# In the matter of Erotic Buildcon Private Limited (IB)-1050 (PB)-2020

> NCLT judgment dated 2021-05-31. Citation: TCN-2021-NCLT-02067. UKG Steel Private Limited, claiming to be a financial creditor, filed a petition against Erotic…

- **Court:** NCLT
- **Order date:** 31 May 2021
- **Citation:** TCN-2021-NCLT-02067
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/erotic-buildcon-private-limited-ib-1050-pb-2020-70817f9b

## Summary

### Background

UKG Steel Private Limited, claiming to be a financial creditor, filed a petition against Erotic Buildcon Private Limited, the corporate debtor, under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the IBC Rules, 2016. The financial creditor claimed to have disbursed a loan of Rs. 3.76 Crores to the corporate debtor, which the corporate debtor defaulted on. The corporate debtor acknowledged financial difficulties but expressed a bonafide intention to repay the amount. The NCLT observed discrepancies in the financial creditor's evidence, particularly regarding the disbursement of the loan. The NCLT also considered whether the financial creditor, not being a bank or NBFC, was authorized to give such a loan, referring to Section 186 of the

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## Facts

UKG Steel Private Limited (the 'Financial Creditor') claimed to have disbursed a loan of Rs. 3.76 Crores to Erotic Buildcon Private Limited (the 'Corporate Debtor'). The loan agreement was executed on 2019-03-16, with an interest rate of 6.5% per annum. The repayment was agreed to be made in 8 quarterly installments starting from 2019-06-30 and operative up to 2021-03-31. The Financial Creditor disbursed the amount in five installments on different dates in March 2019. The Corporate Debtor defaulted on the repayment. The Financial Creditor sent a notice on 2019-07-10 demanding the outstanding amount with interest. The Corporate Debtor replied expressing its inability to make the payment due to liquidity concerns. The Financial Creditor then decided to recall the total

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## Issues and analysis

### Issue 1: Whether the petitioner, UKG Steel Private Limited, can be considered a financial creditor under …

**Ratio:** A financial creditor is defined under the IBC as a person to whom a financial debt is

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**Reasoning:** The NCLT examined whether UKG Steel Private Limited met the criteria of a financial

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**Interpretation:** The interpretation of 'financial creditor' hinges on the existence of a

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**Application:** The NCLT scrutinized the evidence presented to determine if a financial debt

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## Parties

- **Judges:** B.S.V. Prakash…; HEMANT KUMAR…
- **Appellants:** M/s. UKG Steel…
- **Respondents:** M/s. Erotic…

## Timeline

- **1956-01-01 — Companies Ac…**: UKG Steel Private Limited was incorporated…
- **1998-06-11 — Incorporation of UKG…**: UKG Steel Private…

## 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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