Authority: National Company Law Tribunal, Mumbai Bench-VI (Hon'ble Shri Nilesh Sharma, Member (Judicial) & Hon'ble Shri Sameer Kakar, Member (Technical))

Order Date: 15.06.2026

Case Overview

HDFC Bank Limited (Financial Creditor) filed a petition (C.P. (IB)/1298/MB/2025) on 05.09.2025 under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Bansi Pulp And Paper Mills Private Limited (Corporate Debtor). The Corporate Debtor was a corporate guarantor for credit facilities sanctioned to Sampada Paper Industries Private Limited (Principal Borrower). The amount claimed to be in default was ₹17,84,91,870.63 as of 31.03.2025, with a stated date of default of 17.04.2025. The account was classified as a Non-Performing Asset (NPA) on 05.02.2025.

The Financial Creditor's case was based on sanction letters dated 09.09.2021 and 10.12.2021, initially for ₹29.99 crore and later enhanced to ₹33.73 crore. The Corporate Debtor had executed a Letter of Continuing Guarantee and a Supplementary Letter of Continuing Guarantee. After defaults by the Principal Borrower, recall notices were issued on 18.03.2025, and the Corporate Debtor's guarantee was invoked on 07.04.2025. The petition was supported by an Acknowledgement of Debt dated 01.07.2024 and a Record of Default from NeSL.

The Corporate Debtor's principal defense was that both it and the Principal Borrower were registered MSMEs. It contended that the Financial Creditor was obligated under RBI circulars and MSME frameworks (specifically Notification S.O. 1432(E) dated 29.05.2015) to first attempt restructuring the stressed account before initiating coercive actions like insolvency or SARFAESI proceedings. The Corporate Debtor alleged the Financial Creditor failed to constitute a committee for stress resolution before classifying the account as an NPA and ignored multiple restructuring requests made from August 2024 onwards.

The Financial Creditor, in its rejoinder, argued that the requests for restructuring were vague, involved requests to release secured properties, and did not constitute a concrete, viable proposal. It maintained that the established debt and default were sufficient for admission under Section 7 of the IBC, and alleged procedural lapses in NPA classification or parallel SARFAESI actions (which were underway) did not bar insolvency proceedings.

The Tribunal analyzed the evidence, including the authenticated NeSL default record, and referenced legal precedents like Vijay Kumar Singhania v Bank of Baroda and the overriding effect of IBC under Section 238. It found that the Financial Creditor had successfully established the existence of a financial debt and a default exceeding the threshold of ₹1 crore. The defense regarding MSME restructuring was deemed a matter beyond the limited jurisdiction of a Section 7 application, as the core requirements of debt and default were met.

Final Outcome

The petition was admitted. The Tribunal declared a moratorium under Section 14 of the IBC with immediate effect, prohibiting any suits, transfers of assets, or recovery actions against the Corporate Debtor. Mr. Pankaj Bhattad (Registration No. IBBI/IPA-001/IP-P-02841/2023-2024/14362) was appointed as the Interim Resolution Professional (IRP). The Financial Creditor was directed to deposit ₹3,00,000 with the IRP to meet initial CIRP costs, which would be treated as interim finance. The IRP is to make a public announcement and submit monthly progress reports to the Tribunal.

Topics: Corporate Insolvency, MSME Debt, Guarantor Liability