CIRP plea admitted as corporate debtor committed default in repayment of loan facility disbursed by financial creditor

  • News|Blog|Insolvency and Bankruptcy Code|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 16 October, 2021

Recent Posts

News, Blog, Account & Audit

Accounting Standard Board of ICAI Invites Comments on IASB’s Exposure Draft for Amendments to IAS 37

Blog, News, Company Law

SEBI Removes Requirement for No Objection Certificate for Release of 1% of Issue Amount Under ICDR Regulations

Latest from Taxmann

Corporate insolvency resolution process - Financial debt

Case Details: DMI Finance (P.) Ltd. v. Abloom Infotech (P.) Ltd. - [2021] 131 taxmann.com 38 (NCLT - New Delhi)

Judiciary and Counsel Details

    • P.S.N. Prasad, Judicial Member and Dr. V.K. Subburaj, Technical Member
    • Abhijit Sinha, Kinshuk Chaterjee, Ms. Shrishti Gupta and Kushal Bansal, Advs. for the Petitioner.
    • Rakesh Kumar, Vikas Kumar and Manish Paliwal Adv’s for the Respondent.

Facts of the Case

Pursuant to a loan agreement, a loan facility was disbursed in four tranches by financial creditor to the corporate debtor and its associate companies against the letter of drawdown issued by the corporate debtor.

The Corporate debtor failed to make payment of installments to a financial creditor on time. Therefore, the financial creditor filed a petition under section 7 of the Insolvency and Bankruptcy Code, 2016.

The Corporate debtor contended that in view of judgment passed by NCLAT in Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. The application was not maintainable in view of fact that the financial creditor had already approached co-borrowers in its CIRP process for its claimed amount as due under loan agreements.

NCLT Held

The NCLT, on the other hand, in State Bank of India v. Athena Energy Venture Pvt. Ltd. has expressed its disagreement with the view taken earlier in Dr. Vishnu Kumar Agarwal (supra) that CIRP against corporate guarantor and borrower cannot commence simultaneously and, therefore, the rationale in Dr. Vishnu Kumar Agarwal judgment is no more a precedent.

In order to allow any application under section 7, the applicant has to prove that the application is maintainable as the applicant is a ‘financial creditor’, and debts claimed in the application come within the purview of ‘financial debt’.

Since in instant case there was the existence of loan facility, disbursal of loan facility and existence of default, an application under section 7 being complete in all respects was to be admitted.

Case Review

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied