Corporate Debtor Cannot Avoid Insolvency By Claiming Loan Documents Were Executed In Old Name: NCLT Mumbai
The National Company Law Tribunal at Mumbai has admitted an insolvency petition against JBS Enterprises Ltd, formerly known as JBS Enterprises Private Limited holding that a corporate debtor cannot escape liability merely because loan documents were executed in its earlier name prior to conversion from a private limited company to a public limited company.
A coram of Judicial Member Nilesh Sharma and Technical Member Sameer Kakar said that once the corporate debtor has availed and benefited from financial facilities, it cannot rely on technical defects in its own documentation to defeat proceedings under the Insolvency and Bankruptcy Code.
The tribunal observed, “All the above referred documents were executed by the Corporate Debtor in its erstwhile name as a private limited company and, therefore, there is a default/non-compliance of provisions of law by the Corporate Debtor and after having got the benefit of the transaction entered into with the financial creditors by availing the finance from them, the Corporate Debtor cannot take the plea that it has wrongfully signed/executed the different documents in its erstwhile name and, therefore, the present proceedings may not proceed against it.”
The petition was filed jointly by Insta Capital Pvt Ltd and Richbond Capital Pvt Ltd in respect of loans of Rs. 96 lakh and Rs. 1.80 crore sanctioned in January 2024. The creditors claimed a total outstanding of over Rs. 2.44 crore after recall notices were issued in March 2025.
JBS Enterprises argued that it had been converted into a public limited company on September 13, 2023, and that several loan documents bore its former name. It also raised objections relating to stamping and internal approvals.
Rejecting these pleas, the tribunal held that the debt, disbursement and default were clearly established through bank records, acknowledgements of debt and even dishonoured settlement cheques issued during proceedings. Applying the doctrine of indoor management, it ruled that internal non compliance cannot be used to defeat a creditor's claim.
The tribunal accordingly admitted the petition and initiated CIRP against the company.
For Financial Creditor: Advocate Narpat Singh i/b Indialaw LLP
For Corporate Debtor: Advocate Prachi Wazalwar