# In the matter of Katare Spinning Mills Limited CP No. 3460-IBC-NCLT-MB-MAH-2018

> NCLT judgment dated 2020-07-17. Citation: TCN-2020-NCLT-01006. The case involves an application filed by Bank of India under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 17 Jul 2020
- **Citation:** TCN-2020-NCLT-01006
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/katare-spinning-mills-limited-cp-no-3460-ibc-nclt-mb-mah-2018-613869b8

## Summary

### Background

The case involves an application filed by Bank of India under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Katare Spinning Mills Limited, the Corporate Debtor. The bank sought initiation of the Corporate Insolvency Resolution Process (CIRP) due to default in repayment of financial debt. The bank had sanctioned term loan and cash credit facilities to the Corporate Debtor. Several attempts were made to settle the dues through One Time Settlement (OTS) schemes, but the Corporate Debtor failed to comply with the terms and conditions of these schemes. The bank then invoked the provisions of the IBC to recover the outstanding debt.

## Facts

Bank of India sanctioned a term loan of Rs. 9,00,00,000 and a cash credit facility of Rs. 6,00,00,000 to Katare Spinning Mills Limited, the Corporate Debtor, on 14.08.2013. The Corporate Debtor defaulted on the repayment, with the total amount in default being Rs. 23,90,64,696.69 as of 28.08.2018. The date of default was stated as 30.06.2015. The bank initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016. Several attempts were made to settle the dues through One Time Settlement (OTS) schemes. The first OTS scheme (OTS-2018) required the Corporate Debtor to pay Rs. 1229.64 lakhs by 31.03.2019, but the Corporate Debtor failed to comply. A second OTS scheme (OTS-2019) was offered, with a tentative amount of Rs. 11.17 crore, subject to the

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor defaulted on …

**Ratio:** Section 5(8) of the Insolvency and Bankruptcy Code, 2016 defines 'financial debt'.

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**Reasoning:** The NCLT considered the documents submitted by the bank, including the sanction letter,

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**Interpretation:** The existence of a 'financial debt' and a 'default' are essential requirements

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**Application:** The court applied the definition of 'financial debt' and 'default' to the facts

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## Parties

- **Judges:** SUCHITRAKAN…; Chandra Bha…
- **Appellants:** Bank of…
- **Respondents:** Katare Spinning…

## Timeline

- **2013-08-14 — Sanction…**: Bank of India sanctioned term loan and cash credit facilities to Katare Spinning Mills…
- **2015-03-31 — NPA Decla…**: The account of the Corporate Debtor was…

## 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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