M/s.Trust Metals & Minerals Enterprises vs M/s. Siri Smelters & Energy Private Limited

The Corporate Debtor was incorporated on 18.01.2011 under the provisions of the Companies Act, 1956 and is in the business of manufacturing ferro alloys and all other products incidental to and connected with ferro alloys.

The Financial Creditor is a partnership firm represented by its partner, Shri Guttula Subbarao, having GSTIN number 37AALFT9344D1ZU and PAN number AALFT9344D.

The Managing Director of the Corporate Debtor, Shri Sajja Naga Mohan along with Ms. Sajja Jyothsna Sree approached the Financial Creditor and requested them to provide loan to the Corporate Debtor as the Corporate Debtor was in need of funds for meeting outstanding electricity dues essential for maintaining uninterrupted power supply to the industrial unit, and to meet the immediate working capital requirements for procurement of raw materials, production expenses, and other operational necessities. The Managing Director emphasized that timely infusion of funds was indispensable for maintaining continuity of business operations and preventing any operational downtime, which could otherwise lead to substantial losses and deterioration of the Corporate Debtor's financial position.

After detailed discussions and due deliberations, the Financial Creditor agreed to extend the financial assistance to the Corporate Debtor. Pursuant thereto, the Financial Creditor and the Corporate Debtor duly executed a Loan Agreement dated 03.04.2024, setting out the terms and conditions governing the loan transaction. In accordance with the said Loan Agreement, the Corporate Debtor availed a loan of Rs.4,50,00,000/-(Rupees Four Crores Fifty Lakhs Only) and unequivocally agreed to repay the principal amount together with interest at the rate of 18% (Eighteen Percent) per annum, calculated from the respective dates of disbursement of each tranche, until the full and final payment of the outstanding dues.

The Financial Creditor disbursed the entire loan amount of Rs.4,50,00,000/- through online bank transfers to the Corporate Debtor's designated bank account. The details of the disbursements made by the Financial Creditor are as follows: -

The Loan Agreement expressly provided that the entire outstanding principal along with the accrued interest shall be repaid on or before 31.08.2025. It was further agreed between the parties that the repayment shall be made in such a manner that the entire outstanding principal and accumulated interest are fully discharged on or before the aforesaid due date, without any delay, default, or deferment. The Corporate Debtor undertook to ensure timely repayment as per the contractual schedule, failing which the Financial Creditor would be entitled to invoke the remedies available under law and under the terms of the Loan Agreement.

However, despite the clear contractual obligation and the sufficient time granted for repayment, the Corporate Debtor failed to repay the loan amount on or before 31.08.2025 and has not made any payment towards the outstanding principal or the accrued interest till date, thereby committing a continuing default under the Loan Agreement. The Financial Creditor, upon the Corporate Debtor's failure to repay the loan by the stipulated due date, issued a Demand Letter dated 01.09.2025, calling upon the Corporate Debtor to forthwith clear the outstanding principal along with the accrued interest. In response, the Corporate Debtor, vide its reply, assured the Financial Creditor that the dues would be cleared and sought time for repayment. However, despite such assurances, the Corporate Debtor failed to make any payment till date, thereby confirming the continuing nature of the default.

The Financial Creditor several times made demands with the Corporate Debtor for repayment of due amount, but the Corporate Debtor failed in doing so. The Corporate Debtor requested some time for clearing the due amount. The Financial Creditor conceded to the requests made by the Corporate Debtor and waited for payment. Even after lapse of lot of time, the Corporate Debtor failed to clear the due amount.

The Financial Creditor extended financial assistance to the Corporate Debtor, which enabled the latter to run its business operations. The Corporate Debtor has duly received and utilised the entire loan amount. However, despite such assistance, the Corporate Debtor failed to honour its financial obligations and has consistently defaulted in repayment of the dues owed to the Financial Creditor.

As security for the due repayment of the loan amount along with interest and all other monies payable under the Loan Agreement, the Directors of the Corporate Debtor voluntarily agreed to execute personal guarantees in favour of the Financial Creditor. By executing such guarantees, the Directors undertook to be jointly and severally liable for the repayment of the entire loan amount, including accrued interest, penal charges, costs, and any other sums due under the Loan Agreement, in the event of default by the Corporate Debtor.

The Financial Creditor sufficiently established that there is a lawful financial debt between the Financial Creditor and Corporate Debtor. The present Petition filed by the Financial Creditor lucidly outlines the nature and description of the unpaid financial debt in accordance with the provisions of the Code and thus satisfies all the conditions for admission. There is an unpaid "Financial Debt" exceeding Rs.1 Crore, there is sufficient documentary evidence furnished by the Financial Creditor showing that the debt is due & payable and not been paid.

The Insolvency professional has given consent to act as Interim Resolution Professional (hereinafter referred to as the "IRP"), vide his communication dated 02.12.2025 and has also certified that he is eligible to be appointed as the IRP.

The Petition has been filed within the prescribed limitation period under the Code and is made in good faith.

The Petition is stated to comply with all the requirements under Section 7 of the Code based on the facts, documents, and information provided.

Copy of Master Data of the Corporate Debtor as Annexure-A at pages 34-35 of the Petition.

Copy of GST registration and Pan Card of the Financial Creditor as Annexure-B at pages 36-39 of the Petition.

Copy of Loan Agreement dated 03.04.2024 and Board Resolution dated 02.04.2024 as Annexure-C at pages 40-49 of the Petition.

Copy of bank statement of the Financial Creditor and acknowledgment receipt of the loan amount dated 03.07.2024 issued by the Corporate Debtor as Annexure-D at pages 50-59 of the Petition.

Copy of demand letter dated 01.09.2025 and reply of the Corporate Debtor as Annexure-E at pages 60-64 of the Petition.

Copy of interest calculation sheet and penal interest calculation sheet as Annexure-F at pages 65-66 of the Petition.

Copy of e-mails exchanged between the Financial Creditor and Corporate Debtor as Annexure-G at pages 67-69 of the Petition.

Copy of personal guarantee deed dated 03.04.2024 and promissory notes issued by the Corporate Debtor as Annexure-H at pages 70-78 of the Petition.

Copy of Income Tax Returns of the Financial Creditor for the financial year 2024-25 along with Balance Sheet and Notes as Annexure-I at pages 79-90 of the Petition.

Record of financial information filed with the NeSL (Form-C) as Annexure-J at pages 91-92 of the Petition.

Copy of written communication by the proposed IRP as Annexure-M at pages 95-98 of the Petition.

The Petition is barred by limitation under Article 137 of the Limitation Act, 1963, and therefore is liable to be dismissed at the threshold itself.

The Financial Creditor failed to establish any legally enforceable debt that is due and payable. The alleged claim is disputed, not supported by proper evidence, and therefore no “default” as defined under Section 3(12) of the Code has occurred. In the absence of both debt and default, the Petition is not maintainable.

The alleged claim has not crystallized and is contingent, disputed, and subject to reconciliation. Since there is no ascertained debt within the meaning of Section 3(11) of the Code, there can be no default, and the Petition deserves to be dismissed.

The Petition is a clear misuse of the Code, as this Adjudicating Authority is not a recovery forum for uncrystallised or disputed claims, and invocation of CIRP in such circumstances is legally impermissible.

The Corporate Debtor is engaged in the business of manufacturing ferro alloys. Due to disconnection of electricity by the electrical department, the manufacturing unit remained closed for more than one year, resulting in severe operational and financial distress. The Government of Andhra Pradesh, taking into consideration the genuine difficulties faced by the ferro alloys industry, recently reduced the applicable electricity tariffs, thereby providing substantial relief to such industries. In view of the said policy decision, the Corporate Debtor has a realistic and viable opportunity to revive its operations upon restoration of power supply. Hence, in the interest of justice and with a view to enabling revival of the Corporate Debtor, the Petition be kept in abeyance for six months, during which time the Corporate Debtor undertakes to revive its manufacturing operations.

The Hon'ble NCLAT in several instances held that the financial stress arising due to factors beyond the control of the Corporate Debtor cannot automatically be construed as default warranting insolvency. In view of the law laid down by the Hon'ble Supreme Court in Vidarbha Industries Power Ltd. v. Axis Bank Ltd, this Adjudicating Authority is vested with discretionary power under Section 7(5)(a) the Code to defer admission of a Petition, even where debt and default are alleged, The Hon'ble Supreme Court has categorically held that the Adjudicating Authority is not bound to mechanically admit a Petition upon mere proof of debt and default and may, having regard to the overall facts and circumstances, keep the Petition in abeyance, where admission would defeat the object of revival.

Admitting the Petition at this stage would seriously harm a viable industrial unit and go against the objective of the Code, which emphasizes revival rather than liquidation.

As per clause 4 of the Loan Agreement dated 03.04.2024, the Corporate Debtor undertook to repay the outstanding amount of Rs.4,50,00,000/-together with interest @ 18% per annum to the Financial Creditor on or before 31.08.2025. As per Part IV of the Petition, the date of default is mentioned as 31.08.2025, as the Corporate Debtor failed to repay the outstanding amount to the Financial Creditor on 31.08.2025. The relevant extracts of the clause 4 of the Loan Agreement dated 03.04.2024 are reproduced below:

On perusal of the records, the instant Petition was e-filed on 04.12.2025 and physically filed on 04.12.2025 vide Dairy No. 2434.

Therefore, we are of the considered view that the present Petition has been filed well within the limitation period of three years.

Under section 7 of the IBC, a Financial Creditor can initiate the CIRP by proving the existence of financial debt and default in its repayment, when it became due and payable.

As per the Loan Agreement entered into between the Financial Creditor and Corporate Debtor on 03.04.2024, the Financial Creditor agreed to extend interest bearing loan facility of Rs.4,50,00,000/- (Rs.1,00,00,000/-to be disbursed on the date of execution of the Loan Agreement and balance Rs.3,50,00,000/- in one or more tranches within a period of three months from the date of the Loan Agreement) subject to certain terms and conditions and covenants as mutually agreed between the parties. The interest on the loan amount was payable @ 18% per annum from the respective dates of disbursements, until full and final repayment of the entire outstanding loan. In case of delay or default in payment of interest or principle additional penal interest was also payable. The entire loan amount was repayable on or before 31.08.2025. The relevant extracts of the aforesaid Loan Agreement are reproduced below:

In terms of the aforesaid Loan Agreement, the Financial Creditor disbursed Rs.1,00,00,000/-, Rs.30,00,000/-, Rs.50,00,000/-, Rs.20,00,000/-, Rs.1,00,00,000/-, Rs.50,00,000/-, Rs.50,00,000/-, and Rs.50,00,000/- on 03.04.2024, 08.04.2024, 03.05.2024, 03.05.2024, 28.05.2024, 01.06.2024, 28.06.2024 and 03.07.2024 respectively from its bank accounts with ICICI Bank and enclosed with the Petition the statement of the aforesaid bank account. The relevant extracts of the above bank account are reproduced below:

The Corporate Debtor, in response to the email dated 01.09.2025 of the Financial Creditor along with the demand letter dated 01.09.2025, has acknowledged the debt vide its email dated 01.09.2025. The aforesaid emails are reproduced below:

In reply to the email of the Financial Creditor dated 27.11.2025, the Corporate Debtor vide email dated 28.11.2025 has again acknowledged the debt. The relevant extracts of the emails are reproduced below:

In view of the aforesaid discussions, we are of the considered view that there is a financial debt extended by the Financial Creditor to the Corporate Debtor and there is a default in repayment thereof, when it became due and payable on 31.08.2025 and the default exceeds the minimum threshold of Rupees One crore. In this regard, we also rely on the judgement dated 24.02.2026 of the Hon’ble Supreme court in the matter of Catalyst Trusteeship Ltd. vs. Ecstasy Realty Pvt. Ltd., 2026 INSC 186 (Civil Appeal No. 7424 of 2025, wherein the Supreme Court has observed as below:

Moratorium under section 14 (1) for prohibiting all of the following, namely:

The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor.

It is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period;

The provisions of sub-section of section 14(1) shall not apply to such transactions, agreements or other arrangement, as may be notified by the Central Government in consultation with any financial sector regulator or any other authority; and also to a surety in a contract of guarantee to a corporate debtor.

The supply of essential goods or services to the Corporate Debtor, as may be specified, shall not be terminated or suspended or interrupted during moratorium period, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period or in such circumstances, as may be specified.

The order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the Corporate Debtor under Section 33 as the case may be.

The term of appointment of Mr. Krishna Komaravolu shall be in accordance with the provisions of Section 16(5) of the Code ;

The aforesaid IRP shall submit an affidavit to this Adjudicating Authority within 7 days of this Order that his existing assignments including the present assignment are within the permissible limit of clause 22 of Code of Conduct specified in First Schedule to IBBI (Insolvency Professionals) Regulations, 2016

The aforesaid IRP shall also submit an affidavit to this Adjudicating Authority within 7 days of this Order that he is eligible to be appointed as IRP under Regulation 3 of IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016;

The IRP in the first meeting of the CoC shall make the requisite disclosure in terms of Regulation 7 of the IBBI (Insolvency Professionals) Regulations, 2016

In terms of Section 17 of the Code, from the date of this appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the IRP and the officers and the managers of the Corporate Debtor shall report to the IRP, who shall be enjoined to exercise all the powers, as are vested with the IRP and strictly perform all the duties as are enjoined on the IRP under Section 18 and other relevant provisions of the Code, including taking control and custody of the assets, over which the Corporate Debtor has ownership rights recorded in the balance sheet of the Corporate Debtor, etc. as provided in Section 18(1)(f) of the Code. The IRP is directed to prepare a complete list of the inventory of assets of the Corporate Debtor;

The IRP shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standards of ethics and moral;

The IRP shall cause a public announcement within three days as contemplated under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of the initiation of the CIRP in terms of Section 13(1)(b) read with Section 15 of the Code calling for the submission of claims against Corporate Debtor;

The IRP/RP shall also ensure that all the assets appearing in the Financial Statements on the CIRP date have been considered in the valuation report. The IRP/RP shall send individual communication through post or electronic means along with a copy of public announcement to all the creditors as per last available books of accounts / financial statements on the CIRP date of Corporate Debtor as prescribed under Regulation 6A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Corporate Debtor, its Directors, personnel and the persons associated with the management shall extend all cooperation to the IRP in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor;

The suspended Board of Directors is directed to give complete access to the books of accounts of the Corporate Debtor maintained under Section 128 of the Companies Act. In case, the books are maintained in the electronic mode, the suspended Board of Directors are to share with the IRP/ RP all the information regarding maintaining the backup and regarding service provider kept under Rule 3(5) and Rule 3(6) of the Companies Accounts Rules, 2014 respectively as effective from 11.08.2022, especially the name of the service provider, the internet protocol of the service provider and its location, and also address of the location of the books of accounts maintained in the cloud. In case accounting software for maintaining the books of accounts is used by the Corporate Debtor, then IRP/ RP is to check that the audit trail in the same is not disabled as required under the notification dated 24.03.2021 of the Ministry of Corporate Affairs. A reference is made to the provisions of Section 128(5) of the Companies Act 2013, whereby every company should maintain its books of accounts for not less than eight financial years immediately preceding a financial year. Minutes and statutory records are the principal documents of the company that should be maintained and preserved since inception.

In view of the above mandatory provisions, the suspended directors of the board will ensure that the books of accounts for the eight previous financial years preceding the date of this order be made available to the IRP/ RP within 15 days of the initiation of the CIRP order. The statutory auditor is also directed to share the records maintained by him in the course of the audit of the accounts of the Corporate Debtor for the period of three years prior to the date of initiation of this CIRP order within the same period of 15 days.

The IRP/ RP is directed to approach the government departments, banks, corporate bodies and other entities with request for information/ documents available with those authorities/ institutions/ others pertaining to the Corporate Debtor, which would be relevant in the CIRP. The government departments, banks, corporate bodies and other entities are directed to render the necessary information and cooperation to the IRP/ RP to enable him to conduct the CIRP as per law.

The IRP shall, after collation of all the claims received against the Corporate Debtor and the determination of the operational position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Adjudicating Authority on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the Committee within seven days of filing the report of constitution of the Committee;

The IRP shall also serve a copy of this order to all relevant statutory departments such as Income Tax, GST (Centre and State), Provident Fund, ESI etc. and also to trade unions, and employee associations to inform them about the commencement of CIRP.