Shashwat Enterprises vs Labhanshi Agritech Private Limited

The case is fixed for pronouncement of the order. The order is pronounced in open Court vide separate sheet.

This Company Petition has been filed by M/S SHASHWAT ENTERPRISES (“Financial Creditor”), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against LABHANSHI AGRITECH PRIVATE LIMITED (“Corporate Debtor”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for having committed a default in payment of its financial debts amounting Rs. 2,78,07,500/- (Rupees Two crore Seventy Eight Lakh Seven Thousand Five Hundred only) as on 31.03.2025. (being the due date as per the Loan Agreement dated 04.12.2024)

Perusal of Part-I of the Form-1 indicates that the Financial Creditor is Shashwat Enterprises Through its Sole Proprietor Pushpendra Jain, having its registered office at 68, Agar Road, Chimanganj Mandi, Ujjain, Madhya Pradesh - 4560 06,

Perusal of Part-II of the Form-1 indicates that the Corporate Debtor is one Labhanshi Agritech Private Limited , CIN: U15100MP2021PTC057591, having its registered office at, 410- Apollo Tower 2 M.G. Road, Indore, M.Р. -452 001.

Perusal of Part-III of the Form-1 indicates that the applicant has nominated Navin Khandelwal , as Insolvency Professional, having Registration No. IBBI/IPA-001/IPP00703/2017-2018-11301, E-mail: navink25@yahoo.com to act as Interim Resolution Professional (“IRP”). The proposed IRP has given written communication as per the requirement of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,2016 (Annexure-A14). That the proposed interim resolution professional has a vaild AFA, having AFA certificate no. AA1/11301/02/311225/107818, and is valid upto 31-12-25, however as per IBBI website it is observed that the AFA is valid upto 31^st December 2026.

Perusal of Part-IV of the Form-1 reveals that the total amount in default is claimed to be Rs.2,78,07,500/- .

It is stated that the respondent had approached the Applicant in the month of November, 2024 requesting for a short term unsecured loan up-to Rs.2,50,00,000/- (Rupees Two Crore Fifty Lakh only), to meet its urgent working capital and other financial requirements. A Loan Agreement dated 04.12.2024 was executed among the parties as per the terms of the agreement, the loan amount was to be disbursed by the Applicant on or before 31.12.2024 to the Respondent, who in turn agreed to repay the said amount till 31.03.2025 along-with interest calculated @1.5% per month. It was further agreed that, in case the Respondent fails to repay the amount on due date it shall pay an additional penal interest calculated @ 3% per month over and above the normal interest till the actual date of payment.

The corporate Debtor has disbursed the loan amount to the tune of Rs.2,27,00,000/- (Rupees Two Crore Twenty Seven Lakh Eighty Thousand only) in various tranches via banking channel which were duly received by the Respondent. It has disbursed the loan amount in the following tranches through banking channel:

(a)

On 31.03.2025, the Corporate Debtor defaulted in repaying the outstanding principal along with accrued interest under the Loan Agreement, following which the Financial Creditor repeatedly demanded payment through letters dated 14.04.2025, 10.05.2025 and a Demand Letter dated 26.05.2025, while the Corporate Debtor, despite giving successive verbal assurances and specific timelines for payment in April and May 2025, failed to honour its commitments and did not clear the outstanding dues, including normal and penal interest, necessitating the present action

Following the Demand Letter, representatives of the Corporate Debtor met the Financial Creditor on 03.06.2025, admitting financial distress and promising to issue three post-dated cheques to secure repayment. However, no cheques were issued, and instead, by letter dated 26.06.2025, the Corporate Debtor sought an additional 15 days citing financial constraints. Considering their long-standing business relationship, the Financial Creditor granted a final opportunity to make payment, but the Corporate Debtor failed to act or honour its commitments. Consequently, the Financial Creditor issued a Demand Notice dated 31.07.2025 (sent via email on 02.08.2025), calling upon the Corporate Debtor to clear the outstanding dues with interest within seven days, yet no reply or payment was received.

The copy of bank account statement of the financial creditor depicting the disbursal of the loan amount to the corporate debtor is annexed here as ANNEXURE-A3 and Copy of the bank statement of the Financial Creditor for the period 01.04.2025 to 22.07.2025 as per the provisions of the Bankers Books of Evidence Act is here annexed as ANNEXURE-4 and the copy of the ledger of the corporate debtor as maintained in the books of accounts of the Financial Creditor is here annexed as ANNEXURE-6

The Applicant issued multiple reminders and letters , dated 14.04.2025 & 10.05.2025, to the corporate debtor for the payment of outstanding amount of Rs. 2,27,00,000/-. The failure of which the Applicant had to issue Demand letter, dated 26^th May,2025 for the payment of outstanding dues along with its pending interest and penal interest.

The copy of the letter dated 26.06.2025, sent by the corporate Debtor to the Financial Creditor acknowledging its liability qua the outstanding dues is here annexed herewith as ANNEXURE-8.

It is observed that the certificate of NESL i.e. Form-C dated 13.08.2025 is placed on record indicating a default date of 31/03/2025 , with the Part-A remarks as “ The Financial Creditor has given an unsecured loan to the corporate debtor as per loan agreement dated 04.12.2024 and the corporate debtor has failed to repay the loan amount on the due date i.e. 31.03.2025” , thus affirming the occurrence of debt & default. The applicant has also complied with the procedure for generation of Form-D and the generation of Form-D is still under process by NESL. In the light of the above, the applicant undertakes to file the Form-D immediately upon recipe of the same.

The Applicant/Financial Creditor has relied upon the following documents in order to prove the existence of the debt:-

The deponent has given a substantive reply addressing the applicant’s claims and arguments without responding paragraph-wise. No statement should be treated as admitted unless expressly accepted. The Board Resolution authorizing the present deponent is attached as Annexure-R1.

It is contended that the present petition is not maintainable as it is defective under Section 7 of the Insolvency and Bankruptcy Code, 2016 and the I&B (Application to Adjudicating Authority) Rules, 2016. The petition is further alleged to be legally infirm and liable to dismissal for non-compliance with Rule 34(4) of the NCLT Rules, 2016, which mandates verification of every petition through an affidavit in Form NCLT-6. The petitioner’s failure to follow this requirement, along with the affidavit being inadmissible under the Indian Stamp Act, 1899 (as applicable in Madhya Pradesh), renders the verification and the petition itself legally unsustainable.

It is submitted that under Article 4 of Schedule 1-A of the Madhya Pradesh Stamp Act, an affidavit must bear stamp duty of ₹100, which the petitioner has failed to pay. Since an insufficiently stamped instrument is legally inadmissible, the affidavit is void under Section 35 of the Stamp Act. As a result, the petition, lacking a valid supporting affidavit, cannot be acted upon until the deficiency is rectified and the applicable penalty is paid.

The petition is contended to be misconceived as it has been filed in the name of “M/s. Shashwat Enterprises,” a sole proprietorship, which lacks a separate legal identity. Under Section 3(23) of the Insolvency and Bankruptcy Code, 2016, a sole proprietorship is not recognized as a “person” and therefore cannot act as a financial creditor or institute proceedings in its own name. The petitioner, Mr. Pushpendra Jain, has neither filed the petition in his individual capacity as proprietor nor provided documentary proof of his proprietorship or identity. Owing to these deficiencies and incorrect description of the financial creditor, the petition lacks locus standi and is liable to be dismissed.

The petition is stated to be incomplete and non-compliant with mandatory requirements under the Insolvency and Bankruptcy Code, 2016, as the petitioner failed to attach the Record of Default (Form D) from the Information Utility (NeSL). Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017 requires a financial creditor to file default information with the Information Utility before submitting a Section 7 application. Since this requirement is mandatory, the absence of the NeSL record—being the primary evidence of debt and default—renders the petition defective and insufficient to justify initiation of the Corporate Insolvency Resolution Process (CIRP).

That promoters of the company are working days and nights to ensure that the company's operational performance is brought at right pace and so that the debts are paid off. The Respondent is confident that if the matter is deferred for an year, the Respondent would be in position of clearing all of its debts.

That in view of the above solvent and running status of the company, the CIRP cannot be initiated under IBC. In this regards the findings of Hon'ble Supreme Court in Vidarbha Industries Power Limited Vs. Axis Bank Limited in Civil Appeal No. 4633 of 2021 is important, which are as under:

The copy of said Hon'ble Supreme Court judgement dated 12.07.2022 in the matter of Vidarbha Industries Power Limited Vs. Axis Bank Limited in Civil Appeal No. 4633 of 2021 is attached herewith and marked as ANNEXURE R2.

All objections raised by the Corporate Debtor are factually incorrect, legally untenable, and unsupported by evidence. The Petition satisfies all statutory requirements of Section 7, and the Corporate Debtor has itself acknowledged the liability in writing. The defences are merely dilatory and do not rebut the core ingredients: existence of debt, disbursal, and default and therefore, CIRP may kindly be initiated against the Corporate Debtor.

We have heard the counsel for the applicant and have perused the records. The Observations of the Tribunal are follow as under: -

This is a petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by M/S SHASHWAT ENTERPRISES (“Financial Creditor”) seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against LABHANSHI AGRITECH PRIVATE LIMITED (“Corporate Debtor”) for default in repayment of a financial debt amounting to Rs.2,78,07,500/- as on 31.03.2025.

The brief facts, as stated by the Financial Creditor, are that in November 2024, the respondent sought a short-term unsecured loan of up to ₹2.5 crore from the applicant to meet urgent financial needs. A Loan Agreement dated 04.12.2024 was executed, under which the applicant was to disburse the loan by 31.12.2024, and the respondent agreed to repay it by 31.03.2025 with interest at 1.5% per month and an additional 3% penal interest in case of default. Pursuant to the agreement, the applicant disbursed ₹2.27 crore in multiple tranches through banking channels, which were duly received by the respondent.

It is further stated that the applicant sent several reminders and letters on 14.04.2025 and 10.05.2025 to the corporate debtor seeking payment of the outstanding ₹2.27 crore. Upon continued default, the applicant issued a Demand Letter dated 26.05.2025, calling for payment of the outstanding dues along with accrued and penal interest

The record includes an NeSL certificate (Form-C) dated 13.08.2025, which shows the default date as 31.03.2025 and confirms that the financial creditor had granted an unsecured loan under the agreement dated 04.12.2024, which the corporate debtor failed to repay on time. The applicant has also followed the process for generating Form-D, which is currently under preparation by NeSL, and has undertaken to submit it upon receipt.

The Corporate Debtor, in its affidavit in reply, contests the maintainability of the petition. It is contended that the that the petition is defective and not maintainable under Section 7 of the Insolvency and Bankruptcy Code, 2016, for multiple procedural and legal deficiencies. It is argued that the petition violates Rule 34(4) of the NCLT Rules, 2016, as the mandatory affidavit in Form NCLT-6 is improperly verified and inadequately stamped, making it inadmissible under the Madhya Pradesh Stamp Act, 1899.

Further, the petition was wrongly filed in the name of “M/s. Shashwat Enterprises,” a sole proprietorship with no separate legal identity, without proof of proprietorship or identity of Mr. Pushpendra Jain, thereby lacking locus standi. Additionally, the petitioner failed to annex the mandatory Record of Default (Form D) from NeSL, contrary to Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017.

The respondent also submits that the company is solvent and actively working to clear its debts, and therefore, CIRP cannot be initiated. Reliance is placed on the Supreme Court’s judgment in Vidarbha Industries Power Limited v. Axis Bank Limited (Civil Appeal No. 4633 of 2021), emphasizing that the financial health and viability of a company are relevant considerations before admitting a Section 7 application.

The Financial Creditor, on the other hand, refutes all objections raised by the corporate debtor as baseless. It is asserted that the affidavit accompanying Form-1 is duly stamped, notarized, and in the prescribed format, satisfying Rule 34(4) of the NCLT Rules, 2016, and that vague claims of improper stamping lack evidentiary support. The maintainability objection is also rejected, as the petition was filed by the sole proprietor himself, with proof of proprietorship established through the GST Registration Certificate, and settled law recognizes that a proprietorship and its proprietor are legally identical. The objection regarding the absence of Form D is termed untenable since courts, including in Vijay Kumar, have held that submission of Form D is not mandatory, and default can be proven through other reliable documents such as the loan agreement, bank records, and debt acknowledgments. Lastly, reliance on the Vidarbha Industries judgment is deemed misplaced because the corporate debtor has provided no financial statements to prove solvency, and the case applies only to exceptional circumstances—whereas the present matter involves admitted debt, disbursal, and default.

The amount of default as evidenced is Rs. 2,78,07,500/- which exceeds the minimum threshold prescribed under Section 4(1) of the Code. The petition, therefore, satisfies all requirements of Section 7(3) read with Rule 4 of the Adjudicating Authority Rules, 2016.

The application is complete in all respects and the proposed Interim Resolution Professional, Mr. Navin khandelwal, (IBBI/IPA-001/IPP00703/2017-18/11301), has submitted her written communication in Form 2, confirming his eligibility and consent to act as Interim Resolution Professional.

Upon perusal of the documents and after hearing both sides, this Adjudicating Authority finds that the debt and default committed by the Corporate Debtor are duly established. There is no material on record disproving the Financial Creditor’s claim. The petition is liable to be admitted.

Further, the Hon'ble Supreme Court in the case of Innoventive Industries Limited v. ICICI Bank Limited, where it has discussed extensively the scope of the Adjudicating authority under section 7 of the IBC is limited to assessing the records provided by the financial creditor to satisfy itself that the default has occurred:

Thus as per the evidence produced before us, keeping in view the law as discussed above and as per the terms and conditions of the said loan agreement the corporate Debtor had to pay the dues in discharge of its obligation. The corporate debtor was irregular in the payment and committed default in payment. Despite various demand notice/reminder letters, the corporate debtor had not made any efforts to make payments of the dues on the respective due dates. Therefore, the said debt has remained due, defaulted and payable since then. The application filed under section 7 of IBC,2016 r.w. rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of corporate Insolvency Resolution Process of the corporate Debtor and the present case is fit to initiate CIRP of the corporate Debtor

Navin Khandelwal , as Insolvency Professional, having Registration No. IBBI/IPA-001/IPP00703/2017-2018-11301, E-mail: navink25@yahoo.com to act as Interim Resolution Professional (“IRP”). The proposed IRP has given written communication as per the requirement of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,2016 (Annexure-A14). That the proposed interim resolution professional has a vaild AFA, having AFA certificate no. AA1/11301/02/311225/107818, and is valid upto 31-12-25 however as per IBBI website the AFA of the IP has been extended upto 31^st December 2026. The proposed IRP is to carry out the functions as per Sections 17, 18, and 19 of the Code. It is further made clear that all personnel connected with the Corporate Debtor, its Promoter, or any other person associated with management of the Corporate Debtor are under legal obligation as per Section 19 of the Code to extend every assistance and co-operation to the Interim Resolution Professional. Where any personnel of the Corporate Debtor, its Promoter, or any other person required to assist or co-operate with IRP, do not assist or co-operate, the IRP is at liberty to make the appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.