Case Overview

This order pertains to an application (C.P. (IB) No.845/MB/2025) filed by Union Bank of India (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Excel Overseas Private Limited (Corporate Debtor) on 08 November 2024. The Corporate Debtor is a private limited company established in 1992 engaged in the business of cutting and polishing raw diamonds for export.

The Financial Creditor, acting as the lead bank of a consortium, had sanctioned and enhanced credit facilities to the Corporate Debtor up to ₹40.91 crores through a sanction letter dated 09 August 2017 and a revised sanction letter dated 12 March 2019. The facilities included Working Capital Consortium Limits categorized into Fund-Based limits (FDBP/FUDBP/AFDBC Bills) and a sub-limit for W/W Packing Credit/PCFC. These facilities were secured by a Hypothecation Agreement creating a first charge on current assets and a Mortgage Deed dated 20 December 2017.

The principal allegation was that the Corporate Debtor defaulted on repayment obligations, leading to its accounts being classified as Non-Performing Assets (NPA) on 31 January 2020. The Financial Creditor claimed a total default amount of ₹60,19,49,713.32 (Sixty Crore Nineteen Lakh Forty-Nine Thousand Seven Hundred Thirteen Rupees and Thirty-Two Paise) as of 30 September 2024, comprising ₹40,70,44,005 in principal and ₹19,49,05,708.32 in interest.

The Corporate Debtor contested the application on multiple grounds: (1) lack of statutory disclosures regarding disbursement dates and default particulars; (2) improper NPA classification arguing that packing credit accounts were within sanctioned limits on 31 January 2020; (3) claim of ₹24.67 crore interest being without legal basis; (4) the application being barred by limitation; and (5) failure to comply with the requirement to furnish default records from an Information Utility.

The Tribunal conducted a detailed analysis, referencing several key judgments including Innoventive Industries Ltd. v. ICICI Bank, Asset Reconstruction Company (India) Limited v. Bishal Jaiswal, and the recent Power Trust v. Bhuvan Madan case. The bench emphasized that its role under Section 7 is limited to verifying the existence of a financial debt and occurrence of default, not adjudicating disputes about debt quantification or the corporate debtor's ability to pay.

The Tribunal found that the Financial Creditor had established both the debt existence and default through sanction letters, account statements, revival plans (14 August 2020), OTS proposals (10 July 2023), and balance sheets for FY 2021-2023 which constituted acknowledgment of debt. On the limitation issue, the bench calculated that excluding the COVID-19 period (15 March 2020 to 28 February 2022) and considering acknowledgments through revival plans and OTS proposals, the application filed on 08 November 2024 was within limitation.

Final Outcome

The Tribunal admitted the application and initiated Corporate Insolvency Resolution Process (CIRP) against Excel Overseas Private Limited. The bench declared a moratorium under Section 14 of the IBC with the following consequential directions:

  • Prohibition of institution or continuation of suits/proceedings against the Corporate Debtor
  • Restriction on transferring, encumbering, or disposing of the Corporate Debtor's assets
  • Suspension of any action to foreclose, recover, or enforce security interests
  • Continuation of essential goods or services supply during moratorium
  • Appointment of Mr. Mahesh Chand Gupta (Registration No. IBBI/IPA-001/IP-P-01489/2018-2019/12304) as Interim Resolution Professional
  • Direction to the Financial Creditor to deposit ₹3,00,000 with the IRP for initial CIRP costs
  • The moratorium will remain effective until completion of CIRP, approval of resolution plan, or liquidation order

Topics: Corporate Insolvency, Banking Debt Recovery, NCLT Proceedings