Pranav B Prem

The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member), has held that a default in even one of several credit facilities availed by a borrower is sufficient to trigger the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal further clarified that where a corporate debtor maintains multiple credit accounts, each account represents a distinct debt obligation, and default in one such account can independently attract classification as a Non-Performing Asset (NPA).

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Background of the Case

The petition under Section 7 of the IBC was filed by HDFC Bank Limited (Financial Creditor) against Shree Sant Kripa Appliances Private Limited (Corporate Debtor), seeking initiation of CIRP. HDFC Bank had extended multiple working capital and cash credit facilities to the Corporate Debtor — ₹35 crore under a Sanction Letter dated 22 December 2015, and an additional ₹65 crore under a Sanction Letter dated 7 January 2021. Over time, these facilities were renewed and revised through Annual Review and Revision of Credit Facility Letters dated 23 December 2021 and 21 July 2023. Despite renewals, the borrower defaulted in repayment, leading the bank to classify the account as Non-Performing Asset (NPA) and to issue a recall notice on 9 October 2024. The outstanding debt as of 30 April 2025 was ₹69.49 crore, including contractual and penal interest.

Corporate Debtor’s Contentions

The Corporate Debtor contested the maintainability of the petition, arguing that the alleged default was premature and that all credit facilities formed part of a composite arrangement, making it impermissible to treat default in one account as independent of the others. It was also argued that since there had been fresh disbursements of ₹10.25 crore on 1 January 2024, the bank could not have classified the account as NPA the very next day, 2 January 2024. The debtor maintained that the loan had not yet matured and that the NPA classification was arbitrary.

The debtor further contended that the petition was barred by limitation, as the initial sanction was issued in 2015 and had long expired. Additionally, it invoked Section 10A of the IBC, arguing that the alleged defaults occurred during the COVID-19 period and were thus protected from insolvency proceedings. It was also alleged that the bank had not produced a NeSL report, and hence the application was defective.

Submissions of the Financial Creditor

HDFC Bank submitted that the Corporate Debtor had availed several independent credit facilities, each with its own maturity period and repayment schedule. It pointed out that even though additional disbursements were made later, the earlier accounts continued to remain overdue for a specified period, justifying their classification as NPA.

The bank relied on documentary evidence, including the Commercial Credit Information Report issued by TransUnion CIBIL, and the Recall Notice dated 9 October 2024, which recorded that the loan account had been declared NPA on 26 February 2024. The bank also produced revival letters, acknowledgements of debt, and credit facility agreements, demonstrating continued liability and acknowledgment of debt by the Corporate Debtor. It was contended that the absence of a NeSL report could not invalidate the petition, as the existence of debt and default was conclusively proved by other admissible records.

Tribunal’s Findings and Observations

The Bench, after reviewing the evidence, found that the debt and default stood clearly established. It rejected the debtor’s plea that the default in one facility could not trigger CIRP when other accounts were active. The Tribunal observed:“The Corporate Debtor was availing credit facilities under five different accounts and each account had an independent maturity period. Even if there was a fresh disbursement in another account on the preceding date, it cannot lead to an inference that the other account could not have been classified as NPA on the next date if such account had been delinquent for the specified period.”

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The NCLT also held that a petition under Section 7 of the IBC remains maintainable even when there are multiple dates of default, provided the debt related to defaults within the limitation period exceeds the threshold limit prescribed under Section 4 of the Code, i.e., ₹1 crore.

On the debtor’s plea of limitation, the Tribunal noted that the facilities sanctioned earlier had been periodically renewed, and revival letters dated 14 July 2023 acknowledged the outstanding dues, thereby extending the period of limitation. The Bench specifically referred to the debtor’s own acknowledgment stating that the facilities “will continue to be in full force and effect” and that the debtor “promises to pay completely the entire amounts due under the aforesaid facilities along with interest and other amounts, if any, payable in relation thereto even if the period of limitation has lapsed.”

Rejecting the debtor’s Section 10A argument, the Tribunal held that the renewed credit facilities continued well beyond the pandemic period, and hence, the bar under Section 10A did not apply. It also clarified that the mere absence of a NeSL record could not defeat an otherwise complete Section 7 petition when the debt and default were evidenced through authentic banking documents.

Decision of the Tribunal

In light of the findings, the NCLT concluded that the financial debt exceeded the statutory threshold and default was duly established. It accordingly admitted the Section 7 petition filed by HDFC Bank Limited, initiating the Corporate Insolvency Resolution Process (CIRP) against Shree Sant Kripa Appliances Pvt. Ltd. The Tribunal appointed Mr. Subhash Nathuramka (IBBI/IPA-001/IP-P00472/2017-18/10815) as the Interim Resolution Professional (IRP) and declared a moratorium under Section 14 of the IBC, prohibiting institution of new suits, transfer of assets, or enforcement of security interests during the CIRP period. The IRP was directed to issue public announcements, invite claims from creditors, and assume control over the management of the Corporate Debtor.

The NCLT’s ruling reiterates that default in any one credit facility can suffice to initiate insolvency proceedings, even when the debtor has multiple active accounts. Each loan account is treated as a separate debt obligation, and a continuing default in any such account—once classified as NPA—meets the threshold under Section 7 of the IBC.

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By admitting HDFC Bank’s petition, the Tribunal reaffirmed the principle that fresh disbursement in one account cannot negate earlier defaults and that acknowledged debts and contractual obligations remain enforceable irrespective of composite lending arrangements. Consequently, the CIRP against Shree Sant Kripa Appliances Pvt. Ltd. was admitted, and moratorium declared, paving the way for insolvency resolution under the IBC framework.

Appearance

Counsel for Financial Creditor: Adv. Sameer Pandit a/w Adv. Aastik Agarwal (i/b Wadia Ghandy & Co.)

Counsel for Corporate Debtor: Adv. Ayush J. Rajani a/w Adv. Keshav Khandelwal (i/b AKR Legal)

Cause Title: HDFC Bank Limited v. Shree Sant Kripa Appliances Private Limited

Case No: CP (IB) No. 665 of 2025

Coram: Sushil Mahadeorao Kochey (Judicial Member), Prabhat Kumar (Technical Member)