Case Overview

The National Company Law Tribunal (NCLT) Mumbai Bench-VI, comprising Hon'ble Shri Nilesh Sharma (Member Judicial) and Hon'ble Shri Sameer Kakar (Member Technical), heard an application filed by UCO Bank (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Longrange Commodities Private Limited (Corporate Debtor).

The Financial Creditor sought initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for defaulting on a financial debt of ₹90,54,16,402.51 (Ninety Crore Fifty-Four Lakhs Sixteen Thousand Four Hundred Two and Fifty-One Paisa). The debt originated from credit facilities sanctioned on 22 May 2010, comprising: (a) Clean Overdraft facility of ₹10 crore, (b) Letter of Credit limit of ₹90 crore, and (c) Bank Guarantee limit of ₹5 crore, aggregating to ₹105 crore. These facilities were renewed through sanction letters dated 15 December 2011, 29 June 2013, and 30 April 2015.

The facilities were secured by: (a) first exclusive charge on current assets; (b) equitable mortgage of Flat No. 74 at 7th Floor with Garage No. 17 at Rajat Apartments, Malabar Hills, Mumbai (estimated value ₹10 crore); (c) pledge of fixed deposit of ₹0.80 crore; (d) personal guarantees of Mr. Vijay Soni and Mr. Namit Soni; and (e) corporate guarantee by Global Tradex Ltd.

The date of default was stated as 10 September 2015, when the loan account was classified as Non-Performing Asset (NPA). The Financial Creditor issued loan recall notices on 19 May 2015 and 3 June 2015, followed by a demand notice under Section 13(2) of the SARFAESI Act on 1 October 2015. The Corporate Debtor proposed several One Time Settlement (OTS) offers on 25 August 2017, 21 December 2017, 3 January 2018, and 23 December 2020, and acknowledged the debt in its audited financial statements from FY 2015-16 to FY 2022-23.

The Corporate Debtor contested the application on multiple grounds:

1. Limitation: Claimed the petition was time-barred as the alleged default occurred on 10 September 2015, and the application was filed on 12 April 2025.

2. Multiple Default Dates: Alleged inconsistencies in the date of default mentioned in the application.

3. Pending DRT Proceedings: Highlighted pending proceedings before Debts Recovery Tribunal (DRT), Jabalpur (OA No. 358 of 2015) where the Corporate Debtor had filed a counterclaim of ₹118.98 crore.

4. Procedural Defects: Cited non-compliance with requirements under the Bankers' Books Evidence Act, 1891; non-service of application copy to IBBI; and non-filing of record of default with Information Utility.

5. Forum Shopping: Accused the Financial Creditor of initiating multiple proceedings for the same cause of action.

The Financial Creditor rebutted these contentions, asserting that:

  • The OTS proposals and acknowledgments in financial statements extended the limitation period under Section 18 of the Limitation Act, 1963.
  • The COVID-19 limitation extension period (15 March 2020 to 28 February 2022) excluded from calculation.
  • The pendency of DRT proceedings does not bar initiation of CIRP under IBC.
  • Procedural defects were curable and substantiated through additional affidavits and rejoinder.

Final Outcome

The Tribunal admitted the application, holding that:

1. The Financial Creditor established the existence of financial debt and default exceeding the threshold of ₹1 crore under Section 4 of IBC.

2. The debt was not time-barred due to acknowledgments through OTS proposals (last on 23 December 2020) and financial statements (until FY 2022-23), which extended limitation under Section 18 of the Limitation Act, 1963.

3. The pendency of DRT proceedings and counterclaim does not preclude initiation of CIRP under IBC.

4. Procedural defects were cured by additional documents filed in rejoinder.

5. The appointment of Mr. Kuldeep Tank (Registration No. IBBI/IPA-001/IP-P-02776/2022-2023/14255) as Interim Resolution Professional (IRP) was approved.

The Tribunal declared moratorium under Section 14 of IBC with immediate effect, prohibiting: (a) institution or continuation of suits/proceedings against Corporate Debtor; (b) transfer of assets; (c) enforcement of security interest; and (d) recovery of property by owners/lessors. The moratorium will remain until completion of CIRP or approval of resolution plan or liquidation order.

The Financial Creditor was directed to deposit ₹3,00,000 as initial CIRP cost with the IRP, which shall be treated as interim finance and repaid on priority from CoC funds. The IRP was directed to make public announcement, issue notices to statutory authorities, and submit monthly progress reports to the Tribunal.

Topics: Corporate Insolvency, Debt Acknowledgement, Limitation Law