# in the matter of Paramshakti Steels Ltd. CP No. 727-MAH-2017

> NCLT judgment dated 2017-07-03. Citation: TCN-2017-NCLT-00766. Union Bank of India filed a Company Petition against Paramshakti Steels Ltd. under Section 7 of…

- **Court:** NCLT
- **Order date:** 3 Jul 2017
- **Citation:** TCN-2017-NCLT-00766
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/paramshakti-steels-ltd-cp-no-727-mah-2017-5eef40d6

## Summary

### Background

Union Bank of India filed a Company Petition against Paramshakti Steels Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016, alleging default in repayment of a sum of Rs. 35,88,82,988/- plus interest amounting to Rs. 4,55,68,672/- from 26.07.2016 to 31.03.2017. The Financial Creditor had sanctioned Letter of Credit and Cash Credit facilities to the Corporate Debtor, secured by various collaterals and personal guarantees. The Corporate Debtor defaulted on its payment obligations, leading to the petition.

## Facts

Union Bank of India (Financial Creditor) sanctioned Rs.50,00,00,000/- as Letter of Credit facility and Rs.25,00,00,000/- as Cash Credit facility to Paramshakti Steels Ltd. (Corporate Debtor). These facilities were secured by collaterals including Land and Building, plant & machinery and FDR/Cash collateral belonging to the Corporate Debtor valued at Rs.113.53 crores and also on the personal guarantee of Mr. Vinod Garg, Director of the Corporate Debtor. The Corporate Debtor defaulted on 26.07.2016 in repaying a sum of Rs.35,88,82,988/- plus interest amounting to Rs.4,55,68,672/- from 26.07.2016 to 31.03.2017. The Financial Creditor filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor argued that the Power of Attorney

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## Issues and analysis

### Issue 1: Whether the petition filed by the Financial Creditor is maintainable under Section 7 of the …

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

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**Reasoning:** The NCLT found that the Corporate Debtor had defaulted in making payment of the debt as

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**Interpretation:** Section 7 provides a mechanism for financial creditors to recover their dues

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**Application:** The NCLT applied Section 7 to the facts of the case and found that the

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## Parties

- **Judges:** B.S.V. Prakash…; V. Nallasen…
- **Appellants:** Union Bank of…
- **Respondents:** Paramshakti…

## Timeline

- **2014-07-14 — Sanction of Credit…**: Financial Creditor sanctioned Rs.50,00,00,000/- as Letter of Credit facility and…
- **2016-07-26 — Default in Re…**: Corporate Debtor defaulted on 26.07.2016 in repaying a sum of Rs.35,88,82,988/- plus…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14 — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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