NCLT Kolkata Holds Default Date for MSMEs Relates Back to Original NPA, Rejects Post-Restructuring Default Claim
Sangeetha Prathap
The National Company Law Tribunal (NCLT), Kolkata Bench, has held that when an MSME corporate debtor’s loan account is restructured and subsequently slips into default again, the date of default for the purpose of an insolvency application must relate back to the original date on which the account became a Non-Performing Asset (NPA). The Tribunal clarified that this position flows directly from the RBI Master Circular dated 01 April 2025, which stipulates that once an account becomes NPA, its classification for future defaults must be carried forward from the original NPA date. It stressed that “there cannot be two NPA dates in respect of the same corporate debtor.”
The Bench, comprising Bidisha Banerjee (Judicial Member) and Cmde Siddharth Mishra (Technical Member), was dealing with a Section 7 application filed by UCO Bank against Haran Chandra Cold Storage Pvt. Ltd. for an alleged default of over ₹24 crore. The bank relied on a series of sanction letters dating back to 2015 and correspondence showing chronic irregularities. The account had been classified as NPA on 30 June 2019. Although the debtor’s account was restructured in November 2019 as an MSME account, the default continued thereafter.
UCO Bank argued that under the applicable RBI Master Circular, if a restructured account again becomes irregular, the account classification must revert to the original NPA date. It submitted that the debtor had consistently admitted its liability and even made several one-time settlement proposals, thereby acknowledging the debt and default. The bank also produced NeSL records where the corporate debtor had authenticated the default.
The corporate debtor challenged the maintainability of the petition, contending that the application was filed without proper authorization because the individual who signed it had no supporting board resolution. It also invoked Section 10A of the Insolvency and Bankruptcy Code, arguing that since the default occurred after the 2019 restructuring, the alleged non-payment fell during the COVID-19 bar period (25 March 2020 to 24 March 2021). The debtor further asserted that the bank was impermissibly relying on the pre-restructuring NPA date merely to circumvent the statutory protection under Section 10A.
Rejecting these objections, the Tribunal held that there was “nothing substantial” to show lack of authorization for filing the petition. On limitation, it noted that restructuring had taken place on 26 November 2019, and limitation stood extended due to the Supreme Court’s suo motu orders on COVID-19. Subsequent OTS proposals submitted by the debtor between 2022 and 2024 also extended limitation, rendering the petition “well within limitation.”
On the crucial issue of the date of default, the Tribunal relied on the RBI Master Circular and observed: “The account has to be reckoned as NPA from 30.06.2019. As such, date of default will relate back to the original date of default.”The Tribunal concluded that the debtor’s attempt to rely on the post-restructuring default to invoke Section 10A was legally untenable. It emphasised that the restructuring merely gave temporary regulatory relief and did not erase the original NPA classification for the purpose of determining default in insolvency proceedings.
The NCLT Kolkata admitted UCO Bank’s Section 7 application, imposed a moratorium under Section 14, and appointed Santanu Brahma as Interim Resolution Professional. It held that the default traced back to the original NPA date of 30 June 2019, thereby removing the debtor from the protection of Section 10A.
Appearance
For Applicant: Advocates Shusna Santra and R N Ghose
For Corporate Debtor: Advocates Shaunak Mitra,Tanvi Luhariwala, Patita Paban Bishwal, Sohini Dey
Cause Title: UCO Bank Versus Haran Chandra Cold Storage Pvt. Ltd.
Case No: I.A. No. 381/KB/2025 In CP(IB) No. 275/KB/2024
Coram: Bidisha Banerjee (Judicial Member), Cmde Siddharth Mishra (Technical Member)
