# In the matter of Loyal Auto Globe Private Limited CP No. 4216-IBC-NCLT-MB-MAH-2018

> NCLT judgment dated 2019-03-12. Citation: TCN-2019-NCLT-04458. The Corporate Debtor approached the Financial Creditor in 2008 for a loan. Certain credit…

- **Court:** NCLT
- **Order date:** 12 Mar 2019
- **Citation:** TCN-2019-NCLT-04458
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/loyal-auto-globe-private-limited-cp-no-4216-ibc-nclt-mb-mah-2018-032b1a25

## Summary

### Background

The Corporate Debtor approached the Financial Creditor in 2008 for a loan. Certain credit facilities were enhanced via a sanction letter dated 2008-02-09. The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Loyal Auto Globe Private Limited, due to default in payment of debt. The total amount claimed to be in default was ₹30,27,66,450/- as of 2018-09-14, inclusive of interest.

## Facts

The Corporate Debtor, Loyal Auto Globe Private Limited, approached the Central Bank of India (Financial Creditor) for availing loan facilities in 2008. The credit facilities were enhanced vide sanction letter dated 2008-02-09. The amounts sanctioned on 2009-02-28, along with interest, were claimed to be in default. The total amount claimed to be in default was ₹30,27,66,450/- as of 2018-09-14. Loan documents, including three Deeds of Hypothecation for ₹5,50,00,000/-, ₹50,00,000/- and ₹96,00,000/-, were executed on 2008-02-18. The Corporate Debtor defaulted in making payments. The account of the Corporate Debtor was classified as NPA on 2009-02-28. A Demand Notice U/s 13(2) of SARFAESI Act was served on 2009-03-21, which was replied to by letter dated 2009-05-18,

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## Issues and analysis

### Issue 1: Whether the Financial Creditor has established the existence of a financial debt and a default on …

**Ratio:** Section 5(8) of the Code defines 'Financial

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**Reasoning:** The NCLT considered the loan documents, including deeds of hypothecation and promissory

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**Interpretation:** The court interpreted the definition of 'Financial Debt' under Section 5(8) of

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**Application:** The NCLT applied the definitions of 'Financial Debt' and 'Default' to the facts

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## Parties

- **Judges:** M.K. Sh…
- **Appellants:** Central Bank of…
- **Respondents:** Loyal Auto Globe…
- **Advocates:** Maneesha…

## Timeline

- **2008-02-09 — Sanction…**: Certain Credit facilities were enhanced vide Sanction Letter Ref. No.…
- **2008-02-18 — Execution o…**: Three Deeds of Hypothecation for ₹5,50,00,000/-, ₹50,00,000/- and ₹96,00,000/- were…

## 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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