Application U/S 7 Of IBC Can Be Admitted In Absence Of NeSL Certificate If Loan Disbursal & Default Are Proved By Other Documents: NCLT Mumbai

Brief Facts:

The Corporate Debtor was incorporated on 01.10.2015 under the provisions of the Limited Liability Partnership Act, 2008, and is registered with the Registrar of Companies, Pune. 5. The Corporate Debtor availed multiple credit facilities from Canara Bank under the category of Advances against Supply Bills for trading activities, as sanctioned by the letter dated 24.08.2022.

The Corporate Debtor has created a security interest in form of Charges on Supply Bills and Hypothecation of goods to secure the loan facilities availed from the consortium banks/Financial Creditor, and the said charge has been registered under CERSAI. Pursuant to the loan sanctioned by the Financial Creditor, the loan amount was disbursed to the Corporate Debtor on various dates

The Corporate Debtor's loan account was classified as NPA on 21.11.2023, the date of default as stated in Part IV of Form 1. A loan recall notice was issued on 16.12.2023, but no payment was made. On the same date, a Section 13(2) SARFAESI notice was also issued to the Guarantors. Subsequently, the Financial Creditor filed O.A. NDN 1721 of 2024 before the DRT-II, Delhi on 08.04.2024, which is currently pending.

In reply, the Corporate Debtor submitted that the present application is not maintainable due to lack of proper authorization or a valid Power of Attorney, as the Power of Attorney annexed to the application was executed on 12.04.2011 by the Financial Creditor in favor of Mr. Paritosh Kumar, prior to the incorporation of the Corporate Debtor and the enactment of the Insolvency and Bankruptcy Code, 2016.

It was further submitted that the total amount claimed by the Financial Creditor in Part IV of the application does not match the statement of dues or the data recorded in the NeSL annexed to the application. No notice or letter declaring the account as NPA has been filed with the application, nor has the Corporate Debtor received any such communication.

Observations:

The Tribunal noted that Clause 10 of the Power of Attorney dated 12.04.2011 authorizes the grantee to initiate insolvency and winding-up proceedings against the Bank's debtors. Hence, Mr. Paritosh Kumar is duly authorized to file the present application, regardless of the POA being executed before the Debtor's incorporation or the IBC's enactment.

It further observed that the NESL certificate confirms a default of ₹26,84,191.26 in the current account as on 26.08.2022. The application reflects ₹26,33,315.99 outstanding as on 28.03.2024. While no NESL certificate is filed for four loan accounts, defaults are supported by loan agreements, account statements, and the recall notice. No notice is required for NPA classification. The Corporate Debtor raised no substantive objections and only cited a pending OTS proposal, which lacks acceptance by the Financial Creditor.

The Supreme Court in M. Suresh Kumar Reddy v. Canara Bank (2023) held that if the existence of a financial debt and its default on the part of the corporate debtor is proven, the National Company Law Tribunal (NCLT) has no discretion but to admit the petition under Section 7 of the IBC. The Court clarified that the NCLT's role is to assess the existence of a debt and default. If these elements are established, the application must be admitted.

The Tribunal concluded that “from perusal of the record and the documents relied upon by the Applicant it stands proved that there has been a financial debt in respect of which default has been committed by the Corporate Debtor and further that the Application has been filed within the period of limitation. Therefore, the Application u/s 7 of the Code, deserves to be admitted.”

Case Title: Canara Bank Versus M/S Syska E-Retails LLP

Case Number: CP(IB)No. 548/MB/2024

Judgment Date: 17/06/2025

For the Financial Creditor : Mr. Brijesh Kumar a/w Mr. Nehal Rajput, Ld. Adv

For the Corporate Debtor : Mr. Manoj Garg,Adv