# 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-03926. 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-03926
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/vallabh-textiles-company-limited-cp-ib-no391-chd-pb-2018-c9c48ecf

## 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, resulting in a total sanctioned credit limit of ₹179.83 crores. The corporate debtor failed to pay 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, the corporate debtor created an equitable mortgage of various properties. The corporate debtor defaulted on payments, leading PNB to classify the account as a Non-Performing Asset (NPA) on March 31, 2018. PNB issued a demand notice under Section 13(2) of the SARFAESI Act, 2002, claiming ₹157,52,69,715/- as outstanding. As of October 8, 2018, the outstanding amount was ₹167,04,29,627.58/-. The corporate debtor admitted to the sanctioned credit limit and NPA classification but claimed to have

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## Issues and analysis

### Issue 1: Whether the petitioner, Punjab National Bank, has met the requirements of 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 Adjudicating Authority found that PNB had provided sufficient evidence of default,

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**Interpretation:** Section 7 requires the financial creditor to demonstrate a default and propose

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**Application:** PNB submitted Form 1, the application prescribed under Rule 4(1) of the

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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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