NCLT Kochi Admits Kotak Mahindra Bank's Insolvency Petition Against Inditrade Business Consultants

Kotak Mahindra Bank advanced working capital and overdraft facilities of Rs. 20 Cr. to Inditrade Business Consultants Limited. The amount was later enhanced to Rs. 25 Cr. Subsequently, the corporate debtor defaulted on the repayment, leading to the classification of its account as NPA.

The loan was secured through the pledge of the cotton bales, which were stored in the warehouse managed by the creditor's collateral agency. However, the same was destroyed due to fire. The pledged goods were insured under a policy where the bank was the sole beneficiary.

The corporate debtor argued that there exists a valid pre-existing dispute between the parties. It argued that it had no role in the selection of the warehouse and management of the stock. And the commodities remained under the exclusive control of the bank.

It submitted that despite being the beneficiary of the insurance claim, the bank raised an arbitrary margin call on it. Further, the bank deducted an amount of Rs. 1.2 Cr from its account and also froze the debit.

Aggrieved by these coercive actions, the corporate debtor filed a civil suit seeking recovery of the amount and damages. The civil court was pleased to grant the partial relief and directed both the parties to maintain the status quo. The order was also confirmed by the Bombay High Court, where the bank assured not to take any recovery proceedings until due adjustment of the insurance claim and recovery already made. SLP against the order is pending before the Hon'ble Supreme Court.

Decision of the NCLT

The NLCT observed that the pledged agreement places the risk of loss on the pledgor, and it also mentions that the pledgee would not be liable for involuntary loss or destruction of the goods pledged.

The NCLT relied on the Hon'ble Bombay High Court's ruling where the court clarified that the bank, or pledgee, is not the insurer of goods, and if the pledged agreement mentions the liability of the pledger, such a clause or agreement shall be legally valid.

Further, the bench observed that the non-disclosure of ongoing civil proceedings does not affect the petition, as the relevant facts and documents were presented by the respondent.

The bench concluded that for the admission of a section 7 petition, the adjudication of a civil or insurance dispute is not required, and merely the existence of debt and default is sufficient.

With the above observations, the bench admitted the petition and imposed the moratorium.

Case Name: M/s. Kotak Mahindra Bank Limited v. M/s. Inditrade Business Consultants Limited

Case No: CP (IB)/21/KOB/2025

Coram: Vinay Goel (Member-Judicial) and Madhu Sinha (Member-Technical)

Order Date: 10.10.2025