Company's Worth Is Irrelevant For Initiating Insolvency If Debt & Default Are Established: NCLAT New Delhi

The Company Law Appellate Tribunal (NCLAT), New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Arun Baroka (Member-technical), has held that the company's worth is irrelevant for initiating insolvency if debt and default are established. The appeal was filed against the admission of the Section 7 application filed by the Axis Bank against the corporate debtor for debt and default of Rs. 16,95,95,909. Contention of the Parties The appellant, a corporate debtor, argued that the financial creditor had sanctioned a loan of Rs. 24.90 Cr. to it, but the disbursement was only made of Rs. 12.50 Cr. Also, the corporate debtor had given the documents of the properties to the financial creditor; however, now it is denying the fact that it hasthe document. It also argued that the NCLT has erred in admitting the application, as the worth of the corporate debtor was much more. The financial creditor didn't dispute the disbursement, and it only argued that the non-disbursement of the full amount cannot be the ground for opposing the section 7 application. And the OTS proposal given by the corporate debtor during the pendency of the matter before the NCLT itself indicates the existence of debt and default. Observations of the NCLAT The NCLAT primarily observed that the non-disbursement of the full amount cannot be the basis of rejection of a Section 7 application. The tribunal also observed that the registered mortgage was not on record. Further, the bench observed that the contention with regard to the net worth of the corporate debtor is not relevant for rejection of the section 7 application, especially when the debt and default of more than 1 Cr. are established. Furthermore, the OTS proposal clearly indicates the acceptance of debt and default. The bench also observed that it is immaterial for the present proceedings that certain assets of the corporate debtor were sold after the imposition of the moratorium. Accordingly, the appeal was dismissed and the I.A.s were disposed of. Case Name: Ammeet Kamal Agarwal v. Axis Bank Ltd. & Anr. Case No.: Comp. App. (AT) (Ins.) No. 1216 of 2023 For Appellant: Mr. Krishna Sharma, Ms. Kaushambi, Advocates For Respondent: Mr. Anuj P. Agarwala (for R1); S. Dixit, Karan Vir Khosla (for RP); Rishi Sood (Intervenor) Coram: Justice Ashok Bhushan (Chairperson) and Arun Baroka (Member-technical) Order Date: 6 October 2025 Click Here To Read/Download The Order

Company's Worth Is Irrelevant For Initiating Insolvency If Debt & Default Are Established: NCLAT New Delhi

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Company's Worth Is Irrelevant For Initiating Insolvency If Debt & Default Are Established: NCLAT New Delhi

Mohd.Rehan Ali

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