# In the matter of Sovereign Developers and Infrastructure Ltd. C.P. (IB) No. 167-BB-2018

> NCLT judgment dated 2019-07-16. Citation: TCN-2019-NCLT-02515. Phoenix ARC Private Limited, acting as the financial creditor, filed a petition under Section 7…

- **Court:** NCLT
- **Order date:** 16 Jul 2019
- **Citation:** TCN-2019-NCLT-02515
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/sovereign-developers-and-infrastructure-ltd-cp-ib-no-167-bb-2018-73699f14

## Summary

### Background

Phoenix ARC Private Limited, acting as the financial creditor, filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Sovereign Developers and Infrastructure Limited, the corporate debtor, due to a default on a total outstanding amount of Rs. 42,80,92,640. Sovereign Developers had initially approached Karnataka Bank for a loan of Rs. 25,00,00,000 for constructing residential apartments. After repeated defaults, Karnataka Bank assigned the debt to Phoenix ARC. Subsequently, Sovereign Developers sought additional funding from Phoenix ARC, leading to a new loan agreement. However, defaults continued, prompting Phoenix ARC to issue a recall notice and file a case

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## Facts

Sovereign Developers and Infrastructure Limited approached Karnataka Bank for a loan of Rs. 25,00,00,000 for the construction of residential apartments. Due to repeated defaults by Sovereign Developers, Karnataka Bank classified the account as a Non-Performing Asset (NPA) on August 16, 2013, and issued a demand notice under Section 13(2) of the SARFAESI Act. Subsequently, Karnataka Bank assigned the debt to Phoenix ARC Private Limited on March 29, 2016. Sovereign Developers then sought additional funding of Rs. 5,00,00,000 from Phoenix ARC, leading to a new loan agreement on June 9, 2016. Despite this, Sovereign Developers continued to default, leading Phoenix ARC to issue a recall notice on August 24, 2017, for Rs. 35,33,34,286. As of September 2, 2018, the total

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor committed a default for the total outstanding amount of …

**Ratio:** A default occurs when a debt is due and payable but has not been paid by the debtor. The

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**Reasoning:** The Adjudicating Authority found that the Corporate Debtor failed to repay the

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**Interpretation:** The term 'default' under Section 7 of the IBC, 2016, is interpreted as the

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**Application:** The Corporate Debtor's failure to repay the outstanding amount, despite the

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## Parties

- **Judges:** Rajeswara Rao…; Ashok Kumar…
- **Appellants:** Phoenix ARC Pvt.…
- **Respondents:** Sovereign…

## Timeline

- **2006-04-21 — Incorporation of…**: M/s. Sovereign Developers and…
- **2007-03-02 — Incorporation of…**: M/s. Phoenix Arc Private…

## 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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