# In the matter of Maruti Cotex Ltd.

> NCLT judgment dated 2019-05-08. Citation: TCN-2019-NCLT-03380. The case involves a petition filed by JM Financial Asset Reconstruction Company Ltd. under…

- **Court:** NCLT
- **Order date:** 8 May 2019
- **Citation:** TCN-2019-NCLT-03380
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/maruti-cotex-ltd-9b6de522

## Summary

### Background

The case involves a petition filed by JM Financial Asset Reconstruction Company Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Maruti Cotex Limited, seeking to initiate the Corporate Insolvency Resolution Process (CIRP). The petitioner, as a financial creditor, claims default on a term loan and working capital facilities availed by the corporate debtor. The petitioner is an assignee of the original lender, Bank of India, and other lender banks. The corporate debtor had availed a term loan of ₹75,00,00,000/- in December 2006, along with a sub-limit of import Letter of Credit of ₹75,00,00,000/-. The amount of default as stated in Form 1 is ₹194,36,76,833/- as on 31.1.2018, based on a final order passed by the Debt Recovery Tribunal, Pune in OA

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## Facts

In December 2006, Maruti Cotex Limited (Corporate Debtor) availed a term loan of ₹75,00,00,000/- along with a sub-limit of import Letter of Credit of ₹75,00,00,000/- from Bank of India. Directors of the Corporate Debtor executed a Deed of Continuing Guarantee to secure the term loan. The interest payable was agreed at 11.75% per annum with monthly rest. The Corporate Debtor created a charge by way of hypothecation on the Plant and Machinery and Equipment. A Joint Deed of Hypothecation dated 4.1.2008 was executed in favor of Bank of India as the Lead Bank of Consortium of Lender Banks, including Union Bank of India, the Federal Bank Ltd., Corporation Bank, and OBC. Bank of India sanctioned a limit of ₹75,00,00,000/- at an interest rate of 1.50% below BPLR. The Corporate

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## Issues and analysis

### Issue 1: Whether the petition filed under Section 7 of the I&B Code, 2016, for initiating corporate …

**Ratio:** Section 7 of the I&B Code allows a financial creditor to initiate CIRP against a

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**Reasoning:** The court observed that the application under sub-section (2) of Section 7 of the I&B

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**Interpretation:** Section 7 provides the mechanism for a financial creditor to trigger the

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**Application:** The court applied the provisions of Section 7 to the facts of the case, finding

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## Parties

- **Judges:** V. P. S…; RavikumarDu…
- **Appellants:** JM Financial…
- **Respondents:** Maruti Cote…

## Timeline

- **2006-12-01 — Term Loan A…**: Corporate Debtor availed Term Loan of ₹75,00,00,000/- with a sub-limit of import Letter…
- **2008-01-04 — Joint Deed of…**: Corporate Debtor executed Joint Deed of Hypothecation in favor of Bank of India as Lead…

## 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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