NCLT Admits Section 7 CIRP on Proof of Financial Debt and Default

Case Details: Pavitra Commercial Ltd. vs. Simara Foods (P.) Ltd. - [2026] 186 taxmann.com 532 (NCLT-Mum.)

Judiciary and Counsel Details

Nilesh Sharma, Judicial Member & Sameer Kakar, Technical Member
Nakul Mohta, Yash Sinha & Tushar A Goradia, Advs. for the Appellant.
Ms Reema Jain, Adv. for the Respondent.

Facts of the Case

In the instant case, the applicant/financial creditor disbursed Rs. 4.05 crores to the corporate debtor in five tranches as Inter-Corporate Deposits (ICDs) at 13% p.a. The corporate debtor failed to repay despite demands, but acknowledged the debt and committed to repay. The financial creditor filed a Section 7 application to initiate CIRP against the corporate debtor.

The corporate debtor contended that funds were commercial advances for joint trades, not ICDs; there was no loan agreement, stipulated interest or structured repayment; RBI Fair Practices/Companies Act requirements were not complied with; and Section 7 of the IBC was being used as a recovery tool.

It was noted that, merely naming facility as a Joint Trade Advance did not change nature of transaction, and since corporate debtor never named facility as Joint trade Advance during time of disbursement but only raised contention after default in payment, and in reply corporate debtor failed to file any document which supported contention of corporate debtor that money was advanced for advance trade in commodities, only bald averments had been made in reply qua commodity trade.

NCLT Held

The NCLT observed that since the applicant had placed enough documents, including a statement of account, which evidenced disbursal and letters that stated the terms and conditions of ICD, including payment terms, along with interest rates and due dates, even if there was some breach in adherence to RBI guidelines, the contention of the corporate debtor was not sustained.

The NCLT held that, since the applicant had established the existence of financial debt and default, which was well above the threshold limit of Rs. 1 crore stipulated under section 4, the application was to be admitted.

List of Cases Reviewed

Sinki Commodities Pvt Ltd v. ABC Floors Pvt Ltd 2025 SCC Online 1657 (para 7.20)
Power Trust v. Bhuvan Madan [2026] 183 taxmann.com 568 (SC)/Civil Appeal No(s). 2211/2024 (para 7.24) followed
Kalpesh Jaysukh Shah v. Arch Pharmalabs Limited [CP (IB) 3460/MB/2019] (para 7.23) distinguished

List of Cases Referred to

Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd. [2021] 125 taxmann.com 360/166 SCL 678 (SC) (para 3.5)
Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 3.5)
Rohit Motawat v. Madhu Sharma, Proprietor Hind Chem Corporation [2023] 152 taxmann.com 148 (NCLAT- New Delhi) (para 3.5)
HPCL Bio Fuels Ltd. v. Shahaji Bhanudas Bhad 2024 SCC OnLine 3190 (para 3.5)
Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/143 SCL 625 (SC) (para 4.3)
E S Krishnamurthy v. Bharath Hi Tech Builders (P.) Ltd. [2021] 133 taxmann.com 159/[2022] 169 SCL 644 (SC) (para 4.3)
M.Suresh Kumar Reddy v. Canara Bank [2023] 150 taxmann.com 256/178 SCL 517 (SC) (para 4.3)
Pioneer Urban Land & Infrastructure Ltd. v. Union of India [2019] 108 taxmann.com 147/155 SCL 622 (SC) (para 4.6)
Bijendra Prasad Mishra v. HS Mercantile Pvt Ltd 2025 SCC Online NCLAT 1491 (para 4.7)
Sinki Commodities Pvt Ltd v. ABC Floors Pvt Ltd 2025 SCC Online 1657 (para 4.8)
Elegna Co-Op. Housing and Commercial Society Ltd. v. Edelweiss Asset Reconstruction Company Ltd. [2026] 182 taxmann.com 384 (SC) (para 5.7)
Global Credit Capital Ltd. v. Sach Marketing (P.) Ltd. [2024] 161 taxmann.com 751/184 SCL 506 (SC) (para 5.7)
Orator Marketing (P.) Ltd. v. Samtex Desinz (P.) Ltd. [2021] 128 taxmann.com 424/167 SCL 610 (SC) (para 5.7)
Food Corpn of India v. Assam State Coop. Marketing & Consumer Federation Ltd. [2004] 12 SCC 36 (para 5.7)
Phoenix ARC Pvt. Ltd. v. Spade Financial Services Ltd [2021] 124 taxmann.com 24/165 SCL 21 (SC) (para 6.8)
Kalpesh Jaysukh Shah v. Arch Pharmalabs Limited [CP (IB) 3460/MB/2019] (para 6.8)
Power Trust v. Bhuvan Madan [2026] 183 taxmann.com 568 (SC) (para 7.24).