NCLT Indore Allows AU Small Finance Bank To Intervene In Aviral Bio Tech CIRP Over Pending Vehicle Loan

The Indore bench of the National Company Law Tribunal has allowed AU Small Finance Bank Limited to join the insolvency proceedings against Aviral Bio Tech & Fertilisers Pvt. Ltd.

Holding that the bank, which had extended a vehicle loan to the company, qualifies as a financial creditor, the Tribunal said its objections deserved consideration.

“It is not in dispute that the Applicant has extended financial assistance to the Corporate Applicant by way of a vehicle loan, thereby qualifying as a Financial Creditor within the meaning of the Code.”

A bench of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta passed the order.

Aviral Bio Tech & Fertilisers filed a voluntary insolvency petition under Section 10 of the Insolvency and Bankruptcy Code, seeking initiation of the Corporate Insolvency Resolution Process against itself.

AU Small Finance Bank said it had extended a vehicle loan of Rs 9.5 lakh for a Maruti Ciaz to the company, of which Rs 7,28,961 remained outstanding.

The bank argued that the facility fell within the definition of “financial debt” under Section 5(8) of the Code and raised preliminary objections to the maintainability of the petition.

Earlier, the Tribunal had issued notices to financial creditors, including AU Small Finance Bank, directing them to file replies by way of affidavit. The bank accordingly filed its reply.

On May 31, 2024, the Tribunal took note of the bank's objections to admission of the petition and granted liberty to file an intervention application.

Counsel for the corporate debtor appeared and accepted notice but failed to file a reply despite sufficient opportunities. The Tribunal accordingly closed the respondent's right to file a reply.

The Bench observed that admission of a Section 10 petition has significant consequences, including imposition of moratorium and commencement of CIRP, directly affecting the rights and interests of financial creditors.

“In such circumstances, a Financial Creditor having a subsisting financial exposure and raising objections to the admission of the petition is not only a proper party but also a necessary party for effective and complete adjudication of the issues involved.”

Noting that it had already granted liberty to the bank to place its objections on record and that the bank had already filed its reply, the Tribunal allowed the application.