# In the  matter of Chemstar Organics (India) Limited C.P. (IB) 4044-2019

> NCLT judgment dated 2021-06-03. Citation: TCN-2021-NCLT-02040. Edelweiss Asset Reconstruction Company Limited filed a Company Petition seeking to initiate the…

- **Court:** NCLT
- **Order date:** 3 Jun 2021
- **Citation:** TCN-2021-NCLT-02040
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/chemstar-organics-india-limited-cp-ib-4044-2019-ded5d8e0

## Summary

### Background

Edelweiss Asset Reconstruction Company Limited filed a Company Petition seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Chemstar Organics (India) Limited, alleging default in repayment of loan facilities. The Bank of Baroda had sanctioned credit facilities to Chemstar Organics, which later defaulted, leading to its classification as a Non-Performing Asset (NPA). The loan account was subsequently assigned to Edelweiss. Chemstar Organics had also made a reference before the BIFR under the Sick Industrial Companies Act, which was later rejected. The petitioner claims that the corporate debtor has an outstanding debt of Rs. 142,55,35,318/- as of 23.09.2019.

## Facts

The Bank of Baroda sanctioned credit facilities to Chemstar Organics (India) Limited via sanction letters dated 12.03.1998 and 07.04.1999. Chemstar Organics defaulted on repayments by 31.05.2000, leading to its account being classified as an NPA on 30.09.2000. Chemstar Organics confirmed and acknowledged the liability on 30.06.2003. The company submitted a letter on 13.03.2006 expressing willingness to settle dues. Bank of Baroda initiated SARFAESI proceedings on 15.06.2016, issuing a notice under Section 13(2) of the SARFAESI Act. Chemstar Organics filed a Securitisation Application challenging the SARFAESI measures. The loan account was assigned to Edelweiss Asset Reconstruction Company Limited on 26.03.2014. Edelweiss accepted an OTS proposal on 05.01.2015,

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## Issues and analysis

### Issue 1: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is barred by …

**Ratio:** The trigger for limitation is the inability of the company to pay its debts, which occurs

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**Reasoning:** The court relied on the Supreme Court's judgment in Jignesh Shah Vs. Union of India,

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**Interpretation:** The court interpreted the law to mean that the limitation period begins from

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**Application:** The court applied the ratio to the facts of the case, noting that the default

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## Parties

- **Judges:** H.V. Subb…; Shyam Babu…
- **Appellants:** Edelweiss Asset…
- **Respondents:** Chemstar Organics…
- **Advocates:** Prakash S…; Shadab…

## Timeline

- **1998-03-12 — Sanction…**: Bank of Baroda issued a sanction letter…
- **1999-04-07 — Sanction…**: Bank of Baroda issued another sanction letter providing additional credit facilities to…

## 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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