Bank's No Dues Certificate Not Determinative At CIRP Admission: NCLT Jaipur

The National Company Law Tribunal (NCLT) at Jaipur, has admitted Prayag Polytech Private Limited into insolvency over a Rs.34.14 crore default to Canara Bank.

The bench of Judicial Member Reeta Kohli and Technical Member Kavita Bhatnagar held that disputes over “No Dues Certificates” cannot defeat a Section 7 petition at the threshold.

The Tribunal observed that reliance on NOCs was “a serious defence, but it is not determinative at admission stage because the Bank's case is that the NOC/satisfaction relied upon by the Corporate Debtor did not relate to the outstanding liabilities that form the subject matter of the present claim.”

It reiterated that Section 7 proceedings are summary in nature. The Adjudicating Authority must only examine whether “a financial debt exists” and “default has occurred.” It is not required to conduct a trial on disputed facts.

On objections relating to SARFAESI notices, the Bench held that “variations in SARFAESI notices and alleged errors, even if true, do not by themselves establish that no default exists.”

The corporate debtor had also alleged fraudulent initiation under Section 65 of the Insolvency and Bankruptcy Code, 2016. The tribunal rejected the plea, holding that “Section 65 dismissal is not warranted merely because the Corporate Debtor alleges bank misconduct and sets up counterclaims."

The bench further clarified that disputes over appropriation, discharge, or reconciliation of accounts “cannot be conclusively decided without evidence, but for Section 7, we look for prima facie default.”

Finding that financial debt and default were established above the statutory threshold, the tribunal admitted the petition. It declared a moratorium under Section 14 and appointed an interim resolution professional to take over the company's affairs.

For Petitioner: Advocates Hitesh Sachal and Anju Jain

For Respondent: Senior Advocate Virendra Ganda with Advocates Vipul Ganda, Ayandeb Mitra, Nirti Dua, and Arpita Sahu