# In the matter of Intec Capital Limited Vs. Eastern Embroidery Collections Private Limited CA (AT) (Ins) No. 428 of 2021

> NCLAT judgment dated 2021-10-26. Citation: TCN-2021-NCLAT-00063. The appeal arises from an order dated 27 April 2021, by the Adjudicating Authority/National…

- **Court:** NCLAT
- **Order date:** 26 Oct 2021
- **Citation:** TCN-2021-NCLAT-00063
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/intec-capital-limited-vs-eastern-embroidery-collections-private-limited-ca-0683c888

## Summary

### Background

The appeal arises from an order dated 27 April 2021, by the Adjudicating Authority/National Company Law Tribunal, Bench-V, New Delhi, which rejected an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appellant, Intec Capital Ltd, a financial creditor, sought to initiate Corporate Insolvency Resolution Process (CIRP) against the corporate guarantor, Eastern Embroidery Collections Private Limited (EECPL), for a sum borrowed by the partnership firm M/s Eastern Overseas. The Adjudicating Authority rejected the application primarily because the appellant applied under Section 7 instead of Section 95 of the IBC, and because the application for CIRP against the personal guarantor did not follow applicable rules.

## Facts

Intec Capital Limited ('Intec'), a financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Eastern Embroidery Collections Private Limited ('EECPL'), the corporate guarantor for a sum borrowed by M/s Eastern Overseas, a partnership firm. M/s Eastern Overseas obtained two loans from Intec, amounting to Rs. 82,20,000 and Rs. 34,65,000, sanctioned on 07.10.2013 and 18.02.2014, respectively. EECPL provided a corporate guarantee for the loan. Intec and the borrower/guarantor entered into a loan agreement with a 14% interest rate, repayable in monthly installments. A notice was issued on 01.04.2015, recalling the loan facility due to defaults. EECPL also provided

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## Issues and analysis

### Issue 1: Whether the ‘EECPL' is the Corporate Guarantor and therefore 'Corporate Debtor' of the Eastern …

**Ratio:** The ratio is based on the interpretation of Section 3(7) and (8) of the Insolvency and

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**Reasoning:** The court reasoned that the Adjudicating Authority erred in applying the rules applicable

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**Interpretation:** The interpretation revolves around distinguishing between a 'corporate

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**Application:** The court applied the definitions of 'corporate person' and 'corporate debtor'

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## Parties

- **Judges:** M. Venu…; V. P. S…; +1 more
- **Appellants:** Intec Capital…
- **Respondents:** Eastern Embroidery…
- **Advocates:** Sagar B…; Aabhas…

## Timeline

- **2013-10-07 — Loan Sanc…**: M/s Eastern Overseas sanctioned two loans Rs.82,20,000/- on 09.10.2013 and Rs.34,65,000/-…
- **2015-04-01 — Notice I…**: A notice was issued recalling the loan facility sanctioned to Borrower. The notice was…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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