# In the matter of Vallabh Textiles Company Limited CP (IB) No.391-Chd-Pb-2018

> NCLT judgment dated 2019-04-12. Citation: TCN-2019-NCLT-03922. Punjab National Bank (PNB) filed a petition under Section 7 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 12 Apr 2019
- **Citation:** TCN-2019-NCLT-03922
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/vallabh-textiles-company-limited-cp-ib-no391-chd-pb-2018-9fd256bd

## Summary

### Background

Punjab National Bank (PNB) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against Vallabh Textiles Company Limited (Corporate Debtor). PNB claimed that the corporate debtor defaulted on its loan obligations. The corporate debtor was originally granted a loan on 29.11.2007, with the last sanction on 22.02.2017. The total sanctioned credit limit was ₹179.83 crores. The corporate debtor failed to pay the interest and installments regularly, leading to the account being classified as NPA on 31.03.2018. PNB issued a notice under Section 13(2) of the SARFAESI Act, 2002, claiming a default of ₹157,52,69,715/-.

## Facts

Punjab National Bank (PNB) extended credit facilities to Vallabh Textiles Company Limited, with the last sanction occurring on February 22, 2017, bringing the total sanctioned credit limit to ₹179.83 crores. These facilities included term loans and cash credit. To secure the loan, Vallabh Textiles created an equitable mortgage on its properties. However, Vallabh Textiles defaulted on its repayment obligations, leading PNB to classify the account as a Non-Performing Asset (NPA) on March 31, 2018. PNB then issued a demand notice under Section 13(2) of the SARFAESI Act, 2002, claiming a default of ₹157,52,69,715/-. As of October 8, 2018, the outstanding amount was ₹167,04,29,627.58/-. Vallabh Textiles claimed to have made a payment of ₹4.99 crores between April and

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## Issues and analysis

### Issue 1: Whether the petition filed by Punjab National Bank under Section 7 of the Insolvency and Bankruptcy …

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

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**Reasoning:** The tribunal observed that the respondent did not deny the execution of the loan

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

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**Application:** In this case, PNB, as the financial creditor, provided evidence of the loan

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## Parties

- **Judges:** M.K. Sh…; Pradeep R.…
- **Appellants:** Punjab National…
- **Respondents:** Vallabh Textiles…; M/s Vallabh…

## Timeline

- **1970-03-31 — Incorporation…**: Punjab National Bank…
- **2002-06-18 — Incorporation of…**: Vallabh Textiles Company…

## 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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