NCLAT New Delhi Dismisses Chemstar Director's Appeal Against CIRP Admission Over ₹11.87 Crore Claim

On 18 August, the New Delhi National Company Law Appellate Tribunal (NCLAT) held that the National Company Law Tribunal (NCLT) need not determine the exact quantum of dues while admitting a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), once debt and default are established and the default exceeds the statutory threshold of Rs. 1 crore.

A Bench comprising Officiating Chairperson Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra made the observation while dismissing an appeal filed by Ashutosh Majumdar, suspended director of Chemstar Organics (India) Ltd., against the NCLT's order admitting the company into Corporate Insolvency Resolution Process (CIRP) on 20 February 2025. The Tribunal held:

“In a proceeding under Section 7 of the IBC, 2016 it is not the mandate of the Adjudicating Authority to work out the exact amount which is payable by the Corporate Debtor. It suffices if the amount in default exceeds the threshold prescribed in Section 4 of IBC, 2016, which at the relevant time when the application was filed was Rs. 1 crore.”

The appeal arose from the order passed by the Mumbai Bench of the NCLT on 20 February 2025, admitting Chemstar Organics into CIRP on an application filed by Omkara Asset Reconstruction Pvt. Ltd. 

Chemstar Organics had availed term loans from Gujarat Industrial Investment Corporation (GIIC) in the late 1990s, secured by hypothecation and equitable mortgage. Following persistent defaults, GIIC took possession of the company's units in 2002 and 2004. The matter remained before the Board for Industrial and Financial Reconstruction (BIFR) until its dissolution in 2016. In 2017-18, GIIC sanctioned a one-time settlement (OTS), following which the debt was assigned to Omkara Asset Reconstruction Pvt. Ltd. in 2018.

In April 2019, Omkara approved a fresh OTS of Rs. 6.30 crores. Of this, Rs. 3.75 crores was paid through the sale of the Nandesari unit. The balance of Rs. 2.55 crores was to be paid in tranches, with a grace period and interest at 24%.

Chemstar paid only Rs. 21.20 lakhs in August 2019. Omkara revoked the OTS in January 2020 and demanded repayment within 10 days. Subsequent notices issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) in June 2021 recorded dues of over Rs. 10.51 crores. As the defaults continued, Omkara filed a Section 7 petition in June 2022. The NCLT admitted the petition in February 2025.

Before the NCLAT, Majumdar contended that Omkara was merely an assignee of the debt originally granted by GIIC. He further contended that a Gujarat Government remission scheme dated 15 February 2018 had waived Rs. 5.14 crores towards interest and penal charges. He submitted that, after Rs. 4 crores had been deposited before the Tribunal, the liability stood satisfied. He also contended that the interest rate of 24% per annum was contrary to Reserve Bank of India (RBI) guidelines applicable to Non-Banking Financial Companies (NBFCs).

Omkara, on the other hand, submitted that Chemstar had a continuous history of default since 2002, with repeated failures to honour its OTS commitments. It argued that the benefit under the Gujarat Government scheme was conditional upon timely payment and revival of operations, which Chemstar had failed to achieve. It further submitted that the OTS had been validly revoked in January 2020, before the period covered by Section 10A of the IBC, and that defaults continued thereafter.

The Bench held that the exact quantum of dues was not required to be determined in a Section 7 proceeding where debt and default were admitted and the default exceeded the threshold prescribed under Section 4 of the IBC. It further observed:

“We are conscious that this is a case where “debt” and “default” has not been challenged by the Corporate Debtor. The quantum of dues exceeds the prescribed minimum threshold. The Appellant's argument is only regarding the quantum of dues, especially the liability towards interest. The financial creditor has expressly stated that they are not willing to settle the debt at Rs. 4 crores now offered by Corporate Debtor.”

The Tribunal also held that Chemstar's defaults pre-dated the period covered by Section 10A and continued well beyond it. It therefore rejected the plea that the insolvency proceedings were barred under Section 10A. It distinguished the decision in Achal Kumar Jindal, noting that, unlike in that case, Chemstar's offer of Rs. 4 crores did not satisfy the admitted claim of Rs. 11.87 crores.

Accordingly, the NCLAT dismissed the appeal and vacated all interim orders.

For Appellants: Senior Advocates Abhijeet Sinha and Gaurav Mitra, with Advocates Mahesh Agarwal, Rishi A., Shivam Shukla and Kaustubh Singh

For Respondents: Senior Advocate Sanjeev Sen with Advocates Abhishek Anand, Karan Kohli, Palak Kalra and Ridhima Mehrotra