NCLT Kolkata Admits CIRP Against Saket Infra, Rules FRR Framework Cannot Bar Insolvency Proceedings

The National Company Law Tribunal at Kolkata on 17 February, held that the RBI's Framework for Revival and Rehabilitation (FRR) for MSMEs cannot override the Insolvency and Bankruptcy Code or prevent a financial creditor from initiating insolvency proceedings once default is established.

A Bench comprising Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra observed that the plea of MSME protection was unsustainable in the absence of any contemporaneous MSME certificate produced before the lender during loan sanction or restructuring, while admitting an insolvency petition filed by Aditya Birla Finance against Saket Infra Developers Pvt Ltd.

The Tribunal Observed:

“The plea of MSME protection is also unsustainable. No contemporaneous MSME certificate was produced before the Applicant during sanction/restructuring. Even assuming MSME status, the FRR Framework cannot override IBC nor prevent a financial creditor from initiating CIRP once default is established.”

Aditya Birla Finance had disbursed an aggregate amount of Rs. 8.18 crore to Saket Infra under multiple loan facilities between 2016 and 2021, including restructured facilities sanctioned on 6 July 2021 and formalised through an agreement dated 14 July 2021.

The debtor's loan account was classified as a non-performing asset (NPA) on 13 November 2023, after dues remained unpaid for more than 90 days.

The corporate debtor opposed the petition, claiming protection as a Micro, Small and Medium Enterprise (MSME), and argued that the lender was required to follow the May 2015 FRR Framework before declaring the account NPA or initiating insolvency proceedings.

Rejecting these defences, the Tribunal held that no MSME registration was ever furnished to the financial creditor at the time of sanction, restructuring, or prior to the NPA classification. The bench further held that even assuming MSME status, the FRR Framework cannot override the IBC or bar initiation of CIRP once financial debt and default are established.

Accordingly, the Tribunal found that the existence of financial debt and default had been proved and admitted the petition, initiated CIRP against Saket Infra, and appointed Mahesh Gupta as the interim resolution professional.

For Financial Creditor: Advocates Shaunak Mitra, Amit Kr. Nag, Ranjabati Ray, Saptarshi Kar