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NCLAT Dismisses Chemstar Director's Appeal Against CIRP Admission Over ₹11.87 Crore Claim
The , on dismissed an appeal filed by Ashutosh Majumdar, suspended director of , challenging the National Company Law Tribunal's (NCLT) order admitting the company into under (IBC). The appellate bench, comprising Officiating Chairperson Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra, held that the is not required to determine the exact quantum of once and are established and the exceeds the of ₹1 crore.
A 24-Year Saga of Defaults and Broken Settlements
The dispute traces back to the when sanctioned and disbursed term loans to Chemstar Organics, secured by and . acted as the lead bank of the consortium. The company defaulted on interest and repayment instalments, prompting GIIC to take possession of its units in and . The matter remained before the until its dissolution in . In , GIIC sanctioned a , but before it could be fully implemented, GIIC assigned its to (the financial creditor) via a dated .
In , Omkara approved a fresh OTS of ₹6.30 crores. After adjusting ₹3.75 crores from the sale of the Nandesari unit, the balance of ₹2.55 crores was to be paid by , with a 90-day grace period carrying simple interest at 24% per annum. The corporate debtor paid only ₹21.20 lakhs in and sought repeated extensions. Omkara revoked the OTS on , demanding repayment of ₹8.68 crores within 10 days. A Section 13(2) notice under the was issued in , recording dues of over ₹10.51 crores. Eventually, Omkara filed a Section 7 petition in , which was admitted by the on . The suspended director challenged this order before NCLAT.
The Core Legal Question: Must the NCLT Compute Exact Dues?
Before NCLAT, Majumdar argued that the was not due during the prohibited period under (which barred initiation of CIRP for defaults arising between and ), as the extended due date fell on , within that period. He also contended that a Gujarat Government remission scheme had waived ₹5.14 crores of interest and penal charges, reducing the liability to ₹3.92 crores, and that he had already deposited ₹4 crores before the Tribunal. The interest rate of 24% was claimed to be and contrary to RBI guidelines.
Omkara countered that the corporate debtor had a 24-year history of continuous and had repeatedly violated OTS terms. It argued that the remission scheme was conditional on timely payment and revival of operations—conditions that were never met. The OTS was validly revoked before the Section 10A period, and defaults continued well beyond it. The financial creditor expressly refused to settle at the offered ₹4 crores, asserting its claim of ₹11.87 crores as on .
NCLAT's Ruling: No Need to Compute Exact Quantum in Section 7 Proceedings
The Tribunal squarely rejected the appellant's arguments. It held that
"in a proceeding under Section 7 of the IBC,
it is not the mandate of the
to work out the exact amount which is payable by the Corporate Debtor. It suffices if the amount in
exceeds the threshold prescribed in
."
Noting that the
and
were admitted, the quantum of dues exceeded the ₹1 crore threshold, and the financial creditor had unequivocally declined the settlement offer, the NCLAT found no infirmity in the NCLT's admission order.
Regarding the , the Tribunal observed that the commenced before the and continued after it. Reliance was placed on the 's judgment in Dharamshi K. Patel vs. Indian Bank (), which held that Section 10A does not bar CIRP initiation for defaults that continue beyond the period. The NCLAT also distinguished the case of , noting that in that case the debtor offered complete satisfaction of the claim, whereas here the offered amount was far less than the admitted dues.
Key Observations from the Judgment
-
“We are conscious that this is a case where ‘’ and ‘’ has not been challenged by the Corporate Debtor. The quantum of dues exceeds the prescribed minimum threshold. The Appellant's argument is only regarding the quantum of dues, especially the liability towards interest. The financial creditor has expressly stated that they are not willing to settle the at Rs. 4 crores now offered by Corporate Debtor.”
-
“In a proceeding under Section 7 of the IBC, it is not the mandate of the to work out the exact amount which is payable by the Corporate Debtor. It suffices if the amount in exceeds the threshold prescribed in , which at the relevant time when the application was filed was Rs. 1 crore.”
-
“The judgment of this Tribunal in the case of Achal Kumar Jindal (supra) is not applicable to the facts of this case as the Appellant is not willing to deposit the amount claimed of Rs. 11.87 crores as stated in Part-IV of the application under Section 7. The financial creditor has also refused to accept the offer, on this ground.”
The Final Verdict
Dismissing , the NCLAT vacated all interim orders and closed pending applications. The CIRP against Chemstar Organics will now proceed under the supervision of the . The ruling reaffirms that in a Section 7 petition, once the and are satisfied and the exceeds the prescribed threshold, admission is virtually inevitable—even if the debtor disputes the precise quantum or raises technical defenses like Section 10A. The financial creditor's unwillingness to accept a partial settlement further solidifies the path to insolvency resolution.
