# In the matter of Kafila Hospitality and Travels Private Limited

> NCLT judgment dated 2023-10-17. Citation: TCN-2023-NCLT-01174. Axis Bank Limited filed an application under Section 7 of the Insolvency and Bankruptcy Code,…

- **Court:** NCLT
- **Order date:** 17 Oct 2023
- **Citation:** TCN-2023-NCLT-01174
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/kafila-hospitality-and-travels-private-limited-aef361a3

## Summary

### Background

Axis Bank Limited filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Kafila Hospitality and Travels Private Limited. The application stemmed from an alleged default related to a loan facility of Rs. 40,00,00,000 sanctioned to the Corporate Debtor to meet working capital requirements and pay off existing debts. The funds were intended for a takeover of the Corporate Debtor's existing cash credit facility with Union Bank of India. However, the takeover failed due to non-compliance with RBI norms, and the funds were remitted back to Axis Bank. Axis Bank then sought to debit

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## Facts

Axis Bank Limited ('Applicant') sought to initiate Corporate Insolvency Resolution Process (CIRP) against Kafila Hospitality and Travels Private Limited ('Corporate Debtor') under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Applicant had sanctioned a loan facility of Rs. 40,00,00,000 to the Corporate Debtor for working capital and to pay off existing debts. The loan was intended to facilitate the takeover of the Corporate Debtor's cash credit facility with Union Bank of India ('Existing Lender'). After the loan was sanctioned, a Working Capital Loan Agreement was executed between the Applicant and the Corporate Debtor. The Applicant disbursed Rs. 37,46,00,000 to settle the Corporate Debtor's account with the Existing Lender. However, Union Bank of India

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## Issues and analysis

### Issue 1: Whether the charges and penalties levied by Axis Bank due to the failed takeover of the loan …

**Ratio:** A 'financial debt' under Section 5(8) of the IBC requires a 'disbursal' of funds against

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**Reasoning:** The Adjudicating Authority reasoned that the charges and penalties claimed by Axis Bank

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**Interpretation:** The term 'financial debt' is interpreted strictly to require a direct disbursal

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**Application:** In this case, the charges and penalties were levied due to the Corporate

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## Parties

- **Judges:** MANNI SANKARIAH…; BINOD KUMAR…
- **Appellants:** Axis Bank L…
- **Respondents:** Kafila Hospitality…

## Timeline

- **2016-01-01 — Enactment…**: The Insolvency and…
- **2017-07-19 — Sanction…**: Axis Bank sanctioned a loan facility of Rs. 40,00,00,000 to Kafila Hospitality and…

## 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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