# In the matter of Aditya Fabrication Private Limited CP-547(IB)-2020

> NCLT judgment dated 2020-05-15. Citation: TCN-2020-NCLT-01356. State Bank of India filed a Company Application under Section 7 of the Insolvency & Bankruptcy…

- **Court:** NCLT
- **Order date:** 15 May 2020
- **Citation:** TCN-2020-NCLT-01356
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/aditya-fabrication-private-limited-cp-547ib-2020-d84d73d7

## Summary

### Background

State Bank of India filed a Company Application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) against Aditya Fabrication Private Limited, seeking initiation of Corporate Insolvency Resolution Process (CIRP). The application was based on Aditya Fabrication's failure to discharge its duty as a guarantor for a loan of ₹104 Crores sanctioned to Aditya Vidyut Appliances Limited (Borrower). CIRP had already been initiated against the Principal Borrower, Aditya Vidyut Appliances Limited, by an Operational Creditor. The borrower defaulted in repaying a total outstanding of ₹72,63,63,218.08 as of 31.08.2019. State Bank of India, as the Financial Creditor, invoked the guarantee and sought CIRP against Aditya Fabrication Private Limited.

## Facts

State Bank of India (SBI) sanctioned a loan of ₹104 Crores to Aditya Vidyut Appliances Limited (Borrower). Aditya Fabrication Private Limited acted as a guarantor for this loan. The Borrower defaulted on repayments, with a total outstanding of ₹72,63,63,218.08 as of 31.08.2019. SBI, as the Financial Creditor, invoked the guarantee provided by Aditya Fabrication Private Limited. CIRP had already been initiated against the Principal Borrower, Aditya Vidyut Appliances Limited, through CP 193/2019. Aditya Fabrication Private Limited executed a Deed of Guarantee in favor of the Consortium arrangement. The outstanding was secured by way of the Joint Deed of Hypothecation and Supplemental Joint Deed of Hypothecation, registered mortgage, charge over the property of the

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## Issues and analysis

### Issue 1: Whether the application filed by the Financial Creditor, State Bank of India, under Section 7 of …

**Ratio:** Section 7 of the IBC allows a financial creditor to initiate CIRP against a corporate

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**Reasoning:** The court noted that the Corporate Debtor had executed a Deed of Guarantee in favor of

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**Interpretation:** Section 7 of the IBC is interpreted to allow financial creditors to initiate

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**Application:** In this case, Aditya Fabrication Private Limited acted as a guarantor for the

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## Parties

- **Judges:** B.S.V. Prakash…
- **Appellants:** State Bank of…
- **Respondents:** Aditya Fabrication…

## Timeline

- **2013-08-07 — Working Capital…**: The Borrower Company (Aditya Vidyut Appliances Limited) along with the Corporate…
- **2013-08-07 — Deed of Gua…**: Corporate Debtor executed the Deed of Guarantee in favour of Consortium arrangement and…

## 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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