Canara Bank's Insolvency Petition Against Galaxy Constructions Admitted by NCLT Mumbai

NCLT Mumbai Bench admits insolvency application, declares moratorium, appoints IRP for Galaxy Constructions under IBC 2016.

In a significant development, the National Company Law Tribunal (NCLT) Mumbai Bench has admitted an application filed by Canara Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Galaxy Constructions And Contractors Private Limited. The bench, comprising Member (Judicial) Shri Nilesh Sharma and Member (Technical) Shri Sameer Kakar, ruled in favor of the bank after establishing the existence of financial debt and default by the corporate debtor, Galaxy Constructions.

The proceedings were initiated following Canara Bank's application alleging a default amounting to Rs. 149.95 crore by Galaxy Constructions. The application was filed on January 2, 2025, with the default date recognized as July 25, 2017, subsequently leading to the account being classified as a Non-Performing Asset (NPA) on April 26, 2018. The tribunal's order not only admitted the application but also declared a moratorium under Section 14 of the IBC, effectively halting any suits or proceedings against the corporate debtor and freezing the transfer or disposal of its assets.

Despite objections from Galaxy Constructions, which argued that the classification of its account as an NPA was improper under the MSME framework, the tribunal found no substantial evidence supporting these claims. The objections regarding inconsistent default dates and the application being time-barred were also dismissed. The tribunal noted that payments and One-Time Settlement (OTS) proposals made post-default extended the limitation period, ensuring the application was filed within the permissible timeframe.

An Interim Resolution Professional (IRP), Mr. Srigini Rajat Naidu, has been appointed to oversee the CIRP. The tribunal directed that the supply of essential goods and services to the corporate debtor should not be interrupted during the moratorium period. The IRP is tasked with managing the corporate debtor and submitting monthly progress reports to the tribunal.

This decision underscores the tribunal's commitment to upholding the provisions of the Insolvency and Bankruptcy Code, facilitating the resolution process while ensuring procedural compliance. The tribunal's order is expected to pave the way for resolution and potential restructuring of Galaxy Constructions, aiming to maximize value for all stakeholders.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Admission of Corporate Insolvency Resolution Process (CIRP) under Section 7 - Financial Creditor established existence of financial debt, occurrence of default, and application compliance with limitation - Application admitted, moratorium declared, and Interim Resolution Professional (IRP) appointed.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 14, 17, 25, 31; Limitation Act, 1963 Sections 18, 19; Banking Regulation Act, 1949 Sections 21, 35A; Indian Contract Act, 1872 Section 25

Canara Bank v. M/s. Galaxy Constructions And Contractors Private Limited, (NCLT)(Mumbai Bench-VI) : Law Finder Doc Id # 2816648