NCLT Delhi Imposes ₹1 Crore Penalty On SREI For Fraudulent Insolvency Proceedings Against JBJ Technologies

The National Company Law Tribunal (NCLT), Delhi Bench, has imposed a penalty of ₹1 crore on SREI Equipment Finance Ltd for fraudulently initiating insolvency proceedings against JBJ Technologies Ltd.

The tribunal held that SREI suppressed material correspondence and invoked the insolvency process to exert pressure on the company.

The Bench comprising Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Reena Sinha Puri observed:

“The knowing suppression of material correspondence, coupled with the circumstances in which the disputed guarantee liability was asserted, constitutes an abuse of the insolvency process.”

The dispute arose from two loan agreements dated March 15, 2018, under which SREI extended loans aggregating ₹6.65 crore to the principal borrower, Late Sanjay Prakash. SREI's claim against JBJ Technologies was based on two purported corporate guarantees dated the same day.

JBJ Technologies denied executing or authorising the guarantees. It alleged that SREI had misused blank documents entrusted to it during business dealings and initiated insolvency proceedings as a coercive recovery measure.

The company pointed out that the guarantees bore a franking date of March 10, 2017, although their purported execution date was March 15, 2018. They also referred to a board resolution dated March 14, 2018, authorising their execution. However, SREI failed to produce the resolution before the tribunal.

The loan documents recorded the guarantor requirement as "NA" and stated that no security had been provided.

The guarantor columns also lacked JBJ Technologies' signature and stamp. SREI's March 2022 communication stated that no dues were outstanding against the company, while statutory notices made no mention of guarantee liability. SREI disclosed the guarantees only in February 2023, despite JBJ Technologies denying their execution days later. The tribunal found that SREI proceeded despite knowing of this dispute and without producing the authorising board resolution

The tribunal also found that SREI had suppressed the March 2022 communication, the statutory notices and the company's denial of the guarantees.

It observed, “Thus, before instituting the Section 7 petition, the Respondent was aware of the specific challenge to the very foundation of its claim. Nevertheless, it proceeded without satisfactorily addressing the absence of authorisation and the inconsistencies identified above.”

The tribunal clarified that its conclusion did not rest merely on the disputed execution of the guarantees or the failure to establish a financial debt. It was the cumulative effect of relying on disputed guarantees without producing the authorisation referred to in them, proceeding despite knowing that JBJ Technologies had denied executing them, and suppressing material correspondence that established the misuse of the insolvency process.

It held that SREI had invoked insolvency proceedings to exert pressure on JBJ Technologies rather than pursue a bona fide resolution of insolvency. The conduct attracted Section 65(1) of the IBC.

Allowing JBJ Technologies' application under Section 65, the NCLT dismissed the Section 7 petition and imposed a penalty of ₹1 crore on SREI. It directed the financial creditor to deposit the amount with the Insolvency and Bankruptcy Board of India within 30 days from the date of the November 6, 2026 order.