Authority: National Company Law Tribunal (NCLT), Ahmedabad Bench (Court-II)

Order Date: 17 June 2026

Case Overview

This proceeding, TP (IBC)/2(AHM)/2026, was an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 by Krishkan Investment Private Limited (Financial Creditor) against M/s. Utkal Steels Limited (Corporate Debtor). The case was originally filed at the NCLT Cuttack Bench as CP (IB) 24 of 2025 but was transferred to the Ahmedabad Bench by an order from the NCLT Principal Bench in New Delhi. This transfer was necessitated under Section 60(2) and (3) of the IBC because the Corporate Debtor, Utkal Steels, is a corporate guarantor for a principal borrower, M/s. Cubatics Processors India Private Limited, which is already undergoing a Corporate Insolvency Resolution Process (CIRP) at the Ahmedabad Bench.

The financial creditor, an RBI-registered NBFC, had sanctioned an MSME Business Loan Facility of ₹4,00,00,000 (Rupees Four Crore) to the principal borrower on 02.09.2024 (Sanction Letter No. KIPL-000199). The corporate debtor, along with two other companies, had executed a Deed of Guarantee dated 02.09.2024 in favour of the financial creditor. The principal borrower initially made a few instalment payments but subsequently defaulted. A recall notice was issued on 26.02.2025, and the date of default was recorded as 04.03.2025. The total outstanding debt claimed, as of 15.04.2025, was ₹4,16,51,899 (Rupees Four Crore Sixteen Lakh Fifty-One Thousand Eight Hundred Ninety-Nine Only), which includes interest at 12% per annum and penal interest at 3% per annum.

The corporate debtor opposed the petition, arguing that the financial creditor should first realise the primary security—a windmill valued at approximately ₹7 Crore—which was offered by the principal borrower, before proceeding against the guarantor. It also cited its own financial distress, including a slump sale of assets, and requested more time to arrange funds.

The tribunal, after hearing both parties and examining the documents, found that the execution of the guarantee and the outstanding debt were not disputed. It held that the defence regarding the primary security was untenable, as the realisation of those assets was a matter for the ongoing CIRP of the principal borrower. Citing Section 128 of the Indian Contract Act, 1872, the tribunal reiterated that a guarantor's liability is co-extensive with that of the principal borrower. The tribunal also noted that the corporate debtor had admitted its liability and inability to repay during proceedings.

Final Outcome

The petition was admitted. The Corporate Insolvency Resolution Process (CIRP) was initiated against Utkal Steels Limited. Mr. Pankaj Bhattad (IBBI Registration No.: IBBI/IPA-001/IP-P-02841/2023-2024/14362) was appointed as the Interim Resolution Professional (IRP). A moratorium under Section 14 of the IBC was declared, prohibiting specific actions against the corporate debtor. The financial creditor was directed to deposit ₹2,00,000 (Rupees Two Lakh) with the IRP to meet initial CIRP expenses, which is subject to adjustment by the Committee of Creditors.

Topics: Corporate Insolvency, Corporate Guarantee, NCLT Order