NCLAT Delhi Sets Aside Insolvency Admission Against Raja Udyog, Notes Debt Fell Below ₹1 Crore Threshold

The National Company Law Appellate Tribunal (NCLAT) at Delhi on 25 August set aside the Kolkata Bench of the National Company Law Tribunal (NCLT) order admitting an insolvency application against Raja Udyog Private Limited.

A Bench of Judicial Member Justice Mohd Faiz Alam Khan and Technical Member Naresh Salecha held that a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be admitted when the debt due on the date of admission falls below the statutory threshold of Rs. 1 crore. It observed:

“Thus, from the facts admitted to the parties, it is evident that on the day when the impugned order has been passed by Ld. Adjudicating Authority, only Rs. 93,88,310/- were due on the corporate debtor, which were admittedly below the threshold of rupees 1 crore and therefore the impugned order passed by the Learned Adjudicating Authority may not withstand the test of law and is liable to be set aside.”

Financial creditors Dinesh Chand, Girish Chandra and Anju Agarwal filed the Section 7 application against Raja Udyog, alleging default on loans advanced during the Covid-19 pandemic. The company had received loans totalling Rs. 2.25 crore as urgent financial assistance.

Raja Udyog initially serviced the interest payments until April 2022 but subsequently defaulted. The creditors issued demand notices in January and March 2025. The company then issued cheques towards part payment, but the cheques were dishonoured.

The creditors claimed Rs. 3.18 crore as outstanding. On 20 May 2026, Raja Udyog gave an undertaking acknowledging the liability and assuring repayment within 30 days.

The company subsequently made payments totalling Rs. 2.25 crore between June and July 2026. By 20 July 2026, only Rs. 93.88 lakh remained outstanding.

The NCLT nevertheless admitted the Section 7 application on 20 July 2026 and appointed an Interim Resolution Professional (IRP), prompting Raja Udyog to appeal to the NCLAT.

Raja Udyog argued that the NCLT had acted hastily without allowing adequate time for settlement. It submitted that insolvency proceedings seek to resolve insolvency rather than merely recover debt. The respondents admitted receiving the payments and confirmed that the parties had honoured the settlement terms.

A joint affidavit dated 31 July 2026, along with a memorandum of settlement, recorded that the parties treated the consolidated sum of Rs. 3.18 crore as full and final discharge of the liability. The IRP submitted that he would abide by the NCLAT's decision.

The NCLAT examined the payment records and settlement documents. It found that Raja Udyog had repaid the entire principal amount before the NCLT passed the admission order. Only Rs. 93.88 lakh remained due on the date of admission, which fell below the Rs. 1 crore threshold prescribed under Section 7 of the IBC.

Accordingly, the NCLAT allowed the appeal and set aside the NCLT's order admitting the insolvency application against Raja Udyog Private Limited.

For Appellants: Senior Advocate Joy Saha with Advocates Patita Paban Bishwal, Tanvi Luhariwala & Swastika Roy

For Respondents: Advocate Aishwarya Kumar Awasthi