NCLT Mumbai Admits Section 7 IBC Petition Against Syska E-Retails LLP; Holds NeSL Certificate Not Mandatory If Debt and Default Proven by Other Records
Pranav B Prem
The Mumbai Bench of the National Company Law Tribunal (NCLT), comprising Justice V.G. Bisht (Retd.) as Judicial Member and Mr. Prabhat Kumar as Technical Member, has held that even in the absence of a NeSL (National E-Governance Services Limited) certificate for all loan accounts, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), is maintainable if the disbursal of loan amounts and occurrence of default are duly established through other reliable and relevant documents.
Background of the Case
The petition was filed by Canara Bank as the Financial Creditor seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s Syska E-Retails LLP, the Corporate Debtor, under Section 7 of the IBC. The total claimed default stood at ₹10,70,26,061.11 as on the date of filing. The Corporate Debtor was incorporated on 01.10.2015 under the Limited Liability Partnership Act, 2008 and registered with the Registrar of Companies, Pune.
The Corporate Debtor availed multiple credit facilities sanctioned by Canara Bank under “Advances against Supply Bills” as per the sanction letter dated 24.08.2022. Several security documents including Agreements for Advances, Guarantee Agreements by individual guarantors (Shri Honey Uttamchandani, Smt. Gitika Uttamchandani, Shri Rajesh Uttamchandani, Shri Govind Uttamchandani), and a Hypothecation Agreement were executed on the same date. Additionally, charges were duly registered under CERSAI for securing these facilities.
Disbursement of the loan amounts was done in tranches on various dates. The Corporate Debtor’s loan account was classified as Non-Performing Asset (NPA) on 21.11.2023, which also formed the date of default in the Section 7 application (Form I, Part IV). Subsequently, a Loan Recall Notice dated 16.12.2023 was issued to the Corporate Debtor and notices under Section 13(2) of the SARFAESI Act were issued to the Guarantors on the same day. Meanwhile, the Financial Creditor filed O.A. NDN 1721 of 2024 before the DRT-II, Delhi for recovery of dues.
Submissions by the Corporate Debtor
The Corporate Debtor contested the maintainability of the application on several grounds:
Lack of proper authorization: They argued that the Power of Attorney dated 12.04.2011 relied upon by the Financial Creditor was executed prior to both the Corporate Debtor’s incorporation and the enactment of IBC and hence could not be valid.
Mismatch of debt amounts: The amounts claimed in Part IV of the application did not match with those reflected in the NeSL certificate.
No formal NPA communication: The Corporate Debtor contended that no notice declaring the account as NPA was ever served.
Contradictory claim amounts: The Loan Recall Notice itself cited two different claim amounts — ₹11,38,81,200 and ₹10,12,92,000 — reflecting inconsistencies.
Subsequent repayments: The Corporate Debtor pointed out that payments were made even after the alleged date of default, indicating regular servicing of debt.
Absence of detailed statements: The Financial Creditor allegedly failed to provide full account statements justifying the claim amount.
Tribunal’s Observations
The NCLT examined the objections and made the following findings:
Validity of Power of Attorney: The Tribunal clarified that Clause 10 of the Power of Attorney dated 12.04.2011 authorized the grantee to initiate insolvency and winding-up proceedings. Hence, its execution prior to the Corporate Debtor’s incorporation or IBC’s enactment was irrelevant; the authorization remained valid.
On NeSL Certificate & Debt Verification: While the NeSL certificate only recorded default of ₹26,84,191.26 in the current account as on 26.08.2022, the Tribunal noted that the defaults in the other four loan accounts were established through agreements, account statements, and the loan recall notice. The Tribunal held that submission of a NeSL certificate is not mandatory where other reliable documentary evidence proves disbursal and default.
Inconsistency in amounts claimed: The Tribunal acknowledged that payments were made after the default date of 21.11.2023, but clarified that these payments reduced the outstanding dues without altering the fact of the initial default. The details provided in the recall notice, statements of account, and the ledger supported the claims made by the Financial Creditor.
No requirement to issue separate NPA notice: The Tribunal held that there was no contractual or legal obligation to issue a separate communication upon NPA classification.
No substantial defense by Corporate Debtor: The Tribunal noted that the Corporate Debtor did not dispute the existence of the financial debt or the occurrence of default but rather relied on technicalities such as pending OTS (One-Time Settlement) proposals, which were not formally accepted by the Bank.
Relying on the Supreme Court decision in M. Suresh Kumar Reddy v. Canara Bank [(2023) Company Appeal (AT)(CH)(Ins) No.315/2022], the Tribunal reiterated that once the existence of financial debt and default are established, the NCLT must admit the application under Section 7 without discretion.
Verdict
Finding no merit in the objections raised by the Corporate Debtor and being satisfied that the financial debt and default were established through reliable documents (even in the absence of a NeSL certificate for all loan accounts), the Tribunal admitted the application under Section 7 of the IBC. The Tribunal also initiated a moratorium under Section 14 of the IBC and appointed Mr. Vijay Pitamber Lulla as the Interim Resolution Professional. Directions were issued for public announcement, updating of the Corporate Debtor’s records by the Registrar of Companies, and compliance with CIRP formalities.
Appearance
For the Financial Creditor: Mr. Brijesh Kumar a/w Mr. Nehal Rajput, Ld. Adv
For the Corporate Debtor: Mr. Manoj Garg,Adv
Cause Title: Canara Bank V. M/S Syska E-Retails LLP
Case No: CP(IB)No. 548/MB/2024
Coram: Prabhat Kumar [Hon’ble Member (Technical)], Justice V.G Bisht, (Retd). [Hon’ble Member (Judicial)]
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