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NCLT Indore Admits Insolvency Plea Against Auri Grow India Over ₹78.04 Cr Principal Default
In a significant ruling that reinforces the distinction between an admitted and a , the , admitted an insolvency petition filed by against (formerly Godha Cabcon & Insulation Limited). The decision, delivered on , centered on a default of ₹78.04 crore in principal debt, rejecting the corporate debtor's attempt to delay proceedings by raising objections to the interest claimed.
The Supply Agreement and the Default
Naksh Steel, a company engaged in steel manufacturing and trading, entered into a Master Supply Agreement with Auri Grow India on . The agreement required Naksh Steel to supply industrial and construction goods intended for onward shipment to . Between 22 January and , Naksh Steel raised seven invoices totaling ₹78.04 crore. Under the terms, payment was due immediately upon issuance, with interest at 18% per annum for any delay.
Despite issuing post-dated cheques, Auri Grow India asked Naksh Steel not to present them and failed to clear the dues. Naksh Steel served a on , claiming ₹91.82 crore—₹78.04 crore principal and ₹13.80 crore interest—and stated the date of default as .
Auri Grow’s Defence: Admitting Principal, Disputing Interest
Auri Grow India, a listed public company and a going concern with multiple creditors, admitted the principal liability but disputed the interest claim of ₹13.80 crore. It argued that insolvency proceedings could not be used as a recovery mechanism and sought time to pay in instalments—10% within six months and the balance over the next twelve months.
The corporate debtor contended that its willingness to settle demonstrated good faith and that the interest component was a live dispute. However, the NCLT was not persuaded.
NCLT’s Findings: No on
The Bench, comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta, observed that Auri Grow had not disputed the supply agreement, the supplies made, or the invoices. Correspondence acknowledging the debt and the issuance of post-dated cheques corroborated the liability. Additionally, the authenticated record of default from the further established non-payment.
The Tribunal held that the is not a recovery forum, but the existence of other creditors or a future willingness to pay does not negate an established default. Crucially, the Bench noted that the objections to interest were raised only after receipt of the .
“Its objections to interest are primarily legal objections advanced after receipt of the . These objections may be relevant for determination of the exact amount ultimately recoverable, but they do not establish a concerning the underlying .”
The Tribunal clarified that the petition was admitted on the strength of the , which exceeded the statutory threshold for initiating insolvency proceedings. The interest claim under the would be subject to verification during the .
“Admission of the petition is accordingly founded on the admitted principal and not on a final adjudication of the .”
Legal Analysis: The Thin Line Between Recovery and Resolution
This ruling underscores a key principle under the IBC: a dispute that is not genuine or that is raised belatedly cannot derail insolvency proceedings. The NCLT’s reasoning aligns with the settled position that a “ ” must be one that existed prior to the , not a . By bifurcating the admitted principal from the disputed interest, the Tribunal ensured that the corporate debtor cannot use a secondary legal objection to avoid facing CIRP.
The decision also highlights the limited scope of inquiry at the admission stage. The adjudicating authority is not required to finally determine the exact amount due; it need only ascertain the existence of a debt and a default. Here, the principal debt was undisputed, and the default was confirmed by the .
Impact on Legal Practice and the Corporate Landscape
For legal practitioners, the judgment serves as a reminder to carefully document and timestamp any disputes regarding operational debts. Corporate debtors seeking to resist insolvency must demonstrate that a genuine dispute existed before the was served. Raising objections to ancillary claims like interest will not suffice if the principal debt is admitted.
The ruling also benefits operational creditors by reinforcing that a partial dispute over interest does not immunize the debtor from CIRP. However, the Tribunal’s caveat—that the interest entitlement remains subject to verification during CIRP—ensures that the IRP will examine the validity of the interest claim.
For Auri Grow India, the admission of the petition triggers a under , freezing all legal proceedings and asset transfers. The Tribunal appointed Rajesh Jasti as the Interim Resolution Professional to manage the company’s affairs and invite claims from creditors.
Conclusion
The NCLT Indore’s decision is a textbook application of the IBC’s framework: where the principal is admitted and default is established, a to interest cannot block insolvency. The case reaffirms that the Code is designed to facilitate timely resolution of distressed companies, not to become a battleground for collateral disputes. As CIRP commences against Auri Grow India, the focus will now shift to the resolution process, where all creditors—including Naksh Steel—will have their claims examined.
