NCLT Admits Bank of India Insolvency Plea Against Supreme Engineering, Rejects Section 10A Defence

On 23 June, the Mumbai Bench of the National Company Law Tribunal (NCLT) admitted Bank of India's Section 7 petition against Supreme Engineering Limited over a default of Rs. 117.50 crore, holding that Section 10A of the Insolvency and Bankruptcy Code, 2016 does not shield post-COVID defaults from insolvency proceedings.

Judicial Member Nilesh Sharma and Technical Member Sameer Kakar admitted the petition, imposed a moratorium and appointed S. Gopalakrishnan as the Interim Resolution Professional (IRP). Rejecting the Corporate Debtor's objections based on Section 10A, limitation, pending DRT proceedings and the interim moratorium under Section 96, the Bench held:

“Furthermore, a perusal of the record and the sanction terms agreed upon between the parties reveal that the Corporate Debtor also defaulted on two other credit facilities—namely, the Covid Emergency Support Scheme (CESS) and the Guaranteed Emergency Credit Line (GECL). These defaults occurred outside the protective window of Section 10A. Consequently, the plea of Section 10A bar raised by the Corporate Debtor cannot be sustained.”

Section 10A permanently bars insolvency proceedings for defaults that occurred during the COVID-19 protected period between 25 March 2020 and 24 March 2021.

Bank of India filed the Section 7 application on 10 July 2025 seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Supreme Engineering Limited. It alleged a default of Rs. 117.50 crore as on 2 March 2025 under various facilities, including cash credit, CESS and GECL facilities. It also classified the account as a non-performing asset (NPA) on 19 August 2021 and identified 20 May 2021 as the date of default.

The Corporate Debtor argued that the actual default occurred during the COVID-19 protected period and therefore attracted the bar under Section 10A.

The Tribunal rejected the contention and found that the Corporate Debtor had defaulted not only under the cash credit facility but also under the CESS and GECL facilities, both of which fell outside Section 10A's protection. It further noted that the GECL default alone exceeded the threshold prescribed under Section 4 of the IBC.

Moreover, the Bench also held that the petition was within limitation. It observed that although the default occurred on 20 May 2021, the Corporate Debtor repeatedly acknowledged its liability through multiple One-Time Settlement (OTS) proposals, thereby extending the limitation period under the Limitation Act until 2 February 2028.

It rejected the Corporate Debtor's argument that pending DRT proceedings and measures initiated under the SARFAESI Act barred the insolvency proceedings, holding that SARFAESI and DRT proceedings serve as recovery mechanisms, whereas CIRP aims to resolve and revive the corporate debtor. The Members observed:

“Consequently, the pendency of or any interim reliefs granted in parallel recovery proceedings before the DRT do not pose a legal impediment to the initiation of CIRP herein.”

The Tribunal also rejected the Corporate Debtor's submission that the interim moratorium under Section 96, triggered by personal insolvency proceedings against the guarantors, prevented initiation of CIRP against the company. It held that the moratorium under Section 96 applies only to the concerned personal guarantors and does not prohibit insolvency proceedings against the corporate debtor.

Accordingly, the NCLT admitted the petition and commenced CIRP against Supreme Engineering Limited.