# In the matter of Velugu Engineering and Enterprises (P) Ltd. CP (IB) No. 234-7-HDB-2020

> NCLT judgment dated 2021-03-25. Citation: TCN-2021-NCLT-02564. The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code…

- **Court:** NCLT
- **Order date:** 25 Mar 2021
- **Citation:** TCN-2021-NCLT-02564
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/velugu-engineering-and-enterprises-p-ltd-cp-ib-no-234-7-hdb-2020-a26b0c19

## Summary

### Background

The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 by Bhagyanagar Investments and Trading (P) Ltd (the Financial Creditor) against Velugu Engineering and Enterprises (P) Ltd (the Corporate Debtor) to initiate the Corporate Insolvency Resolution Process (CIRP). The Financial Creditor claims that the Corporate Debtor defaulted on a financial debt of Rs. 2,67,46,301 as of June 10, 2019. The Corporate Debtor availed a corporate loan of Rs. 2.00 crores in June 2017, repayable in 8 quarterly installments with 12% interest per annum. The Corporate Debtor allegedly failed to fulfill the loan agreement obligations, leading to the application for CIRP initiation.

## Facts

Bhagyanagar Investments and Trading (P) Ltd, the Financial Creditor, filed an application under Section 7 of the IBC against Velugu Engineering and Enterprises (P) Ltd, the Corporate Debtor, seeking to initiate CIRP. The Financial Creditor claimed a default of Rs. 2,67,46,301 as of June 10, 2019, stemming from a Rs. 2.00 crore loan availed by the Corporate Debtor in June 2017, with a repayment schedule of 8 quarterly installments at 12% interest. The Corporate Debtor allegedly failed to meet its obligations under the loan agreement. The Corporate Debtor, in its reply, pointed out inconsistencies in the claimed amount and the absence of default records from an information utility. The Financial Creditor clarified a typographical error and expressed readiness to submit

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## Issues and analysis

### Issue 1: Whether the Corporate Debtor committed a default on its financial debt, warranting the initiation …

**Ratio:** Section 7 of the IBC allows a financial creditor to initiate CIRP against a corporate

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**Reasoning:** The court relied on the Corporate Debtor's acknowledgment letters, which admitted the

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**Interpretation:** Section 7 is interpreted to mean that if a financial debt exists and the

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**Application:** The court applied the ratio to the facts by considering the Corporate Debtor's

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## Parties

- **Judges:** Madan B.…; BINOD KUMAR…
- **Appellants:** Bhagyanagar…
- **Respondents:** Velugu Engineering…

## Timeline

- **2017-06-01 — Loan Avai…**: The Corporate Debtor availed a Corporate Loan…
- **2019-06-10 — Default…**: The Corporate Debtor committed default on…

## 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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