NCLT Ahmedabad Rejects CIRP Plea Against Sisa Mosaic, Says Petition May Be Collusive And MOU Appears Fictitious

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has rejected an insolvency application, holding that the petition may be collusive. The tribunal also observed that the Memorandum of Understanding (MOU) relied upon by the applicant appeared to be a fictitious document created for filing the case.

The application was filed by Gayatri Engimech Pvt. Ltd. against Sisa Mosaic Pvt. Ltd. seeking initiation of the corporate insolvency resolution process over an alleged default of ₹3.58 crore arising from an unsecured loan transaction.

A bench of Judicial Member Chitra Hankare and Technical Member Dr. V.G. Venkata Chalapathy observed:

“Further, as per the balance sheet filed of the CD, it is shown in the schedule of balance sheet that the applicant is a related party of Directors and their Associates in Specific Glass Mosaic Limited (same applicant) which is associated concern of Sisa Mosaic Limited (Corporate Debtor) and it is an indirect relationship, thereby we observe it may be a collusive petition. The promissory note signed is not stamped and is not a valid document to prove the debt.”

The tribunal further observed:

“If the loan is granted for specific purpose, this cannot be treated as an investment in CD as loan which is shown as disbursed through an MOU, which appears to be a fictitious document created for the purpose of filing this application.”

Gayatri Engimech claimed that it had advanced an unsecured loan of ₹2.85 crore to Sisa Mosaic under an MOU dated April 15, 2021. According to the applicant, the loan carried interest at 6% per annum and was repayable in three instalments of ₹95 lakh each beginning from April 2022.

The applicant contended that Sisa Mosaic failed to repay either the principal or interest amounts despite repeated demands. It relied upon a promissory note dated April 15, 2021, correspondence exchanged between the parties and a loan recall notice issued in December 2024 demanding ₹3.58 crore, comprising the principal amount and accrued interest.

Gayatri Engimech argued that the transaction constituted a financial debt and submitted that the financial assistance had been authorised under the Companies Act, 2013. It also contended that the Companies Act, being a central legislation, would prevail over any inconsistent provisions of state law.

Sisa Mosaic opposed the plea on several grounds. It argued that the petition was barred by limitation and that the applicant had failed to comply with mandatory procedural requirements governing insolvency applications. It also questioned the evidentiary value of the documents relied upon by the applicant and contended that the applicant was not a registered money lender under the Gujarat Money Lenders Act, 2011.

After considering the pleadings and submissions, the tribunal observed that the applicant had not produced any document demonstrating how it qualified as a financial creditor.

The bench further held that the applicant had not complied with the requirements of Section 186(2) of the Companies Act, 2013. It noted that no proof regarding share capital, reserves or financial capacity to extend the loan had been produced.

The tribunal also found that the MOU dated April 15, 2021 was unstamped and unregistered.

“This is not a valid document to proceed in the matter and no recourse is shown in case of non-payment of debt. Also the balance sheet submitted does not convincingly state figures to comply with the act provisions.”

The bench further observed that the promissory note relied upon by the applicant was unstamped and was not a valid document to prove the debt.

The tribunal also examined the source of the alleged disbursements. It noted that the funds were stated to have been advanced from a cash credit account maintained with Abhyudaya Cooperative Bank. The bench observed that no document had been produced to show that the creditor had agreed to such lending.

Holding that the applicant neither complied with the requirements of the Insolvency and Bankruptcy Code as a financial creditor nor produced satisfactory documents to support the claim, the NCLT rejected and disposed of the application.