# In the matter of Coastal Automobiles Private Limited CP (IB) No. 07-7-AMR-2020

> NCLT judgment dated 2021-11-09. Citation: TCN-2021-NCLT-00570. PPG Asian Paints Private Limited filed an application under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 9 Nov 2021
- **Citation:** TCN-2021-NCLT-00570
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/coastal-automobiles-private-limited-cp-ib-no-07-7-amr-2020-6a19c9ea

## Summary

### Background

PPG Asian Paints Private Limited filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Coastal Automobiles Private Limited, alleging default in payment of dues. The Corporate Debtor, Coastal Automobiles Private Limited, had approached the Financial Creditor for financial contribution towards sales promotion and procurement of specialized painting equipment. An agreement was executed between the parties on 04.06.2013, wherein the Financial Creditor made a contribution of Rs. 4,00,000/-. The Corporate Debtor also issued a demand promissory note for the same amount with 12% interest as collateral security.

## Facts

PPG Asian Paints Private Limited (Financial Creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Coastal Automobiles Private Limited (Corporate Debtor). The Corporate Debtor approached the Financial Creditor for financial contribution towards sales promotion and procurement of specialized painting equipment. An agreement was executed on 04.06.2013, wherein the Financial Creditor contributed Rs. 4,00,000/-. The Corporate Debtor issued a demand promissory note for Rs. 4,00,000/- with 12% interest as collateral security. The Financial Creditor issued a demand notice on 18.12.2018, but the Corporate Debtor did not respond or make any payments. The Corporate

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## Issues and analysis

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

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

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**Reasoning:** The court considered the application filed by the Financial Creditor, the documents

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**Interpretation:** Section 7 provides a mechanism for financial creditors to recover their dues by

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

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## Parties

- **Judges:** TELAPROLU…
- **Appellants:** PPG Asian Paints…
- **Respondents:** Costal Automobiles…; Costal Automobiles…

## Timeline

- **2013-06-04 — Agreement Ex…**: An agreement was executed between PPG Asian Paints Private Limited and Coastal…
- **2018-12-18 — Demand Notice…**: PPG Asian Paints Private Limited issued a demand notice to Coastal Automobiles Private…

## 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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