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

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  • Last Updated on 16 October, 2021

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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

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