Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has held that a company cannot avoid or resist insolvency proceedings merely because it has remained non-operational for two years. The ruling came while the tribunal upheld the admission of HDFC Bank’s Section 7 application against Sant Kripa Appliances Pvt. Ltd. for a default of ₹69.49 crore.

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A Bench comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra dismissed the appeal on December 5, 2025, clarifying that a company’s inactivity has no bearing on its liability to undergo a Corporate Insolvency Resolution Process (CIRP) once a financial default is established. The tribunal observed that “the mere fact that the Corporate Debtor was not functioning for the last two years cannot be a ground to not take a proceeding for resolution of the Corporate Debtor which has defaulted from its financial obligations. The said ground also cannot be a reason for interjecting the order.”

The appeal was originally filed in the name of Sant Kripa Appliances but was subsequently refiled by its former director after HDFC Bank objected to the maintainability of the earlier filing. The appellant argued that the company was engaged in settlement discussions with lenders and had offered repayment of 70% of the dues. It was contended that insolvency should not be used as a recovery mechanism, and reliance was placed on a recent Supreme Court judgment to support the proposition.

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Another key argument advanced was that since the company had not been functioning for two years and had no employees, the insolvency petition served no purpose and was being misused solely to recover money.

HDFC Bank, however, submitted that the settlement offer was made only after the insolvency petition had already been admitted and that no instructions had been received from the bank regarding any such discussions. The bank maintained that the admitted financial default warranted initiation of CIRP.

Noting that a Committee of Creditors (CoC) has already been constituted following the admission of the application, the tribunal held that any prospective settlement could now only be considered under Section 12A of the Insolvency and Bankruptcy Code, which requires approval of 90% of the CoC. The NCLAT permitted the appellant to approach HDFC Bank with a settlement proposal, which the bank may, if it chooses, place before the CoC.

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However, the tribunal rejected outright the contention that the company’s non-operational status could shield it from insolvency proceedings, reiterating that default—not operational activity—is the determinative criterion under Section 7 of the Code. Finding no merit in the appeal, the tribunal dismissed it.

Appearance

For Appellant: Advocates Piyush Beriwal, Ankit Raj, Nikhil, Ruchita Srivastava, Neha and Dev Aaseri,

For Respondents: Senior Advocate Abhijeet Sinha with Advocate Aman Raj Gandhi, Vardaan Bajaj, Ojasvi Sharma, Dhaiyyah C. Shroff, Aayush Maheshwari, Sarrah Khambati and Sameer Pandit

Cause Title: Rajesh Jeevan Uttamchandani, Erstwhile Director of Shree Sant Kripa Appliances Pvt. Ltd. vs. HDFC Bank Ltd. & Anr.

Case No: Company Appeal (AT) (Insolvency) No. 1867 of 2025

Coram: Chairperson Justice Ashok Bhushan, Technical Member Barun Mitra