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Judgment
ORDER
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[PER: CORAM]
1. BACKGROUND
C.P. (IB) No.1172/MB/2025 (Application) was filed on 14.10.2025 by Union Bank of India the Financial Creditor (FC), having PAN: AAACU0564G 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 initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of Future Brands Limited the Corporate Debtor having CIN No. U74999MH2006PLC165722.
This Application has been affirmed by one Mr. Sidhartha Mhade, authorised signatory of the Applicant vide Power of Attorney signed in Board Resolution passed on 06.12.2008.
As per Part IV of the Application, the amount claimed to be in default is Rs.114,17,86,044.81/- (Rupees One Hundred Fourteen Crore Seventeen Lakhs Eighty-Six Thousand and Forty-Four and Eighty-One Paisa Only).
The date of default is stated as 28.02.2023.
The Applicant has proposed the name of Mr. Kanak Jani, an Insolvency Professional , having Registration No. IBBI/IPA-001/IP-P-01757/2019-20/12685, to act as the Interim Resolution Professional (IRP) (having valid Authorisation for Assignment up to 31.12.2026) (as per IBBI site), in case the Application is Admitted.
2. CONTENTIONS OF APPLICANT (FC)
It is stated that the Applicant is a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and is engaged in the business of banking. It is regulated by the Reserve Bank of India under the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949.
The Corporate Debtor is a company engaged in the business of brand consulting and management, including the development and implementation of brand and marketing strategies to assist businesses in enhancing growth and visibility
The Corporate Debtor approached the Financial Creditor seeking sanction of a Term Loan Facility for part financing the acquisition of certain brands (viz., Pink & Blue, Shatranj, Shyla, Studio NX, CTee, and Haute & Spicy), development of brands, and payment of advance/ deposit for print and outdoor media. The total debt requirement of the Corporate Debtor was Rs.540 Crore.
Based on the request of the Corporate Debtor, the Financial Creditor sanctioned a Term Loan of Rs.260 Crore (Rupees Two Hundred Sixty Crore only) vide Sanction Letter No. IFB:ADV:DS: 18-19 dated 18.03. 2019, which was duly accepted by the Corporate Debtor. The Sanction letter is attached as Annexure A9 to the Application.
The Corporate Debtor executed the requisite Financing and Security Documents in favour of the Financial Creditor including
a. Board Resolution dated 19.03.2019 authorising the availing of credit facilities.
b. Term Loan Agreement dated 22.03.2019 for Rs.260 Crores, providing for repayment in 22 stepped-up quarterly instalments after a moratorium of six months, with interest at MCLR + 2.35% p.a. (10.95%), and penal interest@ 2% p.a. on default. Attached to the Application as Annexure A10.
c. Demand Promissory Note, Letter of Continuity, Deed of Hypothecation (hypothecating the assets as duly detailed in Schedule II of the said Deed), Escrow Account Agreement, Interest Agreement (for MCLR Loans), and Letter of Undertaking, all dated 22.03.2019.
To secure the aforesaid facility, Bansi Mall Management Company Pvt. Ltd. ("Corporate Guarantor") executed a Deed of Guarantee dated 22 March 2019 and created a second pari passu charge on its immovable property located at SOBO Brand Factory, Tardeo Road, Mumbai 400034.The Copy of Guarantee Deed is attached as Annexure A11 of the Application.
The Corporate Debtor and the Corporate Guarantor also executed an Indenture of Mortgage dated 30 July 2019, registered as Document No . 6392/2019 in the Office of the Sub-Registrar, Mumbai City-III. The charge was duly registered with CERSAI on 28.08.2019.The Copy of Mortgage Deed is attached as Annexure A 12 of the Application.
Thereafter, on the request of the Corporate Debtor, the Financial Creditor agreed to a restructuring of the existing facility under the "Resolution Framework for COVID-19 related Stress" dated 6 August 2020 issued by the Reserve Bank of India. The Financial Creditor issued a Sanction Letter No. IFB:ADV-OTR:2020-21:872 dated 05.06.2021, approving restructuring by way of Funded Interest Term Loan (FITL) facilities aggregating Rs.298.55 Crores. The Copy of the Renewal cum Restructuring of Credit Facilities is attached as Annexure A 13 of the Application.
Pursuant thereto, the following documents were executed:
a. Deed of Hypothecation dated 5 June 2021.
b. Amended and restated Escrow Account Agreement dated 05.06.2021.
c. Deed of Guarantee dated 5 June 2021 executed by the Corporate Guarantor; and
d. Composite Deed of Mortgage dated 5 June 2021, registered as Document No. 5820/2021 in the Office of the Joint Sub-Registrar, Mumbai City-I.
The Corporate Debtor failed to maintain financial discipline and defaulted in making payments despite multiple reminders and opportunities granted by the Financial Creditor and other consortium lenders. As a result, the One Time Restructuring was cancelled.
The Financial Creditor issued a Recall Notice dated 11.10.2022 (Ref. No. IFB:MUM:ADV:4105-A:2022-23) demanding repayment of the entire outstanding within seven working days. The Corporate Debtor failed to make payment. The Copy of Recall Notice is Attached as Annexure A17 of the Application.
Subsequently, a Demand Notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 24.03.2023 (Ref. No. LCB:/2538/2022-23), calling upon the Corporate Debtor, Mortgagor, and Guarantors to pay Rs.273,70, 17,478.50 as on 28.02.2023, together with further interest and other dues. The Copy of 13(2) demand Notice is attached as Annexure A18 of the Application.
It is stated that the Applicant had also initiated proceedings under the IBC against the Corporate Guarantor (Company Petition IB No. 855 of 2023), which was later withdrawn after the Guarantor made part payment aggregating Rs.141.25 Crores on 8 April 2024 and 16 April 2024.
After giving effect to the payments received, as on 26.09.2025, the total outstanding and recoverable amount from the Corporate Debtor is Rs.114,17,86,044.81(Rupees One Hundred Fourteen Crores Seventeen Lakhs Eighty-Six Thousand Forty-Four and Paise Eighty-One only), together with further interest, default interest, costs, and charges accruing thereon.
The Corporate Debtor's failure to repay the amounts due and payable despite repeated notices and opportunities constitutes a "default" within the meaning of Section 3(12) of the IBC.
The present petition is therefore filed under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor.
The Applicant has attached the Form-D issued by NeSL which reveals that the default is in “Authenticated” status.
The Applicant has attached the following documents along with the Application and /or additional affidavit.
Copy of the master data of the Corporate Debtor.
copy of Statement of Accounts
copy of NeSL Report
copy of Central Depository of Information on large credits (CRILC)
Certificate Under Section 2A(b) of the Banker’s Book of Evidence Act, 1891
Copy of the Sanction Letter dated 18.03.2019 duly acknowledged and accepted by the borrower
Copy of the Term Loan Agreement dated 22.03.2019
Copy of the Deed of Guarantee dated 22.03.2019
Copy of the Indenture of Mortgage dated 30.07.2019
Copy of the sanction letter bearing No. IFB:ADV-OTR:2020- 21:872 dated 05.06.2021
Copy of the resolution dated 01.06.2021 by the borrower for execution of the Restructuring documents and to create security
Copy of the Deed of guarantee dated 05.06.2021
Copy of the Composite Deed of Mortgage dated 05.06.2021
Copy of the recall notice dated 11.10.2022 bearing no. IFB:MUM:ADV:4105 – A:2022-23
Copy of the Demand Notice bearing Ref. No. LCB:/2538/2022-23 dated 24th March 2023
copy of the consent of proposed interim resolution professional in Form 2 & Authorization of Assignment in Form B
3. REPLY BY CORPORATE DEBTOR
The Affidavit in reply was filed on 12.12.2025 by the Respondent through Mr. Pradeep More, who is stated to be an Authorized Signatory of the Corporate Debtor.
It is stated that the Corporate Debtor was making timely repayments of its debts however, sometime around third week of March 2020, due to outbreak of COVID-19 (Corona virus), the Govt. of India had initiated various measures to arrest the spread of said disease including declaration of the nationwide lockdown. As a result of which, the business activities of the Licensees of the Corporate Debtor were completely halted which had put severe financial constraints and hardship on the Corporate Debtor who was also reeling under a severe economic slowdown. Furthermore, the RBI and Finance ministry had implemented various measures including declaration of moratorium, restructuring of accounts and providing liquidity to the stressed banks, NBFCs etc.
However, due to default in repayment of the instalment of the term loan, the Corporate Debtor's account was declared as NPA on 29.12.2020, and that is when the first default occurred.
The Corporate Debtor requested the financial creditor for restructuring of Outstanding amount under the Circular dated 6th August, 2020, which was sanctioned through letter dated 05th June, 2021 and a Framework Agreement dated 05th June, 2021 was executed between the lender Banks of the principal borrowers.
In terms of the Framework Agreement, various security were created in favour of the financial creditor for securing the Funded Interest Term Loan (FITL) Facilities.
Thereafter the principal borrower has repaid the entire FITL Facilities sanctioned under the OTR. However, soon thereafter as and when the instalment of the term loan became due after the moratorium, the Corporate Debtor once again defaulted and therefore the term loan account was once again declared as nonperforming asset ("NPA") with effect from 29.12.2020.
The Corporate Debtor states that no board resolution has been passed by the Applicant for authorizing the signatory to file the present Company Petition.
Further it is stated that Date of default as mentioned in Part IV of the Company Petition is incorrect and unsubstantiated. The Date of Default mentioned is 28.02.2023 however, there is no explanation whatsoever given for arriving at such date.
It is stated that as per notice dated 24.03.2023 ("SARFAESI notice") sent by the Applicant u/s 13(2) of the Securitisation and Reconstruction of Financial Assets Act, 2002 ("SARFAESI Act), an event of default had occurred on 01.04.2022. Further the account of the Corporate Debtor was declared NPA on 30.09.2022.
The financial creditor has also enclosed a NeSL report wherein the `date of default' is mentioned as 28th February 2023. It is pertinent to note that the applicant has nowhere in its Petition explained the basis of such date of default neither have they produced any document to support this date of default.
Further it is stated that the Corporate Debtor is a running concern and is a solvent company having sufficient assets, therefore, it will be against the objective of the Indian Bankruptcy Code, 2016 to admit it to Corporate Insolvency process. The Corporate Debtor's main revenue has been the royalty though licensing the brands like John Miller, BARE, DJ&C, Fresh & Pure, Lombard, Srishti, IQIP, Knighthood, KORYO, Rig etc . These brands owned by the Corporate Debtor have the potential to recover and therefore, it can be said that the Corporate Debtor is a solvent company. Therefore, if the corporate debtor is admitted and insolvency resolution process is initiated then it will be against the objective of the code and shall cause irreparable harm to the company as well as its other lenders.
It is stated the Adjudicating Authority to consider the grounds made out by the Corporate Debtor against admission of the Company Petition, on its own merits. The adjudicating authority has to exercise its discretion under Section 7 (5) (a) of the Code, to keep the admission of the application of the Financial Creditor in abeyance, unless there is a good reason not to do so. The same has been decided by the Hon'ble Supreme Court of India in the case of Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2002) 8 SCC 352.
Further the Corporate Debtor argues that the Applicant has already taken measures under the Recovery of Debt and Bankruptcy Act, 1993 ("RDB Act") for recovery of this alleged debt. The Applicant has filed Original Application bearing no. 33 of 2023 before the Hon'ble Debt Recovery Tribunal, New Delhi. Further, as per the Applicant's own application in the original application, it is stated that the `estimated value of assets' over which the security is created is more than Rs. 2730.75 crores. The Applicant can therefore recover its debt through these proceedings since the assets are way more than the applicant's debt
Hence the financial creditor is doing forum shopping and is using the present forum as a tool of recovery.
4. REJOINDER
Vide hearing held on 15.12.2025 the Applicant stated that they do not want to file any Rejoinder, Hence as a result their Right to file Rejoinder was closed.
5. WRITTEN SUBMISSIONS (CD)
The Corporate Debtor has relied on the Following Judgements:-
a. Palogix Infrastructure Private Limited v. ICICI Bank Limited, 2017SCC OnLine NCLAT 266
b. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353
c. Transmission Corporation of Andhra Pradesh Limited v. Equipment Conductors and Cables, (2019) 12 SCC 697
d. Invent Asset Securitization and Reconstruction Pvt. Ltd. v. Girnar Fibers Ltd. 2022 SCC Online SC 808
e. Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352
6. WRITTEN SUBMISSIONS (Applicant)
The Pleading in the Written Statements are same as that of Applicant and hence for the sake of brevity the same are not reproduced herein.
7. ANALYSIS AND FINDINGS
We have considered the pleadings in the matter and have heard the Ld. Counsels for the parties.
On perusal of the documents it is observed that the Union Bank Of India sanctioned a term loan of Rs.260 Crore to the Corporate Debtor, which was to be repaid within 6 years at a rate of 10.95% per annum vide sanction letter dated 18.03.2019.The Term Loan Agreement was executed on 22.03.2019.
The Term Loan was secured by various documents including indenture of Mortgage Deed, Deed of Guarantee executed by Bansi Mall Management Company Private Limited.
As per the account statement as produced in the Application, the funds came to be disbursed from 26.03.2019. The Applicant has provided Banker Book of Evidence Certificate to support the disbursement.
Further as per the policy on “Resolution Framework for COVID-19 related Stress” issued by the RBI, the Applicant approved restructuring by way of Funded Interest Term Loan facility of Rs. 42.46 crore and total debt amounting to Rs.298.55 crores vide Renewal Cum Restructuring of Credit Facilities under OTR vide letter dated 05.06.2021.
The said facility was secured by Deed of Guarantee and Composite Deed of Mortgage. The repayment terms of the financial facilities stipulated that the Funded Interest Term Loan was repayable in monthly instalments commencing from October 2021 and continuing till March 2022. Further, the existing Term Loan was repayable in quarterly instalments commencing from March 2022 and continuing till March 2027.
The account of the Corporate Debtor became irregular and as a result it was declared Non-performing Asset on 30.09.2022 w.e.f. 29.12.2020.
Thereafter the Applicant issued a Recall Notice dated 11.10.2022 and demand notice under section 13(2) of SARFAESI Act on 24.03.2023 calling the Corporate Debtor along with the Guarantor to pay the outstanding money.
Further on perusal of the Statement of Accounts it is observed that the Corporate Guarantor namely Bansi Mall Private Limited paid amounts aggregating to Rs.141.25 crore on 08.04.2024 and 16.04.2024.The total outstanding as on 26.09.2025 is Rs.114.17 crore.
The date of default as mentioned in NeSL form D is 28.02.2023 and the Status of Authentication of Default is “AUTHENTICATED.”
Corporate Debtor in its reply has not denied the existence of debt, the restructuring agreement entered subsequently and the default.
The Corporate Debtor has contended that the date of default mentioned in Part IV of the Application is incorrect and unsubstantiated, inasmuch as the SARFAESI Notice records the occurrence of an event of default on 01.04.2022 and classification of the account as NPA on 30.09.2022. In this regard, this Tribunal observes that the financial facility extended to the Corporate Debtor was in the nature of a Term Loan, repayable through quarterly instalments in para 14 of SARFAESI notice dated 24.03.2023 the applicant has clearly stated that the repayment instalment due on 31.03.2022 (wrongly mentioned as 31.03.2021) was defaulted by the corporate debtor and therefore the said instalment was recovered from the balance in Debt Service Reserve Account (DSRA), which the corporate debtor was required to replenish immediately which it failed to do and therefore an event of default took place on 01.04.2022. Para 16 of the said notice has further stated that due to default committed in repayment by the corporate debtor the bank classified the credit facilities as NPA in its books on 30.09.2022 w.e.f. 29.12.2020 as per RBI guidelines. It is further observed that the term loan was repayable by way of instalments and the last instalment was repayable on or before March 2027. The material on record reflects that defaults occurred in the repayment obligations falling due from time to time even after the date of NPA. Each successive default in payment of the quarterly instalments constitutes a fresh cause of action for the applicant. A recall notice and a SARFAESI Notice were issued by the Applicant on 11.10.2022 and 24.03.2023 respectively demanding the entire outstanding loan, however, the total outstanding amount was not paid by the Corporate Debtor. In its reply the Corporate Debtor has not denied the subsequent default.
Since the defaults were repeatedly occurring and continuing in nature, this Tribunal does not find any inconsistency in the date of default mentioned in the Application as the same is based upon the date of loan recall notice and SARFEASI Notice. Further the date of default has also been substantiated by the records provided in the Information Utility, which is under “Authenticated” status. In any case, relevance of the date of default is for the purpose of determining as to whether the application has been filed within the limitation period, the issue raised by the corporate debtor in regard to the date of default does not affect the maintainability of this Application as in the facts as stated above there is no doubt about the fact that the application has been filed within the limitation period and that for the said reason even no plea has been raised by the corporate debtor in regard to the limitation period.
It is also noted that originally due to defaults committed by the corporate debtor the loan account was classified as NPA w.e.f. 29.12.2020, however, subsequently, on 05.06.2021 the loan facilities were restructured and further documentation admitting the liability was executed between the parties. The said loan documentation includes deed of hypothecation, amended and restated Escrow account agreement, deed of guarantee and deed of mortgage. Thereafter, due to the defaults committed by the corporate debtor in making payment of restructured dues, the loan facilities were again classified as NPA on 30.09.2022 w.e.f. 29.12.2020 as per the RBI guidelines. The NPA declaration however, does not make the entire loan amount due for payment and therefore vide recall notice dated 11.10.2022 (giving seven days to the corporate debtor to make payment of the entire outstanding) and SARFAESI Act notice dated 24.03.2023 (giving sixty days to the corporate debtor to make payment), the amount of instalments, which had not become due were recalled and as a result the same became due for payment and defaulted. As such, the relevant date for commencement of limitation is when the corporate debtor has made a default in making payment of the recalled amount on 18.10.2022 i.e. on expiry of seven days from the date of recall notice dated 11.10.2022. The application has however, been filed on 14.10.2025 and therefore the same is within the limitation period. It is also observed that the Corporate Guarantor namely Bansi Mall Private Limited has paid amounts aggregating to Rs.141.25 crore on 08.04.2024 and 16.04.2024.
With regard to contention of the Corporate Debtor that no board resolution is passed by Financial Creditor for authorizing the signatory to file the CP, we have found that at page no. 24-28 of the Application a Power of Attorney is attached wherein Mr. Sidhartha S Mhade designated as Chief Manager of the Applicant is authorised to commence, prosecute defend any civil or criminal proceeding in any Court or Tribunal. The Power of Attorney is sufficient for the Authorised Signatory to file the present Company Petition on behalf of Union Bank Of India. The reliance placed by the Corporate Debtor on Palogix Infrastructure Private Limited v. ICICI Bank Limited, 2017SCC OnLine NCLAT 266 in our considered view is misplaced as in that particular case it was held that that general authorisation given to an officer of the financial creditor by means of a power of attorney, would not disentitle such officer to act as the authorised representative of the financial creditor while filing an application under Section 7 of the Code, merely because the authorisation was granted through a power of attorney The relevant para of the said judgement is reproduced herein
“36.In so far as, the present case is concerned, the ‘Financial Creditor’-Bank has pleaded that by Board’s Resolutions dated 30th May, 2002 and 30th October, 2009, the Bank authorised its officers to do needful in the legal proceedings by and against the Bank. If general authorisation is made by any ‘Financial Creditor’ or ‘Operational Creditor’ or ‘Corporate Applicant’ in favour of its officers to do needful in legal proceedings by and against the ‘Financial Creditor’ / ‘Operational Creditor’/ ‘Corporate Applicant’, mere use of word ‘Power of. Attorney’ while delegating such power will not take away the authority of such officer and ‘for all purposes it is to be treated as an ‘authorization’ by the ‘Financial Creditor’/’Operational Creditor’/ ‘Corporate Applicant’ in favour of its officer, which can be delegated even by designation. In such case, officer delegated with power can claim to be the ‘Authorized Representative’ for the purpose of filing any application under section 7 or Section 9 or Section 10 of ‘I&B Code’.”
One of the Contention of the Corporate Debtor is that the Applicant is engaged in Forum Shopping and has used the IBC as a recovery tool. This Tribunal relies on the Judgement of Hon’ble NCLAT in matter of Amar Vora vs City Union Bank Limited (Company Appeal (AT) (CH) (Ins) No. 130 of 2022) wherein it was held that Financial Creditor can file application for initiation of CIRP in NCLT even though the same debt is pending for adjudication before any other Forum. The relevant portion of the Judgement is reproduced here under;
“In view of the above provision of law the financial Creditor/ Operational Creditor/Corporate Persons can file an application under Section 7 ,9 & 10 of the I & B Code, 2016 before the respective Adjudicating Authorities even though in respect of same any proceeding pending before other forums on the ground that the provisions of I & B Code, 2016 is overriding effect of other laws. In view of the aforesaid reasons the Appellant cannot take a stand that the proceedings are pending before DRT and PBPT and the application under Section 7 of the I & B Code, 2016 cannot be maintained does not merit. The application under Section 7 filed by the financial Creditor before the Adjudicating Authority is very well maintained. Accordingly, the point is answered against the Appellant.”
The Corporate Debtor has relied upon the following judgments, which in our view do not help its case for the following reasons: -
a. Judgment of Hon’ble Supreme Court in the matter of M/s. Vidarbha Industries Power Limited v Axis Bank {(2022) 8 SCC 352} does not apply to the facts of this case as the Supreme Court has time and again in its various judgements held that the Judgement of Vidarbha was pronounced keeping in mind the peculiar facts of the case and cannot be held as a precedent. Further at the time of admission, the Adjudicating Authority only needs to ascertain whether debt is due and payable and the same is being defaulted by the Corporate Debtor.
b. Judgements of Hon’ble Supreme Court in the matters of Transmission Corporation of Andhra Pradesh Limited v. Equipment Conductors and Cables, (2019) 12 SCC 697 and Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353 do not come to the rescue of the Corporate Debtor as the Applicant has filed a Section 7 Application and not a Section 9 Application. Further in the instant case the NeSL form D shows the status of Default as Authenticated and there is no pre-existing dispute between the Applicant and the Corporate Debtor. Further for a Section 7 Application this Tribunal is vested with the power to only ascertain whether debt is due and payable and whether the same is being defaulted by the Corporate Debtor.
c. Judgement of Hon’ble Supreme Court in the matter of Invent Asset Securitization and Reconstruction Pvt. Ltd. v. Girnar Fibers Ltd. 2022 SCC Online SC 808 does not apply to the facts of the present case. The Application filed by the Applicant on 14.10.2025 and the same is well within limitation as the date of default was 18.10.2022 . Hence the same is well within limitation.
Further this Tribunal has relied on the matter of Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan, IRP of Hiranmaye Energy Ltd. and Ors. Civil Appeal No(s). 2211/2024, wherein the Hon’ble Supreme Court held while examining the validity of the admission of the Corporate Debtor to CIRP has laid down as under :-
B. Validity of CIRP Admission.
28.The other aspect on which the Appellant has heavily relied is the acceptance of various sums of money paid by the Corporate Debtor purportedly under the 1st and 2nd restructuring proposals, which according to them amounts to deemed approval of such proposal. As discussed earlier, such argument flies in the face of the fact that the 2nd Respondent had resolutely maintained and rightly so, that the restructuring proposals were underpinned on pre-implementation conditions which the Corporate Debtor had failed to fulfil. Under such circumstances, receipt of various sums of money would not amount to acceptance of the restructuring proposals, thereby novating the earlier loan agreement. Neither would such part payments constitute full satisfaction of the existing debt so as to render the Section 7 application inadmissible.
29.It has also been vociferously contended that the Corporate Debtor is an ongoing concern and does not lack the ability to repay the debt. It has a subsisting PPA for 25 years with WBSEDCL, and has raised bills of Rs. 906 crore from 01.11.2024 to 31.03.2025. It also has a continuous fuel supply arrangement with Mahanadi Coalfields Ltd. under the SHAKTI scheme and had earned EBIDTA of Rs. 20 crore per month during the CIRP. These facts though attractive at first blush, do not yield either legal or factual justification to rebut the admission of the Section 7 application.
30.On the legal score, one must bear in mind the scope and purpose for which IBC was promulgated. The main objective of its enactment was to create a complete code for easy, prompt and seamless resolution of insolvency process and thereby ensure that the net worth of the corporate debtor is not dissipated and the entity is salvaged from corporate death through a viable resolution plan accepted by its CoC. The Code prescribes whenever a corporate debtor defaults on a debt that is due and payable, an insolvency process may be initiated. Section 3(12) defines “default” as non payment of a debt which has become due and payable, and includes default in respect of a part or instalment thereof. Such insolvency process may be initiated either by the corporate debtor itself, or by its creditors who are classified as financial creditor or operational creditor. “Financial creditor” is defined as any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned.26 A “financial debt” means a debt along with interest if any, which is disbursed against the consideration for time value of money and includes money borrowed against payment of interest.27 “Operational creditor” is defined as a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned.28 “Operational debt” is a claim in respect of the provision of goods or services including employment or a debt in respect of payment of dues arising under any law for the time being in force and payable to the Central or State government, or any local authority.29 31. In Swiss Ribbons (P) Ltd. v. Union of India [(2019) ibclaw.in 03 SC],30 such classification of creditors as financial creditors and operational creditors has been held to be constitutionally valid. The Bench underscored the essential differences between a financial creditor and operational creditor and held that financial creditors were mostly secured creditors like banks and financial institutions who extended finance to enable a corporate debtor to set up and/or operate its business. Such credit is extended to a corporate debtor under well-defined loan agreements having specified repayment schedules and reserving rights to recall the loan in case of default or restructure the same enabling a corporate debtor to tide over unforeseen financial stress. On the contrary, operational creditors are mostly unsecured creditors and their claims are relatable to supply of goods and services in the operation of the business. Ordinarily, operational debts are not based on admitted documents and the possibility of genuine disputes with regard to such debts is much higher compared to financial debts.
32.In light of such classification, the Code makes a distinction in the manner in which an insolvency process may be initiated by a financial creditor under Section 7, IBC in contradistinction to an operational creditor under Section 8 and 9, IBC. Unlike an operational creditor, a financial creditor may trigger an insolvency process under Section 7 in respect of default of any financial debt, whether owed to itself or to any other financial creditor. While the financial creditor may directly file an application under Section 7 setting out the particulars of the financial debt and evidence of default, the operational creditor, on the occurrence of a default, is to first deliver a demand notice of the unpaid debt to a corporate debtor and the latter may within 10 days of receipt of such demand notice bring to the notice of the operational creditor the existence of a dispute or record the pendency of a pre-existing suit or arbitration proceeding in respect of such debt. Once a corporate debtor demonstrates a dispute regarding the existence of the debt, the insolvency process stands aborted vis-à-vis the operational creditor. But when the financial creditor initiates the insolvency process for the purposes of admission, the Adjudicating Authority is only to ascertain the existence of a default from the records of the information utility or the evidence furnished by the financial creditor within fourteen days from the receipt of such application. At this stage, neither is a corporate debtor entitled nor is the Adjudicating Authority required to examine any dispute regarding the existence of such debt. This significantly reduces the scope of enquiry at the stage of a time-bound admission of an insolvency process by a financial creditor which has been succinctly summed up in Innoventive (supra):
“30…… in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”
33.Reiterating the ratio in Innoventive (supra), this Court in ES Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd. [(2021) ibclaw.in 173 SC]32 held as follows: “34. The adjudicating authority has clearly acted outside the terms of its jurisdiction under Section 7(5) IBC. The adjudicating authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the adjudicating authority must then either admit or reject an application, respectively. These are the only two courses of action which are open to the adjudicating authority in accordance with Section 7(5). The adjudicating authority cannot compel a party to the proceedings before it to settle a dispute.”
34.In a similar vein, the Adjudicating Authority is not required to go into the inability of a corporate debtor to pay its debt. This is a clear departure from the scheme of winding up envisaged under Section 433(e) of the erstwhile Companies Act, 1956 which required the Adjudicating Authority to come to a finding with regard to the inability of the company to pay the debt and thereby arrive at a requisite satisfaction whether it is just and equitable to wind up the company.
The Code restricts the scope of enquiry for admission of an insolvency process by a financial creditor merely to the existence of default of a debt due and payable and nothing more. The legislative intent behind such prompt and summary intervention is “to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation.”
35.The Appellant has heavily relied on Vidarbha (supra) to argue that the Adjudicating Authority has ample discretion to apply its mind to relevant factors including the feasibility of initiation of insolvency process notwithstanding the existence of default on a debt due and payable by the Corporate Debtor. In Vidarbha (supra), this Court observed:-
“61.In our view, the Appellate Authority (NCLAT) erred in holding that the adjudicating authority (NCLT) was only required to see whether there had been a debt and the corporate debtor had defaulted in making repayment of the debt, and that these two aspects, if satisfied, would trigger the CIRP. The existence of a financial debt and default in payment thereof only gave the financial creditor the right to apply for initiation of CIRP. The adjudicating authority (NCLT) was required to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating company operated under statutory control, the impact of MERC’s appeal, pending in this Court, order of Aptel referred to above and the overall financial health and viability of the corporate debtor under its existing management. …………………………………………………………………
90.We are clearly of the view that the adjudicating authority (NCLT) as also the Appellate Tribunal (NCLAT) fell in error in holding that once it was found that a debt existed and a corporate debtor was in default in payment of the debt there would be no option to the adjudicating authority (NCLT) but to admit the petition under Section 7 IBC.”
36.However, in review, this Court clarified that observations made in Paragraph 90 are restricted to the facts of Vidarbha (supra):-
“6.The elucidation in para 90 and other paragraphs [of the judgment under review] were made in the context of the case at hand. It is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial utterances and/or pronouncements are in the setting of the facts of a particular case.”
37.Finally, the apparent dichotomy between Innoventive (supra) and Vidarbha (supra) was set at rest in M. Suresh Kumar Reddy (supra), wherein this Court observed: “14. Thus, it was clarified by the order in review that the decision in Vidarbha Industries was in the setting of facts of the case before this Court. Hence, the decision in Vidarbha Industries cannot be read and understood as taking a view which is contrary to the view taken in Innoventive Industries and E.S. Krishnamurthy. The view taken in Innoventive Industries still holds good.”
38.In light of the ratio in M. Suresh Kumar Reddy (supra) there is no cavil that the ratio in Innoventive (supra) lays down the correct proposition of law and the observations in Vidarbha (supra) were made in the facts of the case and do not operate as binding precedent.
39.Even otherwise on facts, Vidarbha (supra) does not come to the aid of the Appellant. In Vidarbha (supra), this Court had taken note of an award passed by APTEL in favour of the corporate debtor which far exceeded the claim of the financial creditor, and held in the setting of such facts, initiation of CIRP was unwarranted. In the present case, Appellant’s contention regarding Corporate Debtor’s viability is highly dubious. Though the Corporate Debtor strenuously demonstrates its commercial viability, the NCLAT has noted that the extent of outstanding liability as on 02.01.2024 was Rs. 3103.31 crore, which far exceeds the bills raised on WBSEDCL to the tune of Rs 906 crore and EBITDA of Rs. 20 crore per month during the CIRP.
40.For these reasons, we are of the opinion the admission of the Section 7 application was lawful and does not call for interference.”
(emphasis wherever required supplied)
In view of the above , the Applicant has successfully demonstrated the existence of a financial debt , as the transaction involves money borrowed against the payment of interest under section 5(8)(a) of IBC 2016, the occurrence of default which is way above the threshold as stipulated under Section 4 of the Code , and continuing nature of such default supported by clear documentary evidence.
Financial Creditor has also proposed the name of an Insolvency Professional (IP) i.e. Mr. Kanak Jani, having Registration No. IBBI/IPA-001/IP-P-01757/2019-20/12685 and Authorization for Assignment (AFA) which is valid up to 31.12.2026 as per IBBI portal as the proposed IRP and as per the Form 2 attached along with the Application , no disciplinary proceedings are going on against the said IP. Further, this Application is complete as all the required documents have been attached along with the Application. Accordingly, the present Application is fit for admission under Section 7 of the IBC, 2016.
We make it clear that at this stage we have not crystallised the amount as claimed in this Application; the same is left to be collated by the IRP.
ORDER
In view of the aforesaid findings, this Application bearing C.P. (IB) 1172/MB/2025 filed under Section 7 of IBC, 2016, by Union Bank of India, the Applicant (FC) ,for initiating CIRP in respect of Future Brands Limited , the Corporate Debtor, is Admitted.
We further declare a moratorium under Section 14 of IBC, 2016 with consequential directions as mentioned below:
I. We prohibit:
the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor, including the execution of any judgment, 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, and;
the recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.
II. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period.
III. That the order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under Section 31(1) of the IBC or passes an order for the liquidation of the Corporate Debtor under Section 33 thereof, as the case may be.
IV. That the public announcement of the CIRP shall be made immediately as specified under Section 13 of the IBC read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and other Rules and Regulations made thereunder.
V. That this Bench hereby appoints, Mr. Kanak Jani , having Registration No. IBBI/IPA-001/IP-P-01757/2019-20/12685 and e-mail address [email protected] having valid Authorisation for Assignment up to 31.12.2026 (as per IBBI site) as the IRP to carry out the functions under the IBC.
VI. That the fee payable to IRP/RP shall be in accordance with such Regulations/Circulars/ Directions as may be issued by the IBBI.
VII. That during the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of Section 17 or Section 25, as the case may be, of the IBC. The officers and managers of the Corporate Debtor are directed to provide all assistance to the IRP as and when he takes charge of the assets and management of the Corporate Debtor. Coercive steps will follow against them under the provisions of the IBC read with Rule 11 of the NCLT Rules for any violation of law.
VIII. That the IRP/IP shall submit to this Tribunal monthly reports with regard to the progress of the CIRP in respect of the Corporate Debtor.
IX. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the Financial Creditor is directed to deposit a sum of Rs.3,00,000/- (Three Lakh Rupees) with the IRP to meet the initial CIRP cost arising out of issuing public notice and inviting claims, etc. The amount so deposited shall be interim finance and paid back to the Financial Creditor on priority upon the funds becoming available with IRP/RP from the Committee of Creditors (CoC). The expenses incurred by IRP out of this fund are subject to approval by the CoC.
X. A copy of this Order be sent to the Registrar of Companies, Mumbai Maharashtra, for updating the Master Data of the Corporate Debtor.
XI.The IRP is directed to issue notice of Admission upon all the statutory authorities of Corporate Debtor without Fail
XII. A copy of the Order shall also be forwarded to the IBBI for record and dissemination on their website.
XIII.The Registry is directed to immediately communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by way of Speed Post, e-mail and WhatsApp.
XIV. Compliance report of the order by Designated Registrar is to be submitted today.