# In the matter of EZHIL Chemical Private Limited CP (IB)-139(CHE) 2021

> NCLT judgment dated 2022-09-20. Citation: TCN-2022-NCLT-01011. The case involves an application filed by State Bank of India (SBI), the Financial Creditor,…

- **Court:** NCLT
- **Order date:** 20 Sept 2022
- **Citation:** TCN-2022-NCLT-01011
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/ezhil-chemical-private-limited-cp-ib-139che-2021-dfb0bd81

## Summary

### Background

The case involves an application filed by State Bank of India (SBI), the Financial Creditor, under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against Ezhil Chemical Private Limited, the Corporate Debtor. SBI sought to initiate the Corporate Insolvency Resolution Process (CIRP) against Ezhil Chemical, declare a moratorium, and appoint an Interim Resolution Professional (IRP). Ezhil Chemical stood as a corporate guarantor for credit facilities granted by SBI to Kiran Global Chems Ltd., the Principal Borrower. The Principal Borrower defaulted, leading to the Corporate Debtor's account being classified as a Non-Performing Asset (NPA).

## Facts

State Bank of India (SBI) filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Ezhil Chemical Private Limited. Ezhil Chemical acted as a corporate guarantor for credit facilities extended by SBI to Kiran Global Chems Ltd., the principal borrower. The credit facilities were initially Rs.18 Crores, enhanced to Rs.57.97 Crores. Kiran Global Chems Ltd. defaulted on repayments, leading to Ezhil Chemical's account being classified as a Non-Performing Asset (NPA) on 27.11.2018. SBI issued notices invoking the guarantee and demanding payment. The date of default was averred as 23.02.2018 in the application. SBI also filed an application in OA No.30 of 2020 before DRT 1

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## Issues and analysis

### Issue 1: Whether the application filed by the Financial …

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

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**Reasoning:** The NCLT found that the Financial Creditor had provided sufficient evidence to prove the

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**Interpretation:** The interpretation of Section 7 of the IBC emphasizes the Adjudicating

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**Application:** The NCLT applied the principles of Section 7 of the IBC to the facts of the

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## Parties

- **Judges:** Ramalingam…; AVINASH K.…
- **Appellants:** State Bank of…
- **Respondents:** EZHIL CHEMICAL…

## Timeline

- **2007-02-16 — Enhancement of Credit…**: Credit facilities were enhanced to the limit of Rs.18 Crores by the Financial Creditor to…
- **2009-09-26 — Further Enhancement of…**: The credit facilities were later…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14(1) — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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