Authority: National Company Law Tribunal (NCLT), Jaipur Bench

Order Date: 01.07.2026

Case Overview

A petition (CP No. (IB)-111/7/JPR/2024) was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by eight Financial Creditors, led by Mr. Om Prakash Somani, against the Corporate Debtor, VMN Stones Private Limited. The petitioners claimed a default in repaying an unsecured loan. The Corporate Debtor is a private company incorporated on 08.11.2019, with an authorized share capital of Rs. 60,00,000 and a paid-up share capital of Rs. 51,99,480, engaged in marble/granite processing.

The petitioners, who were former majority shareholders holding 60% of the company, alleged they had advanced substantial unsecured loans for setting up the Corporate Debtor's plant. The principal sum disbursed was claimed to be Rs. 9,67,61,000 out of the Corporate Debtor's total long-term borrowings of ~Rs. 15.06 crore. A Settlement Agreement was executed on 28.12.2023 for the sale of the petitioners' shareholding and settlement of the outstanding loan for a total consideration of Rs. 10,92,38,920. The petitioners contended that after part-payments until 30.03.2024, the Corporate Debtor defaulted, leaving a principal sum of Rs. 5,78,51,000 overdue, along with interest, leading to a total claimed default of Rs. 12,21,99,872.

The Corporate Debtor opposed the petition, denying the existence of a 'financial debt' or 'default'. It argued the dispute stemmed from a commercial shareholder exit arrangement (the Rs. 10 crore Agreement) and not a borrowing. It contended the petitioners lacked locus standi, the claim was inflated, and that the transaction lacked the 'time value of money' element necessary to qualify as a financial debt under the IBC. The Corporate Debtor also alleged payments continued after the claimed default date and pointed to other ongoing proceedings under the Companies Act, 2013 between the parties.

Analysis & Findings

The Adjudicating Authority analyzed the Settlement Agreement dated 28.12.2023 and found that it did not extinguish the pre-existing unsecured loan. The Agreement expressly acknowledged separate components for unsecured loans (Clause 7 quantified them at Rs. 10.47 crores), share capital, and total liabilities. Clause 10 recorded a continuing outstanding balance. The Tribunal noted the absence of language indicating a 'full and final settlement' or 'novation'.

The allocation of part-payments between 'unsecured loan' and 'share consideration' heads, as per Annexure-2 of the petition, demonstrated that the parties themselves continued to recognize the loan as an independent liability. The balance due towards the unsecured loan was specifically recorded as Rs. 5,78,51,000, matching the principal claimed. The Tribunal held that the commercial substance of the transaction indicated a restructuring of repayment for a pre-existing debt that carried the time value of money, thus qualifying it as a 'financial debt' under Section 5(8) of the IBC. The existence of other shareholder disputes was found not to negate this financial debt. The Bench distinguished the case law cited by the Corporate Debtor, finding the present facts involved admitted disbursement, a written agreement, acknowledged liabilities, part-payments, and reflection in books of accounts.

Final Outcome

The petition was admitted. The Corporate Insolvency Resolution Process (CIRP) is initiated against VMN Stones Private Limited. Mr. Vikas Rajvanshi (Registration No. IBBI/IPA-001/IP-P01886-C01/2016-2017/10032) is appointed as the Interim Resolution Professional (IRP). A moratorium under Section 14 of the IBC is declared with immediate effect. The suspended management of the Corporate Debtor is directed to cooperate with the IRP. The petitioners are directed to make an advance payment of Rs. 1,00,000 to the IRP to initiate the process.

Topics: Corporate Insolvency, Debt Default, NCLT Proceedings