NCLT Hyderabad Says IBC Section 7 Default Amount Not A Ceiling On CIRP, Upholds ₹73.98 Cr. Claim

The National Company Law Tribunal (NCLT) at Hyderabad has held that the amount of default stated in a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) does not cap the claim that a creditor may subsequently submit and the Resolution Professional may admit during the corporate insolvency resolution process (CIRP).

A Bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri passed the order on 17 July, upholding the Resolution Professional's decision to retain Madhya Pradesh Financial Corporation's claim at Rs.73.98 crore after re-verification. It observed:

“The amount of Rs.7,95,72,029/- reflected in the Section 7 application cannot, accordingly, be read as capping the claim of Respondent No.2 in these proceedings. Respondent No.2 is entitled to have its claim assessed on the full contractual record as it stood on the insolvency commencement date, namely 05.08.2025, subject always to verification against the underlying loan documents.”

Madhya Pradesh Financial Corporation (MPFC) filed a Section 7 petition against Sri Nagakrishna Chemicals Limited, following which the Tribunal admitted the company into CIRP on 5 August 2025. In the petition, the Financial Creditor stated a default of Rs.7,95,72,029, or approximately Rs.7.95 crore. Subsequently, MPFC submitted a claim of Rs.73,98,56,306, or approximately Rs.73.98 crore, in Form C, which the Resolution Professional admitted.

Frontline Enterprises Limited, another member of the Committee of Creditors (CoC), challenged the admitted claim through IA (IBC) No. 1580 of 2025, contending that it substantially exceeded the amount stated in the Section 7 application. The Tribunal, in an earlier order, rejected the contention that interest stopped accruing upon classification of the account as a non-performing asset but directed the Resolution Professional to re-verify the claim and the interest computation using the supporting documents.

Pursuant to the direction, the Resolution Professional engaged Ajay Johnsaida & Associates LLP, Chartered Accountants, to examine the interest computation and obtained an independent legal opinion from Juris Prime Law Services. The Chartered Accountants' final computation assessed the outstanding dues at Rs.77,54,02,457, or approximately Rs.77.54 crore.

As the final computation exceeded the originally admitted claim of Rs.73,98,56,306, the Resolution Professional retained the claim at Rs.73.98 crore without modification.

Global Insolvency Professionals Private Limited, the Resolution Professional of Sri Nagakrishna Chemicals Limited, subsequently filed IA (IBC) No. 901 of 2026, seeking to place the outcome of the re-verification exercise on record.

The Tribunal rejected Frontline Enterprises Limited's objections to the Resolution Professional's verification process. It held that Section 25(2)(d) of the IBC and Regulation 34 of the CIRP Regulations permit the Resolution Professional to independently engage professional advisors, including Chartered Accountants, for claim verification.

The Bench held that, while considering a Section 7 application, the Adjudicating Authority determines only whether a financial debt exists and whether the applicant has established a default. The Resolution Professional subsequently collates, quantifies and verifies the creditor's claim during the CIRP.

Further, it held that Regulations 8 and 13 of the CIRP Regulations require the Resolution Professional to verify claims against the underlying contractual documents, including loan agreements, sanction letters, ledgers and interest computations, rather than limiting the claim to the amount stated in the Section 7 application.

Accordingly, the NCLT found no infirmity in the re-verification exercise and upheld the Resolution Professional's decision to retain Madhya Pradesh Financial Corporation's admitted claim at Rs.73,98,56,306, or approximately Rs.73.98 crore.