NCLT Kochi Admits Insolvency Plea Filed By Kotak Mahindra Bank Against Inditrade Business Consultants Over ₹6.67 Crore Default
Pranav B Prem
The National Company Law Tribunal (NCLT), Kochi Bench comprising Vinay Goel (Judicial Member) and Madhu Sinha (Technical Member), has admitted the insolvency petition filed by Kotak Mahindra Bank Limited against Inditrade Business Consultants Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. The petition was filed seeking initiation of the Corporate Insolvency Resolution Process (CIRP), declaration of moratorium, and appointment of an Interim Resolution Professional (IRP).
Background
Kotak Mahindra Bank had extended working capital and overdraft facilities of ₹20 crores, later enhanced to ₹25 crores, to Inditrade Business Consultants. The corporate debtor allegedly failed to comply with the repayment terms, leading to its account being classified as Non-Performing Asset (NPA) on 18 February 2024. The bank then issued recall notices demanding repayment of ₹6.67 crores, inclusive of interest and penal charges. The loan was secured through a pledge of cotton bales, which were stored in a warehouse managed by the creditor’s collateral agency. In May 2023, a fire destroyed the pledged goods, which were insured under a policy where Kotak Mahindra Bank was the sole beneficiary.
Contentions of the Corporate Debtor
The corporate debtor argued that there existed a pre-existing dispute between the parties. It submitted that it had no control over the warehouse or the stock management, as the collateral management agency had been appointed by the bank from its own empanelled list. The debtor contended that the commodities remained under the exclusive control of the bank, and despite being the beneficiary of the insurance claim, the bank made arbitrary margin calls, debited ₹1.2 crore from its account, and froze further debits.
Aggrieved by these actions, the corporate debtor filed Commercial Suit No. 48 of 2024 before the City Civil Court, Mumbai, seeking refund and damages. The court granted partial relief, directing both parties to maintain status quo. This order was affirmed by the Bombay High Court, where Kotak Mahindra Bank assured not to initiate recovery proceedings until adjustment of the insurance claim and recoveries already made. A Special Leave Petition against this order is pending before the Supreme Court. It was further argued that the insolvency proceedings were filed as a coercive recovery measure, contrary to the bank’s undertakings before civil courts and settled principles that the IBC cannot be invoked as a substitute for recovery proceedings.
Observations of the Tribunal
After hearing both parties and examining the materials, the Tribunal identified four issues:
- existence of financial debt and default;
- impact of destruction of pledged goods;
- effect of pending civil/insurance proceedings; and
- disclosure of material facts by the petitioner.
The Bench observed that loan facilities were duly sanctioned, availed, and utilized, and despite recall notices, ₹6.67 crore remained unpaid. It held that both financial debt and default were established. Referring to Clause XII and XIII of the Pledge Agreement, the Bench noted that the pledgee shall not be liable for any involuntary loss or destruction of pledged goods, and the risk of such loss rests entirely on the pledgor. The Tribunal further relied on the Bombay High Court’s ruling in the related commercial appeal, which held that a bank or pledgee is not the insurer of goods, and a clause placing risk on the pledgor is legally valid and binding.
Accordingly, the NCLT held that the fire incident of 14 May 2023 does not discharge the corporate debtor from its repayment obligations. It also noted that renewal of the credit facility after the fire amounted to acknowledgment of liability. On the issue of non-disclosure of civil proceedings, the Tribunal remarked that while the petitioner did not initially disclose the pendency of such proceedings, the omission was not fatal since the respondent had already placed relevant documents on record. However, it cautioned the bank to ensure full and candid disclosure in future. The Bench clarified that pendency of civil or insurance disputes does not bar a Section 7 petition, as the adjudication at this stage only requires existence of debt and default, not resolution of ancillary disputes.
Verdict
Citing precedents including M. Suresh Kumar Reddy v. Canara Bank and Narendrabhai v. PNB Housing Finance Ltd., the Tribunal reiterated that once debt and default are established, the Adjudicating Authority must admit the Section 7 application. Rejecting the debtor’s reliance on Vidarbha Industries Power Ltd. v. Axis Bank Ltd., the Bench held that no exceptional circumstances were shown to justify refusal of admission.
Accordingly, the NCLT admitted the insolvency petition, imposed a moratorium under Section 14, and appointed Mr. Vibin Vincent (Registration No. IBBI/IPA-001/IPP-01997/2020-2021/13134) as the Interim Resolution Professional to carry out duties under Sections 15 to 21 of the Code. The Financial Creditor was directed to deposit ₹2 lakh towards initial expenses, and the Registry was ordered to communicate the order to all concerned authorities and the Insolvency and Bankruptcy Board of India.
The Kochi Bench of the NCLT thus admitted Kotak Mahindra Bank’s petition under Section 7 of the Insolvency and Bankruptcy Code, initiating insolvency proceedings against Inditrade Business Consultants Limited and declaring a moratorium on all proceedings against the company.
Cause Title: M/s. Kotak Mahindra Bank Limited v. M/s. Inditrade Business Consultants Limited
Case No: CP (IB)/21/KOB/2025
Coram: Vinay Goel (Member-Judicial), Madhu Sinha (Member-Technical)
