NCLT Admits Section 7 CIRP on Proof of Financial Debt and Default

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  • Last Updated on 3 June, 2026

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Section 7 CIRP

Case Details: Pavitra Commercial Ltd. vs. Simara Foods (P.) Ltd. - [2026] 186 taxmann.com 532 (NCLT-Mum.)

Judiciary and Counsel Details

  • Nilesh Sharma, Judicial Member & Sameer Kakar, Technical Member
  • Nakul Mohta, Yash Sinha & Tushar A Goradia, Advs. for the Appellant.
  • Ms Reema Jain, Adv. for the Respondent.

Facts of the Case

In the instant case, the applicant/financial creditor disbursed Rs. 4.05 crores to the corporate debtor in five tranches as Inter-Corporate Deposits (ICDs) at 13% p.a. The corporate debtor failed to repay despite demands, but acknowledged the debt and committed to repay. The financial creditor filed a Section 7 application to initiate CIRP against the corporate debtor.

The corporate debtor contended that funds were commercial advances for joint trades, not ICDs; there was no loan agreement, stipulated interest or structured repayment; RBI Fair Practices/Companies Act requirements were not complied with; and Section 7 of the IBC was being used as a recovery tool.

It was noted that, merely naming facility as a Joint Trade Advance did not change nature of transaction, and since corporate debtor never named facility as Joint trade Advance during time of disbursement but only raised contention after default in payment, and in reply corporate debtor failed to file any document which supported contention of corporate debtor that money was advanced for advance trade in commodities, only bald averments had been made in reply qua commodity trade.

NCLT Held

The NCLT observed that since the applicant had placed enough documents, including a statement of account, which evidenced disbursal and letters that stated the terms and conditions of ICD, including payment terms, along with interest rates and due dates, even if there was some breach in adherence to RBI guidelines, the contention of the corporate debtor was not sustained.

The NCLT held that, since the applicant had established the existence of financial debt and default, which was well above the threshold limit of Rs. 1 crore stipulated under section 4, the application was to be admitted.

List of Cases Reviewed

  • Sinki Commodities Pvt Ltd v. ABC Floors Pvt Ltd 2025 SCC Online 1657 (para 7.20)
  • Power Trust v. Bhuvan Madan [2026] 183 taxmann.com 568 (SC)/Civil Appeal No(s). 2211/2024 (para 7.24) followed
  • Kalpesh Jaysukh Shah v. Arch Pharmalabs Limited [CP (IB) 3460/MB/2019] (para 7.23) distinguished

List of Cases Referred to

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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