NCLT Mumbai Dismisses Insolvency Plea Against Ganesh Benzoplast Over Disputed Corporate Guarantee

The National Company Law Tribunal (NCLT) in Mumbai has dismissed an insolvency plea filed by UC Inclusive Credit Pvt. Ltd. against Ganesh Benzoplast Ltd.

It held that the application could not be admitted because the corporate guarantee relied upon by the lender is under challenge in multiple civil and criminal proceedings involving allegations of fraud and forgery.

A coram comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Sameer Kakar dismissed the plea seeking initiation of the corporate insolvency resolution process over an alleged default of about ₹6.25 crore.

"In view of the foregoing discussions, we are of the considered opinion that given the nature of fraud that may have been committed which itself is under scrutiny in multiple civil and criminal proceedings for legality and permissibility of the documents based on which the Petitioner/Financial Creditor secured the corporate guarantee is under dispute, the Adjudicating Authority is not inclined to allow the present application. Resultantly the present C.P.(IB)-1388 of 2025 is dismissed.", the Tribunal observed.

The Financial Creditor claimed it had sanctioned a ₹5 crore term loan to Agarwal Bulkactives Pvt Ltd (ABPL) on January 31, 2024 backed by a corporate guarantee allegedly executed by Ganesh Benzoplast on the same day. After repayment defaults from April 2024 the lender invoked the guarantee on August 1, 2025, alleging a default of ₹6.25 crore and filed the Section 7 petition.

Ganesh Benzoplast argued that the guarantee, board resolution and supporting documents were forged by its former CEO Ramakant Pilani, pointing to pending civil suits, FIRs and criminal investigations concerning the alleged fraud.

On the issue of debt and default, the Tribunal held that a Section 7 application cannot be admitted where the corporate guarantee and board resolutions are themselves under challenge for fraud in pending civil and criminal proceedings.

"As regards the Petitioner's contention regarding the facts relating to disbursement of the amount, consequent debt and default is concerned while one may agree with such proposition but the facts and circumstances surrounding such disbursements and consequent debt and default cannot be overlooked. The Petition under Section 7 filed by a Financial Creditor cannot be admitted unless the debt and default is established. In the present case though there is debt and consequent default but the same cannot be established against the Respondent herein in the wake of the surrounding circumstances where the respondent is not admitting issuance of such a guarantee.", the Tribunal said.

The Financial Creditor had argued that loan disbursement itself established debt and default. The Tribunal however, disagreed, holding that allegations of forged signatures and fabricated documents require adjudication through a regular civil proceeding and cannot be decided in summary proceedings under Section 7 of the IBC

"The Deed of Guarantee executed being claimed to be on account of fraud, the signatures and the Board Resolutions supporting such actions of opening bank account and executing Deed of Guarantee alleged to be fabricated. These aspects being disputed and consequent litigations being pursued by the Parties clearly limit the jurisdiction of this Tribunal in coming to a conclusion in respect of establishing of existence of debt and default."

Relying on the judgment in Tulip Hotel Private Ltd. (Suspended Board) v. JC Flowers Asset Reconstruction Pvt. Ltd, the Tribunal reiterated that fraud and forgery disputes involving contractual documents cannot ordinarily be adjudicated in summary proceedings under Section 7 of the IBC.

Finding that the alleged corporate guarantee was under a cloud of fraud and could not form the basis of summary insolvency proceedings, the Tribunal dismissed the insolvency petition.

For Applicant: Advocates Rohit Gupta a/w Syed Naser Ali Rizvi I/b Vertices Partners.

For Respondent: Advocates Nausher Kohli a/w Parag Khandhar, Tapan Radkar, Anaheeta Verma i/b DSK Legal