NCLT Guwahati Bench Orders CIRP Initiation Following Financial Debt Default by Corporate Debtor
In a significant development, the National Company Law Tribunal (NCLT), Guwahati Bench, has ordered the initiation of Corporate Insolvency Resolution Process (CIRP) against Abutani Mercantile Private Limited. The petition was filed by Eduvanz Financing Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking redress for a financial default amounting to Rs. 1,41,81,641.
The proceedings were presided over by Shri Rammurti Kushawaha, Member (Judicial), who admitted the petition based on compelling evidence of financial debt and default. The tribunal's decision came after Eduvanz Financing, the financial creditor, successfully demonstrated the existence of a financial debt and the corporate debtor's failure to meet repayment obligations.
The case revolves around a facility agreement dated January 21, 2023, wherein Eduvanz Financing sanctioned a loan of Rs. 3 crore to Abutani Mercantile. Despite the agreement stipulating repayment by May 5, 2023, Abutani Mercantile defaulted, leading to their accounts being classified as Non-Performing Assets (NPA) by August 5, 2023.
The tribunal noted the corporate debtor's partial payment of Rs. 22 lakh and acknowledgment of the debt, which substantiated the creditor's claims. Despite the debtor's argument citing non-compliance with RBI guidelines for MSME restructuring, the tribunal held that such non-compliance does not invalidate a Section 7 petition under the IBC.
In adherence to Section 14 of the IBC, the tribunal has imposed a moratorium, prohibiting suits, asset transfers, and recovery actions against Abutani Mercantile. The management of the corporate debtor will now vest with the appointed Interim Resolution Professional (IRP), Mr. Kamal Agarwal, who is tasked with overseeing the CIRP.
The tribunal’s decision underscores its stance that once a financial debt and default are established, procedural non-compliance with RBI guidelines does not impede the initiation of insolvency proceedings. This judgment aligns with precedents set by the Supreme Court, reinforcing the tribunal's obligation to admit petitions upon establishing default.
Bottom Line:
Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) initiated under Section 7 IBC for financial debt exceeding statutory threshold.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 5(8), 4, 14, 17, 13
