# In the matter of Furnace Fabrics (India) Limited

> NCLT judgment dated 2023-11-01. Citation: TCN-2023-NCLT-00909. State Bank of India, acting as the financial creditor, filed an application under Section 7 of…

- **Court:** NCLT
- **Order date:** 1 Nov 2023
- **Citation:** TCN-2023-NCLT-00909
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/furnace-fabrics-india-limited-ac25dd63

## Summary

### Background

State Bank of India, acting as the financial creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against Furnace Fabrica (India) Limited, the corporate debtor. The financial creditor, leading a consortium of lenders, had sanctioned a loan facility to the corporate debtor. The corporate debtor defaulted on its debt obligations, leading to the application for CIRP.

## Facts

State Bank of India (SBI), acting as the lead member of a consortium of lenders including Standard Chartered Bank, Kotak Mahindra Bank, and Axis Bank, sanctioned a loan facility to Furnace Fabrica (India) Limited. The initial loan facility was Rs. 215 crores, part of a Rs. 288-crore credit limit established through a working capital consortium agreement on 2010-05-13. Kotak Mahindra Bank later exited the consortium, and SBI reduced the credit facility to Rs. 138 crore via a sanction/renewal letter dated 2017-03-03. The consortium was reconstituted with SBI, SCB, Axis Bank, and EXIM Bank on 2017-08-14, revising the total credit facility to Rs. 281 crore. Furnace Fabrica hypothecated its current assets on 2013-09-24. Directors A. Basheeruddin, Badri Prasad, Sudha Prasad,

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## Issues and analysis

### Issue 1: Whether the application filed by the financial creditor under Section 7 of the Insolvency and …

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

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**Reasoning:** The tribunal found that the financial creditor had submitted sufficient evidence to

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

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**Application:** The tribunal applied Section 7 to the facts of the case, finding that the

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## Parties

- **Judges:** T Krishna…; Shyam Babu…
- **Appellants:** State Bank of…
- **Respondents:** Furnace Fabrica…

## Timeline

- **2010-05-13 — Working Capital…**: Execution of working capital consortium…
- **2017-03-03 — Sanction/Renew…**: SBI reduced the credit…

## 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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