# In the matter of Lotus Auto Engineering Ltd. CP No. (IB)-31-(PB)-2018

> NCLT judgment dated 2018-08-07. Citation: TCN-2018-NCLT-00986. Oriental Bank of Commerce filed an application under Section 7 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 7 Aug 2018
- **Citation:** TCN-2018-NCLT-00986
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/lotus-auto-engineering-ltd-cp-no-ib-31-pb-2018-746046d3

## Summary

### Background

Oriental Bank of Commerce filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Lotus Auto Engineering Limited, claiming to be a financial creditor. The application sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor due to default in repayment of a term loan of Rs. 175 Crores granted on 21.07.2011 and a subsequent term loan of Rs. 50 Crore on 31.12.2015. The bank presented documents including sanction letters, board resolutions, and loan agreements to support its claim. The corporate debtor raised objections regarding the authorization of the applicant's representative and the necessity of consent from other consortium banks. They also proposed a debt restructuring plan. The bank argued

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## Facts

Oriental Bank of Commerce (the applicant/financial creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Lotus Auto Engineering Limited (the respondent/corporate debtor). The applicant claimed that the corporate debtor defaulted on a term loan of Rs. 175 Crores granted on 21.07.2011 and a subsequent term loan of Rs. 50 Crore on 31.12.2015. The applicant relied on documents such as sanction letters, board resolutions, and loan agreements. The corporate debtor's account was declared a Non-Performing Asset (NPA) on 30.09.2016 due to the default. The corporate debtor proposed a debt restructuring plan, which was under consideration by the consortium banks. The corporate

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## Issues and analysis

### Issue 1: Whether the application filed by Oriental Bank of Commerce under Section 7 of the Insolvency and …

**Ratio:** Section 7(1) of the Insolvency and Bankruptcy Code, 2016, allows a financial creditor,

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**Reasoning:** The NCLT reasoned that the applicant bank, being a financial creditor, had the right to

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**Interpretation:** Section 7 of the IBC provides a mechanism for financial creditors to initiate

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**Application:** The ratio and reasoning were applied to the facts of the case, where Oriental

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## Parties

- **Judges:** M. M. K…; S. K. MOH…
- **Appellants:** Oriental Bank of…
- **Respondents:** LOTUS AUTO…
- **Advocates:** S. K. S…; Arun Kath…; +2 more

## Timeline

- **2011-07-21 — Term Loan G…**: Oriental Bank of Commerce granted a term loan of Rs. 175 Crores to Lotus Auto Engineering…
- **2015-09-18 — Master Joint Lenders…**: A Master Joint Lenders Forum Agreement was executed among Oriental Bank of Commerce,…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60 — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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