IDBI Bank Ltd. vs Laxmi Oil & Vanaspati Private Ltd.

This Application has been filed on 30.05.2024 by the Applicant Financial Creditor namely, IDBI Bank Ltd. under section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the “IBC/the Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against the Respondent Corporate Debtor namely, M/s Laxmi Oil and Vanaspati Private Limited in Form 1 containing all the information as required in Part I, II, III, IV and V of the Form showing a total financial debt of Rs.50,22,31,631 till 31.03.2024 along with future and pendente lite interest @ 11.75% (MCLR i.e. 9.05%+ 2.70%) and declaring date of default to be 29.09.2019.

M/s Laxmi Oil and Vanaspati Pvt. Ltd., the Respondent/Corporate Debtor was incorporated on 23 April 2003, having its registered address at 704, KAN CHAMBER 7th FLOOR, 14/113, CIVIL LINES, KANPUR UP 208002. The Corporate Debtor is engaged in the production of Oil and Vanaspati.

The details of financial facilities provided by the Applicant Bank which resulted in debt under default are provided in the Application discussed herein as under.

The Corporate Debtor approached the Applicant Bank in the Year 2015 and requested to take over and enhance the credit facility already running with Bank of Baroda and submitted a letter of request dated 03-06-2015.

Upon the request of the Corporate Debtor, the Applicant Financial Creditor sanctioned Working Capital Facility in the form of Cash Credit Limit of Rs.30 Crore (Rupees Thirty Crore only) (hereinafter referred to as "Facility/cash credit facility") in favour of Corporate Debtor on the terms and conditions as stated in the Sanction Letter dated 07.09.2015. The said facility is repayable together with interest @ Bank's Base Rate (BBR 10%) plus 2.50% i.e. at 12.50% subject to change from time to time as per RBI Guidelines, with monthly rests, cost, and expenses.

The said financial facility of Rs.30 Crore of the Corporate Debtor was disbursed on 21-11-2015 through Cash Credit/Loan Account No. 0141655100000408, opened with the Bank in the name of the Corporate Debtor after having executed the loan and security documents on 19-11-2015 in favour of the Bank for securing the repayment of the loan, which was subsequently renewed in accordance with the terms and conditions stipulated in the sanction letter dated 03.07.2017 and also duly secured vide security documents executed on 14.07.2017 in continuation of the documents dated 19.11.2015 in favour of the Bank to secure the repayment of Cash Credit Limit/Facility of Rs.30 Crore.

For the purpose of securing the repayment of credit facility, the Corporate Debtor confirmed and allowed to Applicant to hold the title deeds of immovable properties as continuing security originally deposited on 07-12-2015 and entered in its record under Memorandum of Entry dated 07.12.2015 whereby the Corporate Debtor hypothecated all plant and Machinery and stocks with all moveable assets belonging to Corporate Debtor in favour of the Applicant Bank by way of first charge as security for the Cash Credit Limit and also for all indebtedness or liabilities of the Corporate Debtor to the Applicant bank together with interest, commissions, costs, charges and expenses payable to or incurred by the Bank. Guarantor of Corporate Debtor also mortgaged a land, the Gata No. 97, situated at Mauza Khan Chandrapur, Tehsil Akbarpur, District (in short "Mortgaged Property").

Existing credit facility is further extended for next one year on the terms and conditions mentioned in the sanction Letter dated 08.05.2018. The Corporate Debtor acknowledged the debt availed from the Applicant Bank vide confirmation of Security letter dated 27.04.2018 acknowledging debt and confirming that all the loan and security documents executed by them in favour of the Bank in respect of the Facility for the sum of Rs.30 Crore, are subsisting, valid and effective and are fully enforceable against them.

Applicant contends that after availing of aforesaid Cash Credit Limit/Facility from the Applicant Bank, the Corporate Debtor started committing breach of various terms and conditions of the sanction letters and Facility Agreements upon which the aforesaid Cash Credit Limit was granted, and they failed to liquidate the Bank's dues as per terms of Sanction Letter and Facility & Security Agreement.

The Corporate Debtor could not produce the necessary financial documents, stock statements, audited Balance Sheet and Income Tax returns etc. and also did not route out the sale proceeds through its loan accounts, and hence the loan account was considered as stressed. The borrower /corporate debtor thereafter defaulted on 29-09-2019, resulting into the loan account becoming irregular and subsequently classified as Non-Performing Assets on 29.09.2019.

As a consequence of default in repayment of the debt, the Applicant sent a Recall Notice to the Corporate Debtor dated 01.11.2019 along with its Guarantors on 18-11-2019 wherein the Applicant withdrew all the facilities and also demanded to Repay the entire debt availed by the Corporate Debtor within time as stipulated in the Recall Notice dated 01.11.2019.

The Corporate Debtor, after receiving the loan recall notice, and acknowledging the debts mentioned therein, submitted One-Time Settlement (in short OTS) proposal dated 21.01.2020 and offered to pay the part of the said amount of debts, which was not accepted by the Bank. In continuation of acknowledging its liability, the Corporate Debtor again submitted OTS by enhancing the amount vide another proposal letters dated 11.02.2020 & 26.11.2020 and requested to settle the dues. However, the Applicant Bank did not accept the same.

After the refusal of the aforesaid OTS proposal by the Applicant Bank, the Corporate Debtor sent another OTS proposals vide letter dated 14.01.2021, and again on 11.03.2022 and again on 21.07.2023 in which the debts/dues of the Applicant bank has been acknowledged. However, the Applicant did not accept the settlement proposals on the amount proposed/offered to be paid. Thereafter, again, the Debtor submitted OTS proposal dated 19.04.2024 for payment of 13.75 crores and also deposited Rs.1.15 Crore as pre-condition for submitting the OTS. However, Applicant Bank still did not find it reasonable to proceed with the OTS Proposal of the Corporate Debtor. Last such OTS proposal was submitted on 19.04.2024, which also rejected. Thus, the OTS proposals repeatedly submitted by the Corporate Debtor were rejected by the Applicant Bank due to the proposed amount in the OTS letters was found unreasonable as compared to the outstanding debt. Thereafter, the present Application u/s 7 has been filed on 30.05.2024 for initiation of CIRP against the Corporate Debtor.

On issuing of notice to the Corporate Debtor, neither any reply was filed nor any submission was made from the side of the Corporate Debtor. Therefore, this Tribunal vide order dated 11.06.2025 set the Corporate Debtor as ex-parte. The relevant order is reproduced as under: -

Subsequently, on 08.07.2025, Ld. Counsel for the Corporate Debtor Shri Shikhar Kaushal appeared and stated to represent the Corporate Debtor by filing vakalatnama. Thereafter, in the hearing held on 29.07.2025, he informed that an OTS proposal has been filed by the Corporate Debtor which is accepted by the Financial Creditor for which the Ld. Counsel for the Financial Creditor agreed to file an affidavit. Relevant part of the order dated 29.07.2025 is reproduced as under:

In compliance of the said order dated 29th July 2025, the Applicant Financial Creditor has filed an affidavit on 07.08.2025 wherein details of all the OTS letters submitted by the Corporate Debtor to Bank have been submitted informing that an OTS Letter dated 26.9.2024 was submitted after filing of the present section 7 Application, in which Rs. 18.24 crores have been offered to pay the outstanding dues but the Corporate Debtor failed to meet the terms of the Letter of Approval (hereinafter referred as “LOA”) issued by the Bank on the above OTS letter , and asked for some extension of time to make payments as per the terms further decided by the Bank, for which it was submitted in the affidavit that the request of Corporate Debtor is under scrutiny. The relevant part of the said affidavit is reproduced as under: -

It is also submitted by the Applicant that each OTS Letter given by the Corporate Debtor corroborates the acknowledgement of liability towards the Applicant bank and also extends the periods of limitation.

The Applicant has also filed Record of Default in Form-D in respect of debt and default details of which are given below:-

The Corporate Debtor being aggrieved by the order 11.06.2025 setting it exparte, filed an application bearing I.A. No. 617 of 2025 for recalling of said order along with condonation of delay of 16 days. This Tribunal vide order dated 16.9.2025 allowed the present application for recalling the ex-parte order as also for filing the reply. Further directed to file the written submissions if any, within a period of ten days by both the parties. The relevant part of this order is reproduced as under: -

As held by us, in the above order to allow the application filed by the Corporate Debtor for recall of the ex-parte order dated 11.6.2025, and as also for filing the reply, we have taken on record the said reply subject to payment of Rs.20,000 which was paid by the Corporate Debtor on 07.10.2025.

In the said reply, the Corporate Debtor admitted the existence of debt but explained the reason for which default has occurred as due to genuine financial distress and unforeseeable circumstances. However, it has been emphasized that admission of CIRP is not only remedy as the Corporate Debtor is actively working on a OTS proposals and also looking for potential investors to come up with a restructuring/refinancing plan.

In this reply, a chronological detail of submission of various OTS proposals have been provided which we have already discussed in this order. By referring to all these OTS proposals, efforts have been made by the Corporate Debtor for getting its OTS proposal approve by the Financial Creditor Bank. It has been submitted that the admission of CIRP against the Corporate Debtor would be premature, counter-productive and commercially unwise. Thus, Corporate Debtor prayed for reasonable time and support to effectuate payment and resolution of debt.

In counter to the affidavit filed by the Financial Creditor on 07.08.2025, the Corporate Debtor has also filed an affidavit on 08.10.2025 wherein it has submitted details of recent follow ups made by the Corporate Debtor for issuance of fresh LOA by the bank for payment of remaining OTS amount out of Rs.18.24 crores earlier approved by the Bank, which was under their consideration as mentioned in their affidavit filed on 07.08.2025. As submitted by the Corporate Debtor in their Affidavit, the Financial Creditor (Bank) finally issued a Letter of Approval (LoA) dated 29.09.2025, approving the Corporate Debtor's OTS proposal of Rs. 18.24 Crores towards full and final settlement of its dues subject to payment of initial amount of Rs. 2.9 crores which the Corporate Debtor claimed to have already paid and balance Rs. 15.34 crores are to be paid in three equal monthly instalments within 90 days. The Corporate Debtor further submitted in its affidavit that it remains fully committed to honouring the terms and conditions contained in the LoA and to ensuring due compliance with the payment schedule within the stipulated period/deadline, and therefore , it prayed that this Tribunal may monitor the progress of the OTS implementation and may consider deferring the present proceedings for a period of about 30 days, as within the said period, substantial clarity and progress are expected in the matter. The relevant part of the affidavit of the Corporate Debtor is reproduced as under:-

Subsequent to filing of affidavits by the Financial Creditor and Corporate Debtor as discussed above regarding the status of the OTS, four hearings were held on 28.10.2025,07.11.2025,11.11.2025 and 19.11.2025. In first three hearings, the matter was adjourned for some reason or other and also keeping in view the fact that the Corporate Debtor was given time for payment of three monthly instalments for the amount offered under OTS. Finally, on 19.11.2025, the Ld. Counsel for the Financial Creditor informed that the Corporate Debtor has failed to comply with the terms of LOA through which, the OTS was approved and insisted for final hearing of the case as the pleadings in this case had already been completed and written submission was also filed. However, the Ld. Counsel for the Corporate Debtor requested for some more time to meet the terms of OTS. The relevant part of the order passed by this Tribunal on 19.11.2025 is reproduced as under:-

Thus, as per our above order , we finally heard this case on 19.11.2025 after the Ld. Counsel for the Financial Creditor informed that OTS by the Corporate Debtor has not succeeded and having drawn our attention to the fact that the debt and default in this case is proved at the end of the Corporate Debtor from the NeSL Certificate as well as various OTS applications filed by the Corporate Debtor and also , considering the fact that its Counsel had nothing to say in defence on behalf of the Corporate Debtor except that there is some OTS proposal, which has already been forwarded to the Petitioner Bank but despite submitting repeated OTS proposals , the Corporate Debtor has so far failed to comply with the terms set by the Financial Creditor in its LOA and the outstanding debt is still not discharged. In our considered opinion, NCLT forum cannot be used by the Corporate Debtor for negotiation and finalisation of its OTS with the Financial Creditor and in the guise of pending OTS, the proceeding of CIRP cannot be kept in abeyance for an indefinite time, therefore we decided not to keep this Application pending and finally heard the case.

The Respondent Corporate Debtor submitted that it proposed for One Time Settlement vide the letters, amongst others, dated 07.12.2020, 06.06.2021, 4.03.2022, 20.7.2024 and 02.08.2025 which were not accepted by the Applicant Financial Creditor. Further, the Respondent Corporate Debtor raised amount from 13.05 to 17 Cr, and also deposited the upfront amount of Rs. 1.90Cr, as evident from the affidavit dated 07.08.2025 filed by applicant financial creditor.

It is also submitted that the Respondent Corporate Debtor vide letter dated 19.09.2025 raised the amount to 18.24Cr and deposited further 1.0 Cr making the total upfront amount as Rs.2.90Cr, as sought by the applicant financial creditor. This proposal has been duly accepted by the Applicant financial creditor as evident from the affidavit dated 08.10.2025 filed by the respondent corporate debtor. In this respect, Corporate Debtor has placed reliance on the case of IFCI Ltd Vs M/s Patil Construction & Infrastructure Ltd. C.P.(I.B.) No. 142/MB/2023 NCLT Mumbai Bench, Court V was dealing with issue whether the existence of alleged binding OTS arrangement bars admission of the petition under section 7 of the Code and held that: -

Written submission has also been filed by the Financial Creditor wherein all the details of debt and default and its subsequent acknowledgement in various OTS proposals filed by the Corporate Debtor have been provided as already discussed in the order and hence not repeated for the sake of brevity. A substantial amount of debt is still outstanding despite numerous OTS filed repeatedly by the Corporate Debtotr and very little amount has been paid as compared to amount proposed in the OTS letters, which was successively enhanced to Rs. 18.24 crores but only Rs. 2.9 crores are paid so far, and thus prayer has been made to admit the Application as the same is filed within limitation.

We have heard the Ld. Counsel for the Applicant and perused the records, exhibits/annexures and after considering arguments advanced by respective Learned Advocates, the main issues which are before us to be decided in respect of the present Application u/s 7 are:

With regard to the first issue of filing of this Application within limitation period is concerned, we find that after availing of the credit facility in 2015 and its successive renewal from time to time, the Corporate Debtor defaulted in its repayment since 29.09.2019 being the date of default as mentioned in Part-IV of the Application. The same date of default is also mentioned in the NeSL certificated issued in Form D. After the default has occurred and consequently a recall notice dated 01.11.2019 has also been issued by the Financial Creditor, the Corporate Debtor though made endeavour for repayment of the cash credit facility by offering OTS proposals successively on various dates on 21.01.2020, 11.02.2020, 26.11.2020, 14.01.2021, 11.3.2022, 02.11.2022, 21.7.2023, and 19.4.2024, all these OTS Proposals could not be complied with and substantial amount of debt still remained outstanding. Consequently, the present Application has been filed on 30.05.2024 after the first date of default being 29.09.2019 and thereafter, having been acknowledged continuously through successive OTS letters till 19.04.2024. Therefore, we find that the present application has been filed within three years of the limitation period as provided in Article 137 of the Limitation Act, 1963 read with section 18 of the Limitation Act, as per which such acknowledgement of liability by the Corporate Debtor has further extended the period of limitation much beyond the year 2024 in which this Application has been filed. The Corporate Debtor has also not filed any objection either in its reply or in written submission challenging the present Application on the ground of limitation. In view of above facts and there being no objection from the Corporate Debtor on the point of limitation, we hold that the present Application has been filed within limitation.

As regards the second issue of whether there is a debt and default or not, we noted from the record that in this case, neither the existence of a legally payable debt nor default in paying the said debt is disputed. The Ld. Counsel of the Corporate Debtor while making his submission in the hearing held on 19.11.2025 has admitted that the Corporate Debtor has taken loan from the Applicant Bank and despite various OTS, a substantial amount of this loan is still outstanding. Default in repaying the said debt is undisputedly established by the NeSL certificate filed in Form D in which the default amount of Rs. 49.9 crores with date of default shown as 29.09.2019 is authenticated. The only defence of the Ld. Counsel representing the Corporate Debtor is that there is some OTS proposal, which has already been forwarded to the Petitioner Bank.

We have already dealt with the details of various OTS proposals submitted by the Corporate Debtor in earlier part of this order. Despite such various OTS Proposals, a substantial amount of debt is still outstanding. The total amount of loan disbursed is Rs. 30 crore and along with interest, the total outstanding amount of Rs. 50.22 crore is shown in the Application filed u/s 7 of the Code. In the latest OTS dated 19.09.2025, the Corporate Debtor raised the amount of OTS to Rs. 18.24 crores but the total amount so far deposited is only Rs.2.9 crores. For balance amount of Rs. 15.34 cores , it is submitted by the Corporate Debtor that the Bank has accepted the undertaking of the Corporate Debtor and, as per the terms of the LoA, directed that the balance amount of Rs. 15.34 Crores be deposited in three equal monthly instalments within 90 days. However, in the hearing held on 19.11.2025, the Ld. Counsel for the Financial Creditor informed that the terms of the OTS has not been complied with, and therefore balance amount proposed to be paid in OTS is still outstanding.

The above facts establish that Corporate Debtor has failed to repay its debt. Thus, the ‘debt’ and ‘default’ on the part of the Corporate Debtor is clearly proved. Therefore, we do not see any reason as to why the present application is not to be admitted under section 7 for starting CIRP against the Corporate Debtor keeping in view the provision of section 7(5) and the decision the Hon’ble Supreme Court in case of M/S. Innoventive Industries Ltd. Vs ICICI Bank & Anr. (Civil Appeal Nos. 8337-8338 OF 2017) dated 31.08.2017 wherein it is held that “The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete”. The same position of law has been reiterated again in the judgment delivered by the Hon’ble Supreme Court in case of M. Suresh Kumar Reddy vs Canara Bank and others, reported in (2023)8 SCC 387. On the issue of admission of the Application u/s 7 during the time period when OTS proposal is submitted by the Corporate Debtor to the Financial Creditor awaiting its consideration for approval, the Hon’ble NCLAT in its recent judgment in case of Rajender Kumar Pahwa v. Canara Bank and Ors., (2025) ibclaw.in 697 NCLAT that “ in the guise of pending OTS the proceeding of CIRP may not be kept in abeyance for a long time.” and “the OTS proposal cannot be claimed by a borrower as a matter of right” . The relevant part of this decision is reproduced as under:

Decision of Coordinate Mumbai Bench in case of IFCI Ltd Vs M/s Patil Construction & Infrastructure Ltd(supra) as relied upon by the Corporate Debtor is not applicable in the present case as in that case substantial payments under OTS have already been made, which is not case here, and also, in view of the judgment of Hon’ble NCLAT in case of Rajender Kumar Pahwa v. Canara Bank(supra) that the OTS proposal cannot be claimed by a borrower as a matter of right, we are not inclined to follow the judgment of coordinate Mumbai Bench cited by the Corporate Debtor.

Thus, in view of our aforesaid findings and analysis, the Applicant/ Financial Creditor has proved that there is a ‘debt’ and ‘default’ on the part of the Corporate Debtor and outstanding debt is more than the threshold limit of Rs.1 crore. The application is also filed within limitation period and complete in all respect. The registered office of the Corporate Debtor is located in Kanpur, and hence this Tribunal has jurisdiction to decide the matter. A resolution professional is also proposed as per section 7(3)(b). Accordingly, the present application under Section 7, has been found fit fulfilling all the conditions for admissions of the Application and initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor i.e. M/s Laxmi Oil & Vanaspati Private Limited, and hence this Tribunal allow this application and order to initiate the CIRP against the Corporate Debtor.

We note that the Financial Creditor has proposed the name of an Insolvency Professional to be appointed as Insolvency Resolution Professional ('hereinafter referred as ‘IRP') in Part-III of the Application. The name of Mr. Rohit Sehgal is proposed to be appointed as IRP having Registration Number: IBBI/IPA-001/IP-P00528/2017-2018/10953, Email ID: [email protected] R/o- A-604, Sujjan Vihar, Sector-43, Gurgaon, Haryana ,122002. The IRP has duly given the consent in Form No. 2 dated 03.02.2024 annexed as Annexure- II with the Application. The Law Research Associate of this Tribunal, Ms. Ankita Sharma, has checked the credentials of Mr. Rohit Sehgal, and found that there are no disciplinary proceedings pending against the proposed Insolvency Professional and also there is nothing adverse against him. Upon verification from the website of IBBI, it is found that Insolvency Professional holds valid authorization till 31.12.2025. After considering these details, we appoint Mr. Rohit Sehgal having registration No. IBBI/IPA-001/IP-P00528/2017-2018/10953, as Interim Resolution Professional (IRP).

Accordingly, this application is admitted u/s 7 of the Code, 2016, under the following terms and conditions.

We direct the Financial Creditor to deposit a sum of Rs. 2,00,000/-with the Interim Resolution Professional, to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The amount, however, is subject to adjustment by the Committee of Creditors as accounted for by the Interim Resolution Professional on the conclusion of CIRP.

A certified copy of the order shall be communicated to both the Applicant Financial Creditor and the Respondent Corporate Debtor. The learned counsel for the Applicant Financial Creditor shall deliver a certified copy of this order to the IRP forthwith. The Registry is also directed to send a certified copy of this order to the IRP at his e-mail address forthwith.

List CP (IB) 119/ALD/2024 on 16.01.2026 for filing of the progress report/further proceeding.