# In the matter of C A V Cotton Mills Private Limited IBA-881-2019

> NCLT judgment dated 2019-09-27. Citation: TCN-2019-NCLT-01190. The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code,…

- **Court:** NCLT
- **Order date:** 27 Sept 2019
- **Citation:** TCN-2019-NCLT-01190
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/c-a-v-cotton-mills-private-limited-iba-881-2019-64d9fde0

## Summary

### Background

The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by Bank of Baroda ('the Creditor Bank') for initiation of Corporate Insolvency Resolution Process ('CIRP') against M/s. C A V Cotton Mills Private Limited ('Corporate Debtor'). The Corporate Debtor defaulted in making repayment of ₹10,74,64,650 as on 30.06.2019. The Creditor Bank had sanctioned a working capital limit of ₹6.50 crores to the Corporate Debtor on 10.11.2009. The Corporate Debtor entered into a Credit Facility Agreement with the Creditor Bank on 30.11.2009, providing various securities. The Corporate Debtor also executed a Demand Promissory Note for ₹6.50 crores and other related documents. The Corporate Debtor acknowledged the debt on 30.10.2012 and

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## Facts

M/s. C A V Cotton Mills Private Limited (Corporate Debtor) defaulted on a repayment of ₹10,74,64,650 to Bank of Baroda (Creditor Bank) as of 30.06.2019. The Creditor Bank had sanctioned a working capital limit of ₹6.50 crores to the Corporate Debtor on 10.11.2009. A Credit Facility Agreement was entered into on 30.11.2009, with securities provided. The Corporate Debtor executed a Demand Promissory Note for ₹6.50 crores on 30.11.2009. The Corporate Debtor acknowledged the debt on 30.10.2012 and 17.06.2015. Part payments of ₹43,83,748 and ₹9,84,182 were made on 12.04.2017 and 05.05.2018, respectively. The account was declared NPA on 29.01.2016. The Creditor Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate

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## Issues and analysis

### Issue 1: Whether the application filed by the Creditor Bank under Section 7 of the Insolvency and Bankruptcy …

**Ratio:** Section 7 of the Insolvency and Bankruptcy Code, 2016 allows a financial creditor to

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**Reasoning:** The court considered the evidence presented by the Creditor Bank, including the sanction

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**Interpretation:** Section 7 of the IBC provides the mechanism for a financial creditor to trigger

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**Application:** The court applied Section 7 of the IBC to the facts of the case, finding that

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## Parties

- **Judges:** B.S.V. Prakash…; S. VIJAYARA…
- **Respondents:** C A V Cotton…

## Timeline

- **2009-11-10 — Sanction of Working…**: Creditor Bank issued a letter sanctioning a working capital limit of ₹6.50 crores to the…
- **2009-11-30 — Credit Facility…**: Corporate Debtor entered into a Credit…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14 — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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