Date Of default For MSMEs Refers to Original NPA Not Subsequent Defaults After Restructuring: NCLT Kolkata

The National Company Law Tribunal (NCLT) at Kolkata has recently clarified that when an MSME corporate debtor's account is restructured and subsequently defaults again, the date of default for an insolvency application must refer back to the original NPA date, in accordance with the RBI circular currently in force and not to the date of default following restructuring.

A coram comprising Judicial Member Bidisha Banerjee and Technical Member Cmde Siddharth Mishra relying on an RBI Master Circular of April 2025 noted that for such cases, “ the account has to be reckoned as NPA from 30.06.2019. As such, date of default will relate back to the original date of default. ” and further stressed that “there cannot be two NPA dates in respect of the same corporate debtor.”

UCO Bank, as the financial creditor, sought admission of its insolvency petition against Kolkata based Haran Chandra Cold Storage Pvt. Ltd for a default of Rs 24 crore citing multiple sanction letters issued over several years and evidence showing the account's classification as an NPA on June 30, 2019.

The bank stated that the debtor's loans were restructured in November 2019, but default persisted thereafter.

The bank argued that the the company habitually defaulted, supported its case with letters and proposals that acknowledged the outstanding dues, and relied on the RBI Master Circular provisions to establish the default.

The company disputed the plea and objected to its maintainability, arguing that the application was filed by someone who was not authorized, as there was no board resolution authorizing him to do so.

It further maintained that its alleged default occurred only after the November 2019 restructuring and that the application was barred by Section 10A of the IBC, which shields defaults during the Covid-19 period from triggering insolvency proceedings.

It further accused the bank of attempting to avoid the statutory bar by relying on the pre-restructuring date.

Addressing these arguments, the tribunal ruled that “there is nothing substantial which would tempt us to hold that there is lack of valid authorization to file the CP” and concluded that the petition was “well within limitation.”

On the question of default date, the tribunal quoted the RBI Master Circular and determined the date should revert to the original NPA.

Consequently, the tribunal admitted UCO Bank's insolvency plea, imposed a moratorium, and appointed Santanu Brahma as Interim Resolution Professional to manage the insolvency resolution process