber stamp and has the duty to sift material available on record to determine if an application is a genuine attempt at resolution or a malicious attempt to derail recovery proceedings. (Para 23)
(B) Malicious Intent - Removal of Hypothecated Assets - The unexplained removal of plant and machinery from the factory premises during recovery proceedings, coupled with the timing of the insolvency application immediately after the initiation of SARFAESI action, constitutes fraudulent or malicious intent under Section 65(1) of the Code. (Para 22, 23, 25)
(C) Penalty - Proportionality - The imposition of a penalty for malicious litigation must adhere to the maxim of proportionality, reflecting the magnitude of the fraudulent act and the reasons guiding the court in determining the quantum. (Para 26, 27)
Issues: Whether an application under Section 10 of the IBC must be admitted on mere proof of debt and default, or whether the Adjudicating Authority can reject it based on the conduct and malicious intent of the applicant.
O R D E R
(Hybrid Mode)
[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]
The instant appeal has been preferred by the appellant/CD againstthe order dated 29.04.2026 (impugned order) passed by National Company Law Tribunal, Bench No. 1, Ahmedabad (Adjudicating Authority) in CP IB No. 353 of 2025 whereby the petition moved by the appellant under Section10 of the IBC, 2016 (Code) has been dismissed.
2. Brief facts necessary for disposal of this appeal are that the appellant, who is a designated partner of the Corporate Applicant-M/s Panshul Agro Food LLP filed a petition under Section 10 of the Code before the Ld. Adjudicating Authority for initiation of Corporate Insolvency Resolution Process (CIRP) and also for appointment of an Interim Resolution Professional (IRP) and also for declaration of moratorium for default inpayment of debt of Rs. 42,20,27,984.96/-.
3. It is also reflected that in Part III of Form 6 the appellant has revealedthe particulars of financial creditors in following manner:
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4. It is further reflected that the appellant had stated before the Ld. Adjudicating Authority that owing to financial constraints and inability to service, debts a resolution was passed on 05.08.2025 approving the filing of the application under Section 10 of the Code as the appellant had availed various credit facilities from multiple financial creditors and also have several operational creditors and default in re-payment of its financial obligations is already occurred on 18.04.2025 with respect to the dues owed to the SBI and thereafter various lenders issued demand notices, loan recall notices and statutory notices under Section 13 (2) of the SARFAESI Act, 2002 calling upon the appellant to repay the outstanding dues and theappellant is not in a position to pay the same.
5. It is further reflected that Rs. 40.92 Crores is shown only to be paid to the Respondent SBI along with the liabilities owed to multiple other financialinstitutions.
6. As stated earlier by passing the impugned order the ld. AdjudicatingAuthority dismissed the application filed by the appellant.
7. Ld. Counsel for the Appellant submits that the Ld. Adjudicating Authority has taken filing of SARFAESI Proceedings before the DRT as a ground to reject the application filed by the Appellant. While relying on the law laid down by this Co-ordinate Bench of this Appellate Tribunal in Pondicherry Extraction Industries Pvt. Ltd. vs. Bank of Baroda , CA (AT) (Ins) No. 471 of 2020, it is submitted that the Ld. Adjudicating Authority was only required to see the debt and default and should have confined its jurisdiction to the material which was available on record andthus material illegality has been committed by Ld. Adjudicating Authority.
8. It is further submitted that Appellant is not responsible if some of the machineries are found missing from the site as the possession was already taken by the Respondent Bank and this cannot be a ground to reject theapplication moved by the appellant.
9. It is further submitted that Ld. Adjudicating Authority should have issued the notices in the petition filed by the Appellant so that the correct state of affairs may come before it however hurriedly without discussing the merits the application the same has been rejected and thus the impugnedorder may not be sustained and is liable to be set aside.
10. Ld. Counsel appearing for the Respondent No. 1 SBI vehemently opposes the submissions advanced by Ld. Counsel for the Appellant and submits that the petition under section 10 of the Code was filed with an ulterior motive to deprive the bank from proceeding further under theproceedings pending before the Ld. DRT under SARFAESI Act.
11. It is further submitted that on inspection of the site it was found that machineries installed at the project site has been taken away by theappellant and thereafter the application has been filed.
12. It is also submitted that that acc
