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

Order Date: 15 July 2026

Case Overview

This proceeding involved an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Mangaldas Finance, a sole proprietorship of Asit Surendrabhai Shah, registered as a money lender under the Gujarat Money Lenders Act, 2011. The applicant sought to initiate a Corporate Insolvency Resolution Process (CIRP) against Ramos Ceramic Private Limited, the corporate debtor, which had provided a corporate guarantee for a loan facility.

The financial creditor claimed a default of ₹9,56,94,059, comprising a principal amount of ₹9,33,01,452 and interest of ₹23,92,607, with a stated default date of 16 December 2025. The debt originated from a sanction letter dated 3 October 2024, where Mangaldas Finance disbursed ₹16.70 crore in term loans to Milano Papers Private Limited (the principal borrower) to help it repay an existing loan to Yes Bank Limited. Ramos Ceramic executed a deed of guarantee dated 19 December 2024 for this obligation. After initial repayments ceased in November 2025, demand and guarantee invocation notices were issued on 28 November 2025. The corporate debtor, in its reply dated 1 December 2025, admitted receipt of the notice and facing a financial crunch but denied liability and sought more time.

The corporate debtor contested the petition's maintainability, arguing it was non-compliant with rules, that the loan repayment terms had been novated by conduct, and that the money lender could not operate as a financial creditor under the IBC. A key issue for the tribunal's determination was whether a registered money lender under a state act qualifies as a 'financial creditor' under Section 5(7) & (8) of the IBC.

Final Outcome

The NCLT bench, comprising Member (Judicial) Mrs. Chitra Hankare and Member (Technical) Dr. V.G. Venkata Chalapathy, rejected the application. The tribunal held that the activity of arranging a loan to repay another bank's debt does not qualify as that of a financial creditor under the IBC. It observed that the loan was governed by the Gujarat Money Lenders Act, 2011, and its recovery mechanisms are regulated by state authorities, not the IBC. The bench found the guarantee deed insufficient and the petition ineligible for admission under Section 7 of the IBC, further noting it appeared "apparently collusive." The application was dismissed with costs, and the applicant was directed to pay ₹1,00,000 to the Prime Minister's National Relief Fund.

Topics: Corporate Insolvency, Financial Creditor Eligibility, Gujarat Money Lenders Act