NCLT Indore Admits ₹95.31 Crore Insolvency Plea By Central Bank Of India Against Narmada Extrusions

The Indore Bench of the National Company Law Tribunal on 13 March admitted an insolvency petition filed by Central Bank of India against Narmada Extrusions Limited under Section 7 of the Insolvency and Bankruptcy Code 2016 over default in repayment of financial debt of more than Rs. 95.31 crore.

A Bench comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta held that the Financial Creditor had established the existence of financial debt and the occurrence of default by the Corporate Debtor. The Tribunal observed:

“It is well settled that remedies available under the SARFAESI Act and the Insolvency and Bankruptcy Code, 2016 operate in different statutory domains. Proceedings under SARFAESI are in the nature of enforcement of security interest, whereas proceedings under the Code are aimed at the resolution of insolvency of the corporate debtor as a whole.”

Narmada Extrusions is a private limited company incorporated in 1984, with its registered office in Dhar, Madhya Pradesh. According to the application, multiple credit facilities were extended to the Corporate Debtor in the form of cash credit, term loans, letters of credit and bank guarantees.

The company defaulted on repayment of its outstanding dues. The account became irregular and overdrawn due to the devolvement of Letters of Credit (LC). As a result, the loan account was classified as a Non-Performing Asset (NPA) on 28 February 2024.

Thereafter, the Financial Creditor issued a notice under Section 13(2) of the SARFAESI Act 2002 to recover its unpaid dues. Despite receiving the recall notice, the Corporate Debtor failed to clear the outstanding amounts.

However, on 29 June 2024, the bank granted a last opportunity to the respondent and permitted “holding-on operations”. This allowed the company to continue its business subject to certain conditions.

The Corporate Debtor again failed to comply with these conditions. Consequently, the bank issued a notice demanding repayment of the entire outstanding loan amount.

On the contrary, the Corporate Debtor argued that no crystallised default existed as of 30 November 2023, as claimed by the applicant. It submitted that the bank had granted a holding-on operations facility which expressly allowed the company to continue its operations.

It further contended that the company had initiated restructuring proposals and had deposited Rs. 7.5 crore by August 2024. According to the Corporate Debtor, this showed bona fide efforts to revive the business.

The Corporate Debtor also argued that proceedings under the Code were not maintainable because the Financial Creditor had already initiated recovery proceedings under the SARFAESI Act 2002. The Bench rejected this contention.

The Tribunal noted that the permission for “holding-on operations” was subject to specific conditions. These included infusion of additional funds of Rs. 10 crore by the promoters and regularisation of overdue interest liabilities.

However, the Corporate Debtor failed to generate sufficient operational revenue or sales collections. The Tribunal further noted that the promoters infused only Rs. 7.41 crore, which was below the required amount.

The Bench held that temporary concessions granted by a bank, such as permission for “holding-on operations”, do not erase the occurrence of default or change the classification of the account as NPA.

It further observed that the bank later withdrew this permission after the Corporate Debtor failed to comply with the stipulated conditions.

The Bench further held:

“It is evident from the account statements and other documentary evidence that the Corporate Debtor has committed default in repayment of the financial debt, and the outstanding amount claimed by the Financial Creditor is well above the minimum threshold prescribed under Section 4 of the Code.”

It also declared a moratorium under Section 14 of the Code and appointed Mr. Kuldeep Tank as the Interim Resolution Professional. It also directed the Financial Creditor to deposit Rs. 2,00,000 in advance towards the initial costs of the Corporate Insolvency Resolution Process. The Tribunal recorded a total financial debt of Rs. 95,31,92,434, including interest till 14 November 2024.

Accordingly, the Bench admitted Narmada Extrusions into the Corporate Insolvency Resolution Process under Section 7 of the Code.