NCLT New Delhi Admits CIRP Against Madhuvan Tieup, Rejects Corporate Debtor's NBFC Claim

The New Delhi National Company Law Tribunal (NCLT), on 6 April admitted the Corporate Insolvency Resolution Process (CIRP) of Madhuvan Tieup Pvt. Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016, for a default of approximately Rs 80.78 crore.

A Bench comprising Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri rejected the Corporate Debtor's claim that it was a Non-Banking Financial Company (NBFC), holding that it did not engage in financial services as defined under the Code.

The Tribunal observed:

“The total outstanding debt defaulted to be paid by the CD as mentioned in Part-IV of the petition is Rs. 80,78,16,596.11/- (Rupees Eighty Crores Seventy-Eight Lakhs Sixteen Thousand Five Hundred Ninety-Six And Paise Eleven Only). Thus, the CD being NBFC could not have availed the financial facility to aforementioned extent. Thus, at this stage having availed the financial facility as above, it cannot claim itself to be NBFC.”

HDFC Bank Limited filed the Section 7 application. Madhuvan Tieup Pvt. Ltd., incorporated in 1996, availed multiple term loans from the bank in 2017 and 2018, amounting to Rs 86.50 crore. The account was classified as a Non-Performing Asset (NPA) on 27 December 2019, with the outstanding default standing at Rs 80.78 crore as of December 2022.

The NCLT had earlier admitted the Section 7 petition on 5 July 2023. The Corporate Debtor challenged the admission before the National Company Law Appellate Tribunal (NCLAT), arguing that it held RBI registration as an NBFC and therefore remained exempt from insolvency proceedings.

The NCLAT initially dismissed the appeal but later recalled its order after the Corporate Debtor produced an RBI registration certificate dated 11 February 2003. It remanded the matter to the NCLT to examine whether the company actually engaged in financial services under Sections 3(16) and 3(17) of the IBC.

HDFC Bank argued that the Corporate Debtor did not carry out financial services and instead engaged in trading commodities, textiles, and machinery, as reflected in its Memorandum of Association. The bank also pointed out that the company's name did not appear in RBI's NBFC lists between 2013 and 2023 and stated that it had surrendered its NBFC certificate in 2014 after changing its address. It further argued that the Corporate Debtor raised the NBFC claim as an afterthought to avoid CIRP, as it never raised this plea in earlier recovery proceedings.

The Tribunal noted that financial service providers receive different treatment under the IBC due to their systemic importance, as their failure can trigger wider financial distress. It also recorded that the Corporate Debtor reported revenue from operations of only Rs 7,714 in FY 2025, along with other income of Rs 3,600, indicating negligible financial activity.

The Tribunal further found that although the company obtained an NBFC certificate in 2003, it surrendered the certificate in 2014 and did not renew or update its status until 2024. It therefore did not appear in the list of active NBFCs during the period when it availed loans and defaulted. The Bench held that the certificate alone could not establish that the company engaged in financial services under Sections 3(16) and 3(17) of the IBC.

It also noted that the Corporate Debtor's liabilities exceeded seven times its own funds, a ratio typically associated with NBFCs, which further indicated that it did not function as an NBFC. It observed:

“Obviously, we need to check the status of a company while taking a decision regarding commencement of CIRP. Indubitably, an NBFC, sudden fall of which may lead to widespread stress and crisis cannot be admitted to the process. Thus, we satisfied ourself regarding the current business of the company. Once, the CD has availed financial facility as non-NBFC, in the present proceedings, it cannot be given the benefit of such status.”

Accordingly, the NCLT admitted the application, imposed a moratorium, and appointed Umesh Gupta as the Interim Resolution Professional (IRP).

For Appellants: Advocate Bheem S Jain

For Respondents: Senior Advocate Arpit Goyal with Advocates Mohit Chaudhary, Kunal