# In the matter of DM Corporation CP No. 952-IBC-NCLT-MB-MAH-2020

> NCLT judgment dated 2021-10-07. Citation: TCN-2021-NCLT-00783. The case involves an application filed by Edelweiss Asset Reconstruction Company Limited under…

- **Court:** NCLT
- **Order date:** 7 Oct 2021
- **Citation:** TCN-2021-NCLT-00783
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/dm-corporation-cp-no-952-ibc-nclt-mb-mah-2020-6a1f2ca3

## Summary

### Background

The case involves an application filed by Edelweiss Asset Reconstruction Company Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016, against D. M. Corporation Private Limited, the Corporate Debtor. The application pertains to a financial debt arising from credit facilities originally sanctioned by Abhyudaya Co-operative Bank Limited to Telsar Construction Pvt. Ltd., with D. M. Corporation providing a corporate guarantee. The account was classified as NPA due to defaults in repayment, leading to SARFAESI action and a recovery suit. The debt was later assigned to Edelweiss Asset Reconstruction Company Limited.

## Facts

Abhyudaya Co-operative Bank Limited sanctioned credit facilities to Telsar Construction Pvt. Ltd. The facilities included a term loan of Rs. 45,00,00,000/- as per a sanction letter dated 2011-10-28. D. M. Corporation Private Limited provided a corporate guarantee to secure the payment obligations of Telsar Construction. Due to defaults in repayment, the account was classified as NPA on 2013-05-31. The Assignor Bank initiated SARFAESI action and filed a recovery suit. A settlement was reached on 2014-02-14, but the Borrower failed to make further payments. A fresh statutory notice was issued on 2015-03-03. The Assignor Bank filed MA No. 70 of 2015 for issuance of a recovery certificate, which was disposed of on 2015-12-02. The Recovery Officer issued a Recovery

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## Issues and analysis

### Issue 1: Whether there is an outstanding financial debt …

**Ratio:** The existence of a financial debt is a prerequisite for initiating CIRP under Section 7

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**Reasoning:** The NCLT relied on the sanction letters, the corporate guarantee, the recovery

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**Interpretation:** The term 'financial debt' is interpreted broadly to include any debt disbursed

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**Application:** In this case, the loan sanctioned by Abhyudaya Co-operative Bank to Telsar

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## Parties

- **Judges:** SUCHITRA KANUPARTH…; Chandra Bha…; +1 more
- **Appellants:** Edelweiss Asset…
- **Respondents:** D. M. Corporation…; Ajinkya Ku…

## Timeline

- **2011-10-28 — Sanction…**: Abhyudaya Co-operative Bank Limited sanctioned credit facilities to Telsar Construction…
- **2013-05-31 — Account Classified as…**: The account was classified as NPA…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(8) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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