Authority: National Company Law Appellate Tribunal, Principal Bench, New Delhi
Order Date: 25 August 2026
Case Overview
This appeal was filed by Panshul Agro Food LLP against an order dated 29 April 2026 from the National Company Law Tribunal (NCLT), Bench No. 1, Ahmedabad. The NCLT had dismissed the appellant's petition filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC) and imposed a cost of ₹10 lakh. The appellant, a designated partner of the LLP, had sought the initiation of Corporate Insolvency Resolution Process (CIRP) due to a default in repaying a total debt of ₹42,20,27,984.96 owed to multiple financial creditors. The principal allegation considered by the NCLAT was whether the application was filed with a fraudulent or malicious intent to misuse the insolvency framework to derail recovery proceedings initiated by the State Bank of India (SBI) under the SARFAESI Act. The background includes the account being declared a Non-Performing Asset (NPA) by SBI on 18 April 2025. SBI issued a notice under Section 13(2) of the SARFAESI Act on 20 June 2025 and filed an application (OA No. 379 of 2025) before the Debt Recovery Tribunal (DRT) on 20 August 2025. The appellant filed its Section 10 petition on 26 August 2025. SBI took symbolic possession of the property on 6 September 2025. A critical finding by the NCLT was that during an inspection on 10 February 2026, substantial plant and machinery hypothecated to the bank were found missing from the factory premises. The appellant failed to provide satisfactory explanations, copies of purchase invoices, or a fixed asset register. The NCLT concluded this removal during pending recovery proceedings was a serious act undermining creditor interests and indicated malicious intent under Section 65(1) of the IBC.
Final Outcome
The NCLAT partly allowed the appeal. It sustained the NCLT's order dismissing the Section 10 application, agreeing that the petition was not a bona fide attempt at resolution but a calculated effort to obtain a moratorium and defeat SARFAESI proceedings. However, the appellate court reduced the penalty imposed from ₹10 lakh to ₹5 lakh, citing the maxim of proportionality and a lack of reasoning in the original order for the quantum. The appellant was directed to deposit the reduced penalty of ₹5 lakh within 30 days into the Prime Minister's National Relief Fund if not already paid, or to receive a refund of ₹5 lakh if the full amount had been deposited.
Topics: Insolvency Petition, SARFAESI Conflict, Asset Misappropriation