The National Company Law Tribunal (NCLT) Cuttack Bench admitted an application filed by Canara Bank against S.S. Aluminium Private Limited for defaulting on a debt of over Rs. 15.88 crores. The application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, for initiating a Corporate Insolvency Resolution Process (CIRP) against the company.
Canara Bank had sanctioned credit facilities, including a cash credit and a term loan, to S.S. Aluminium Private Limited for the modernization and expansion of its aluminum plant. However, the company failed to pay the installments and defaulted on the payment of interest. Despite several notices and attempts to settle the arrears, the company continued to default, leading to the classification of the loan accounts as “Non-Performing Assets” (NPAs) in 2021.
The company had sought a one-time settlement (OTS) of the debt, admitting liability towards the outstanding amount. However, the financial creditor initiated proceedings under the SARFAESI Act, 2002, and issued notices for the sale of the mortgaged properties. The company’s attempts to settle the debt through OTS were unsuccessful, and the financial creditor filed the application for CIRP.
The NCLT bench allowed the application, finding that the company had defaulted on the payment of a debt amount exceeding Rs. 1 crore. The bench also noted that the company’s claim of being a Micro, Small, and Medium Enterprises (MSME) was unfounded, as it had failed to disclose or prove its MSME status when its account was classified as an NPA. The total amount of loans defaulted by the company meets the minimum requirement for initiating proceedings under Section 7 of the Code.
The NCLT’s decision to admit the application for CIRP is based on the evidence provided by the financial creditor, including the Form-C and Form-D of the NeSL certificate, the loan account statement, and the debt restructuring agreement. The company’s default on the payment of the borrowed amount is conclusively established, and the application has been filed within the period of limitation as per Section 18 of the Limitation Act, 1963.
The NCLT’s order allows for the initiation of the CIRP against S.S. Aluminium Private Limited, which will involve the appointment of a resolution professional to oversee the resolution process. The resolution professional will verify the claims of the financial creditor and other stakeholders and formulate a resolution plan to revive the company or distribute its assets among the creditors.
Overall, the NCLT’s decision highlights the importance of timely payment of debts and the consequences of defaulting on loan obligations. It also underscores the role of the NCLT in enforcing the provisions of the Insolvency and Bankruptcy Code, 2016, and ensuring that companies are held accountable for their financial obligations.