TaxTMI 
TaxTMI 
2026 (8) TMI 1314
X X X X Extracts X X X X
X X X X Extracts X X X X
.....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. 2. 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 Corp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Debtor and/ or its Promoters. f) Assignment is restricted to prime security only." 2.2 The Ld. NCLT further notes that the Corporate Debtor, after No-Objection Certificate (NOC) from the Respondent and Financial Creditor, sold its Nandesari unit making a payment of Rs. 3.75 crores. The Respondent vide letter dated 04.02.2019 further promised to make OTS payment of Rs. 2.55 crores with interest @ 18% p.a. The Financial Creditor approved OTS vide letter dated 03.04.2019 noting the receipt of Rs. 3.75 crores out of Rs. 6.30 crores, and balance of Rs. 2.55 crores to be paid in two tranches, as under: Payment Date on which payment to be made Amt. in Rupees First Tranche 31.05.2019 20 Lakhs Second Tranche 31.08.2019 235 Lakhs 2.3 As per the accepted OTS proposal 90 days grace period was allowed at interest of 24% p.a. It was stated that in the event of failure to honor the repayment schedule (including grace period), the OTS will stand cancelled. The Corporate Debtor vide letter dated 16.04.2019 sought extension of OTS, which was agreed to by the Financial Creditor vide letter dated 19.04.2019 subject to payment of interest @ 24% p.a. 2.4 On....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd payment of interest would be on reducing balance. The Financial Creditor was not completely wrong in expecting monthly interest from the Corporate Debtor. 46. Secondly, the Financial Creditor sent various emails dated 03.10.2019, 14.10.2019, 26.11.2019, 10.12.2019 and 21.12.2019 to the Corporate Debtor demanding monthly interest payments. However, the Corporate Debtor neither made any interest payment nor replied to any of the aforementioned emails denying its obligation to pay monthly interest. We also note that it was not in the above-mentioned emails that the demand for monthly interest has been raised by the Financial Creditor for the first time. It is pertinent here to look at the email dated 29.05.2019 sent by the Financial Creditor to the Corporate Debtor: "Dear Sir, As per repayment schedule, your May month instalment is pending. Please make the payment on or before 31.05.2019 to avoid penalty." 47. Thereafter, another email was addressed to the Corporate Debtor by Financial Creditor on 26.08.2019 stating as follows: "Dear Sir, With reference to our sanction letter for OTS dated 03rd April, 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....recluded from filing section 7 petition for a continuous default that occurs even after the 10A period. We are supported by a latest judgment of Hon'ble Madras High Court in Dharamshi K. Patel & Anr. Vs. Indian Bank & Ors. [Writ Petition No. 712/2024], decided on 23.01.2025: "15. Section 10-A of IBC, 2016 is only a moratorium temporarily suspending initiation of CIRP. It is true that Section 10-A prohibits an application for initiation of CIRP of a Corporate Debtor, for any default arising on or after 25.03.2020 for a period of six months. The proviso also indicates that no application can ever be filed for initiation of CIRP of a Corporate Debtor for the said default occurring during the said period, i.e., on or after 25.03.2020 for a period of six months or such further period not extending one year from such date. 16. In the instant case, though the default commenced after the period specified in Section 10-A, it is not in dispute that it continued even after the moratorium period. The intention of the legislature is to give relief by suspending initiation of CIRP. This Court, from the plain reading of Section 10-A is unable to agree with the learned Senior....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceedings to recover the dues. In response, the Corporate Debtor sent letter dated 20.01.2021 and stated that "there is no default on our part. We are ready to give the final payment as per our OTS Agreement." However, no payment was made by the Corporate Debtor. 54. Thereafter, the Financial Creditor issued demand notice dated 22.06.2021 under section 13(2) of the SARFAESI Act, 2002 calling upon the Corporate Debtor to pay the outstanding dues. However, despite that, no payment was made by the Corporate Debtor. Consequently, the present petition has been filed by the Financial Creditor on 01.07.2022. Notably, the issuance of demand notice under SARFAESI Act and the filing of the present petition has been made after the prohibited period under section l0A of the Code. Admittedly, the Corporate Debtor has still not discharged its liability. Thus, the observations of Hon'ble Madras High Court in Dharamshi K Patel (supra) is squarely applicable in the present case. In view thereof, without going into the dispute whether the revocation of OTS by the Financial Creditor vide letter dated 08.01.2020 was valid or not, we can safely conclude that the default continues to exist a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....considering the fact that there is no document to show that there has been novation of any of the letters/agreements by a subsequent letter/agreement, the contention of the Corporate Debtor in this regard holds no merit. 59. Further since there is a continuing default in the present case the case laws relied upon by the Corporate Debtor is not been dealt with. 60. It is a well-settled position that the Adjudicating Authority has to determine whether there is debt and default and if it is satisfied that a default has occurred, then the application under section 7 of the Code must be admitted unless it lacks other necessities as mandated thereunder. 61. We are supported by the decision of Hon'ble Supreme Court in Innovative Industries Limited vs. ICICI Bank and Anr [(2018) 1 SCC 407] wherein it was held as follows: "28 The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days' receipt of a notice from the adjudicating authority. 30 ...... On the other hand, as we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as failed to deposit the requisite amount and has not even sought any extension of time regarding deposit of this amount, vacated the interim order granted on 27.02.2025. 3.2 The Appellant sought time to deposit the balance amount before this Tribunal. Vide letter dated 24.01.2026, the Appellant submitted two FDRs of Rs. 1,50,00,000/- each in favour of Registrar of this Tribunal. However, the Ld. Sr. Counsel for the Respondent submitted that the financial creditor is not willing to settle and requested that the appeal may be decided on merit. 4. In its oral and written submissions, the Ld. Sr. Counsel for Appellant submitted that the Respondent is merely an assignee of the debt originally granted by Gujarat Industrial Investment Corporation Limited (hereinafter referred to as the 'GIIC') to the Corporate Debtor. 4.2 It is argued that Government of Gujarat through letter dated 15.02.2018, had proposed a scheme of settlement of Government dues. As per the said scheme of settlement it had agreed for remission of entire amount of interest, penal interest and penalty on payment of principal and other dues as on 31.03.2016 within a period of 6 months. Accordingly, the details of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g selling and disposing off the same in any manner deemed fit by the Assignee. 3.2 Assignee shall be entitled to exercise all rights of the Assignor in respect of the security and under the Loan documents. 3.3 Assignee shall be entitled to recover the debts in such manner as deemed fit by the Assignee. 3.4 Assignee shall be bound by and shall be liable to perform and discharge all the obligations and liabilities of the Assignor as would be applicable upon the assignment made hereunder. ARTICLE-4 4. REPRESENTATIONS ...... 4.1.2 The Assignor in respect of the securities mentioned in Schedule 1, has not released any Security Interest, pledge or guarantee in respect of the Loan of the Borrower before the date of this Agreement, except disclosed by the Assignor, in Schedule 2, (or can be modified accordingly)." The relevant portions of the schedule 1 and 2 of the said Agreement are scanned below: 4.5 It is argued that as per clause 1(b) of Schedule 2, it is clearly recorded that vide letter dated 15.02.2018 relief of Rs. 5.14 crores has been provided by GIIC. 4.6. In this connection, the Appellant cited Article-7 of the T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the judgment is as under: "72. This Act provides that if the court finds that the transaction in respect of interest was substantially unfair, it may revise the entire transaction and the interest rate as provided therein, and relieve the debtor of all the liability in respect of the interest amount. ....... 75. At this point it is pertinent to refer to Section 3 of the Usurious Loans Act, 1918 which gives the power to the Court to re-open any account already taken between the parties and relieve the debtor of all liability in respect of any interest where it has reason to believe that the Interest is excessive. While considering the excessive nature of such an interest, the court can take into account any amounts charged or paid, whether in money or in kind, for expenses, inquiries, fines, bonuses, premia, renewals or any other charges, and if compound Interest is charged, the periods at which it is calculated, and the total advantage which may reasonably be to have been expected from the transaction. 76. The "excessive nature of Interest" as under Section 3 of the Usurious Loans Act, 1918 was explained by the Apex court in the case of Baidyana....
X X X X Extracts X X X X
X X X X Extracts X X X X
....020, the earliest date of default is 31.03.2020 which falls under the period of embargo under Section 10A of the IBC, 2016. 4.17 It is pleaded, in view of the above facts, the order of Ld. NCLT deserves to be set aside and petition under Section 7 of the IBC, 2016 deserves to be dismissed. 5. The Ld. Sr. Counsel for the Respondent -Financial Creditor in his oral and written submissions argued as under: i. The Corporate Debtor depicts 24 years of continuous undisputed default. The Nandesari unit of the Corporate Debtor was taken in possession by GIIC due to default in repayment on 01.10.2002. Subsequently, the Corporate Debtor had defaulted in repayments and in several OTS offered. ii. On 30.11.2016, proceedings were initiated against the Corporate Debtor before the Board for Industrial Financial Reconstruction (BIFR) and it remained sub-judice till BIFR was dissolved. iii. The Corporate Debtor also violated the OTS sanctioned by GIIC in 2017/18. The debt of GIIC was assigned to Omkara on 14.08.2018. iv. On 03.04.2019, Omkara approved OTS, wherein Rs. 2.55 crores was to be paid on or before 31.08.2019. The Corporate Debtor again failed to av....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion period of Section 10A of IBC, 2016 does not hold good as the default has occurred much prior to the said period and has continued beyond the said period. xii. The Appellant's reliance on the decision of this Tribunal in Achal Kumar Jindal v. Sanjay Kumar Bhuwalka & Anr. in Company Appeal (AT) (Ins.) No. 2341 of 2024 is misplaced as the facts of that case were very different. In Achal Kumar Jindal case, the financial creditor was offered complete satisfaction of its claim, and its refusal to accept settlement was held to be unjustified, whereas in the present case, against the demand of Rs. 11.87 crores, the Appellant is willing to pay only Rs. 4 crores which is not acceptable to the financial creditor. xiii. It is not for the Adjudicating Authority to work out the exact amount of dues and if the dues exceed minimum threshold prescribed under Section 4 of the IBC, 2016, the case should be admitted under Section 7. xiv. Since in this case, financial debt exists and default exists which exceeds the minimum amount prescribed under Section 4, the Adjudicating Authority has no discretion to refuse admission. xv. To supplement his arguments, the Ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extension was sought by the Corporate Debtor, and granted by financial creditor, and finally the date of default noted in Part-IV of application is 28.06.2022, beyond the exclusion period and thus, immunity under Section 10A is not available to the Corporate Debtor. 6.4 We seek guidance from the decision of the Hon'ble Supreme Court in Elegna Co-Op. Housing and Commercial Society Ltd. & Anr. v. Edelweiss Asset Reconstruction Co. Ltd. & Anr. reported in (2026) 264 Comp Cas 239 delivered on 15.01.2026 wherein the Hon'ble Supreme Court held as under: "12.7. In any event, the scope of the Adjudicating Authority's powers stands elaborately discussed by a three-Judge Bench of this court in Indus Biotech P. Ltd. v. Kotak India Venture (Offshore) Fund. While recognising that the National Company Law Tribunal is not expected to act mechanically and is empowered to examine the material on record to satisfy itself that a default has in fact occurred, this court unequivocally held that once the ingredients of section 7, most importantly, default, are satisfied, admission must follow " 6.5 We are conscious that this is a case where "debt" and "default" has not been chal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h BOB) Deed of hypothecation 17/04/99 for Rs. 2 Crores Joint equitable' mortgage 01/07/99 (title deeds are with BOB) Deed of hypothecation for term loan of Rs, 1.25 Croresdated 13/10/2000 Details of pending litigations Commercial Civil Suit Ahmedabad 159/2017 on promoters 8 Nature of security Hypothecation of plant and machinery, spares, tools, accessories both present and future situated at all borrowers factories premises and godowns. Factory land and building, plant and machinery situated at Plot No 107 & 108 GIDCNandesariDist Baroda. & Block No 276 at MoujeU/mraya. TalukaPadra, Dist Baroda 9 Details of secured assets As per Point No. 8 10 Details of Security Documents As per Point No. 6 11 Details of third party litigations as per the knowledge of the Assignor NIL 12 Details Future Third-party Receipts 2 NIL 13 Party entitled for future Third-party Receipts 3 NIL 14 CERSAI Details Not available 15 Remarks, if any 4 Document 2 BRA-4 GRV 16/43 2018 11870 SCHEDULE 2 1. M/S Chemstar Organics (India) Limited (a) Details of loans/Borrowers wherein set-off has been exercised i) NA #i) (b) Details of loans/Borrowers wherein any resc....