NCLT Kochi: Pending Writ Petition Or Account’s NPA/Fraud Classification No Bar To IBC Proceedings; Admits Axis Bank’s Insolvency Plea Against Euro Tech Maritime Academy
Pranav B Prem
The National Company Law Tribunal (NCLT), Kochi Bench, comprising Mr. Vinay Goel (Judicial Member) and Ms. Madhu Sinha (Technical Member), has held that proceedings under the Insolvency and Bankruptcy Code (IBC), 2016 are not barred merely because a writ petition is pending before a High Court or due to the administrative classification of an account as a Non-Performing Asset (NPA) or a fraudulent account by a bank. The ruling came in a petition filed by Axis Bank Limited under Section 7 of the IBC read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Euro Tech Maritime Academy Private Limited (the corporate debtor) for defaulting on a debt amounting to Rs. 14.60 crore.
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Axis Bank had extended multiple financial facilities to Euro Tech Maritime Academy between 2011 and 2022, including loans under the Business M Power Scheme and the Emergency Credit Line Guarantee Scheme (ECLGS). Despite restructuring of the loans and repeated reminders, the corporate debtor defaulted on repayments, leading to the classification of its account as NPA on 29 January 2024. Consequently, Axis Bank issued a recall notice demanding repayment of Rs. 14.10 crore. When the borrower failed to comply, the bank approached the NCLT for initiation of insolvency proceedings.
Corporate Debtor’s Contentions
Euro Tech argued that it had submitted several restructuring proposals in 2023 and 2024, which the bank rejected without due consideration. Being an MSME entity, the corporate debtor claimed entitlement to the benefits of the MSME revival and rehabilitation framework and the RBI’s Master Direction on Lending to MSMEs.
The company contended that Axis Bank’s failure to constitute a Corrective Action Committee before classifying its account as NPA violated the Supreme Court’s decision in M/s Pro Knits v. Canara Bank (SLP No. 7898 of 2024). It also informed the tribunal that it had filed writ petitions before the Kerala High Court seeking enforcement of MSME revival circulars and a stay of the bank’s recovery actions, which were pending adjudication. The debtor thus argued that admitting the Section 7 application would render the writ proceedings redundant.
Axis Bank’s Rejoinder
Axis Bank denied all allegations of procedural irregularity, submitting that it had duly followed the RBI’s MSME restructuring framework and even constituted a committee for revival and rehabilitation of MSME units, which had considered Euro Tech’s account and recommended legal action. The bank maintained that the debtor had repeatedly acknowledged the debt and default, leaving the tribunal with no discretion but to admit the petition.
Tribunal’s Observations
The Kochi Bench held that Euro Tech’s defences based on MSME protection and pending writ petitions were untenable. It observed that the corporate debtor had availed of the restructuring benefits but still failed to maintain financial discipline. The tribunal also noted that the debtor invoked MSME revival provisions only after its account had been declared NPA, which was a delayed and legally unsustainable action. Citing the Supreme Court’s ruling in Suresh Kumar Reddy v. Canara Bank [(2023) 8 SCC 387], the Bench reiterated that once an NCLT is satisfied that a financial debt exists and a default has occurred, it has no discretion to refuse admission of a Section 7 application.
The tribunal also referred to Innovative Industries Ltd. v. ICICI Bank and Vidarbha Industries Power Ltd. v. Axis Bank Ltd., reaffirming that the IBC is a special code dealing with insolvency resolution and that administrative actions like NPA or fraud classification by a bank are distinct from insolvency proceedings. It further clarified: “The classification of an account as NPA or fraud has no bearing on the insolvency process. If a financial debt and default exist and meet the statutory threshold, this Tribunal shall proceed under law.”
High Court Communication and Final Decision
After reserving the matter for orders, the NCLT received communication from the Kerala High Court regarding a plea by the corporate debtor seeking a stay of the insolvency proceedings. However, the High Court rejected the stay request, clearing the way for NCLT to decide on merits.Finding that the debt and default were duly proved and that Axis Bank had complied with regulatory and procedural requirements, the tribunal admitted Axis Bank’s Section 7 petition and directed initiation of CIRP against Euro Tech Maritime Academy. The tribunal appointed AAA Insolvency Professionals LLP as the Interim Resolution Professional (IRP) and imposed a moratorium under Section 14 of the IBC.
The NCLT Kochi’s decision reinforces that:
IBC proceedings cannot be stalled merely due to pending writ petitions or administrative classifications like NPAs or fraud.
Once debt and default are established, the NCLT must admit a Section 7 application.
Banks’ actions on the administrative side and insolvency proceedings operate in distinct legal domains.
Accordingly, the tribunal dismissed the debtor’s objections and allowed the financial creditor’s plea for insolvency initiation.
Cause Title: Axis Bank Limited v. Euro Tech Maritime Academy Private Limited
Case No: IA(IBC)/226/KOB/2025 & CP(IBC)/10/KOB/2025
Coram: Mr. Vinay Goel (Member-Judicial), Madhu Sinha (Member-Technical)
