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2025 Supreme(Online)(NCLT) 3090
NATIONAL COMPANY LAW TRIBUNAL
M/s Elegant Forge & Equipments Private Limited – Appellant
Versus
Canara Bank – Respondent
IA(I.B.C) - 1331/2025
For the Petitioner:MANOJ HARIT
The court determined that the actual default occurred outside the Section 10A period, allowing the initiation of CIRP against the corporate debtor.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 and Section 10A - Corporate Insolvency Resolution Process - Canara Bank initiated CIRP against M/s Elegant Forge for a default amount of Rs. 81,60,32,532.77, claiming a default date of 31.07.2021. The Corporate Debtor contended that the actual default occurred during the COVID-19 period, invoking Section 10A, which bars initiation of proceedings for defaults during this timeframe. The Court found that the date of classification as NPA was 30.11.2021, and according to RBI guidelines, the date of default would be reckoned as 30.08.2021, which is outside the Section 10A window. Accordingly, the court concluded that the petition for CIRP was maintainable. (Paras 28-34)
(B) Corporate Debtor's claims of procedural defects were addressed, with the court noting that the Financial Creditor had established the existence of financial debt. (Paras 29-34)
Findings of Court:
The initiation of CIRP is valid as the actual default date was not within the prohibited period defined under Section 10A.
Result: The petition to initiate CIRP is allowed.
| Table of Content |
|---|
| 1. corporate insolvency resolution process initiation. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. details of loan facilities and defaults. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 3. debate over the validity of defaults and procedural defects. (Para 15 , 16 , 18 , 19 , 20) |
| 4. requisites for proving financial debt and default. (Para 21 , 22 , 23 , 24) |
| 5. court’s evaluation of section 10a applicability. (Para 28 , 29 , 30 , 31 , 32 , 33) |
| 6. conclusion on admission of the petition. (Para 34 , 35) |
ORDER
I. This Company Petition is filed by Canara Bank (hereinafter referred as “Petitioners/Financial Creditor”) on 17.12.2024 seeking to initiate Corporate Insolvency Resolution Process (hereinafter referred as “CIRP” against M/s Elegant Forge & Equipment Private Limited (hereinafter called “Respondent/Corporate Debtor”) by invoking the provisions of Section 7 of the Insolvency and Bankruptcy code, 2016 (hereinafter called “Code”) read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, for a Default amount of Rs. 81,60,32,532.77/- and the date of default being 31.07.2021.
II. Facts of the Petitioner, in brief-
1. The Petitioner vide sanction letter dated 06.10.2018 granted fund based working capital for an amount of Rs. 23 crores for the year 2018-2019 and Rs. 40 Crores for the year 2019-20 and Term loan of Rs. 50 crores to the Respondent.
2. The South Indian Bank Limited (one of the consortium members) vide sanction letter dated 18.01.2019 granted a loan to the Respondent as Cash Credit Overdraft Limit (CCOL-1) for an amount of Rs. 5,00,000.00 and TL (Project 1) for an amount of Rs. 10,00,000/-. The Respondent secured the said loan by creating a hypothecation of the entire current assets of the company.
3. Further, Bank of Maharashtra (one of the members of the consortium) also granted a term loan to the Respondent vide sanction letter dated 28.02.2019 for an amount of Rs. 20 Crores.
4. On 02.03.2019, the Directors of the Corporate Debtor, being the principal borrower, along with Jayshree Limbani, Mrs. Manilal Limbani and M/s Elegant Creation (P) Ltd executed a deed of guarantee for an amount of Rs. 115,00,00,000/-.
5. The Respondent failed to keep up with the terms of the agreement in clearing the dues of the Petitioner and thus the account of the Corporate Debtor was declared NPA on 30.11.2021.
6. On 01.12.2021 the Petitioner addressed a notice under section 13(2) of the SARFAESI Act, 2002, calling upon the Respondent to repay the entire amount within 60 days. Further, on 06.07.2024, the Petitioner published a note for e-auction for sale of the immovable property under section 13(4) of SARFAESI Act, 2002.
7. In the light of the aforementioned, the Petitioner preferred the present Petition before this Tribunal for initiating CIRP against the Respondent.
III. Facts and submissions of the Corporate Debtor, in brief:
8. At the outset, the Corporate Debtor denied all statements, averments, contentions, and allegations made by the Petitioner. The Corporate Debtor is a company engaged in the business of manufacturing forged components. The Directors of the Corporate Debtor had envisaged setting up a green-field forging plant with a capacity of 72000 MT of material production per annum of forged weight components at Wada, Palghar District, intended to cater to the specialized needs of auto, power, oil and gas, defence, aerospace, railway, earthmoving and general engineering industries.
9. The Applicant Canara Bank being the lead bank in the consortium of 3 banks assessed the Business proposal submitted by the Corporate Debtor for setting up a Forging Plant with the capacity of 72000 tons per annum on forged weight at an estimated cost of Rs.148.92 Crore.
10. Upon such Appraisal by the team of the Bankers, the Applicant bank sanctioned the credit facility of Rs.50.00 Crore as Term Loan and Rs.25.00 Crore as Working Capital.
11. The Applicant bank issued Sanction letter dated 06.10.2018, which envisaged the repayment of
