NCLAT Upholds Axis Bank's Section 7 Application in Insolvency Case Against Supreme Transport Organisation Pvt. Ltd.

Tribunal Confirms Admission of Application Despite Lesser Loan Disbursement; Corporate Debtor's Worth Deemed Irrelevant

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) at its Principal Bench in New Delhi has upheld the decision of the Adjudicating Authority to admit Axis Bank Ltd.'s Section 7 application against Supreme Transport Organisation Pvt. Ltd. This decision comes despite the disbursement of a lesser amount than the initially sanctioned loan, as the Tribunal found that the debt and default had been established.

The case, titled "Ammeet Kamal Agarwal Suspended Director of Supreme Transport Organisation Pvt. Ltd. v. Axis Bank Ltd.," was presided over by Justice Ashok Bhushan, Chairperson, and Mr. Arun Baroka, Member (Technical). The judgment dated October 6, 2025, dismissed the appeal filed by Ammeet Kamal Agarwal, challenging the admission of Axis Bank's application under the Insolvency and Bankruptcy Code, 2016.

The financial creditor, Axis Bank, had filed the Section 7 application asserting a debt and default of Rs. 16,95,95,909 as of March 16, 2023. The corporate debtor contested the application, arguing that the bank had sanctioned a loan of Rs. 24.90 crore but disbursed only Rs. 12.50 crore as of March 31, 2017. The appellant also highlighted issues concerning the mortgage of property, claiming the bank had mismanaged original documents.

The NCLAT, however, dismissed these arguments, emphasizing that the non-disbursement of the full sanctioned amount cannot serve as grounds to reject a Section 7 application when debt and default surpassing Rs. 1 crore are evident. The Tribunal noted that the corporate debtor's financial worth, which was claimed to be much higher than the amount in question, holds no relevance in the context of Section 7 proceedings.

Furthermore, the Tribunal stated that any proposal under Section 12A to offer a higher amount must be considered by the Committee of Creditors (CoC) as per legal procedures. It clarified that the issue of title and mortgage of property would not be addressed at this stage, and that a mortgage claim can only be made for assets with deposited title deeds.

The ruling underscores the Tribunal's position that the existence of debt and default, as well as the corporate debtor's proposal for one-time settlement (OTS) during the Corporate Insolvency Resolution Process (CIRP), indicate acknowledgment of the debt and default. The Tribunal found no fault in the Adjudicating Authority's decision to admit the Section 7 application.

In closing, the NCLAT dismissed the appeal, allowing the proceedings to advance under the established insolvency framework. The Tribunal also directed that any issues concerning asset sales post-moratorium should be addressed by the Adjudicating Authority.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Admission of Section 7 application - Disbursement of a lesser amount than sanctioned loan cannot be a ground to reject Section 7 application when debt and default are established.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 12A

Ammeet Kamal Agarwal Suspended Director of Supreme Transport Organisation Pvt. Ltd. v. Axis Bank Ltd., (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2802021