# In the matter of Kharewali Steel Private Limited CP (IB) No.3093-MB-IV-2019

> NCLT judgment dated 2022-12-13. Citation: TCN-2022-NCLT-00165. The case involves a petition filed by Union Bank of India Limited, the Financial Creditor,…

- **Court:** NCLT
- **Order date:** 13 Dec 2022
- **Citation:** TCN-2022-NCLT-00165
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/kharewali-steel-private-limited-cp-ib-no3093-mb-iv-2019-9b673237

## Summary

### Background

The case involves a petition filed by Union Bank of India Limited, the Financial Creditor, under Section 7 of the Insolvency & Bankruptcy Code, 2016, against Kharewali Steel Private Limited, the Corporate Debtor, for initiating Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor had approached the Financial Creditor for a Working Capital Loan and Overdraft Facility. The Corporate Debtor defaulted in payment of interest, leading to its accounts being declared as NPA. The Financial Creditor issued demand notices under Section 13(2) of the SARFAESI Act. The Corporate Debtor contended that the Financial Creditor charged excess interest and failed to renew existing credit facilities.

## Facts

Union Bank of India Limited (Financial Creditor) filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, against Kharewali Steel Private Limited (Corporate Debtor) for initiating CIRP. The Corporate Debtor had availed a Working Capital Loan of Rs.25,00,00,000/- on 10.11.2014 and an Overdraft Facility of Rs.10,00,00,000/-. The Corporate Debtor executed a Demand Promissory Note on 27.03.2015 and entered into a Hypothecation Agreement on 27.02.2017. The Corporate Debtor defaulted in payment of interest for three consecutive months in June, July, and August 2018. The accounts were declared NPA on 31.08.2018. The total amount due was Rs. 36,18,03,995.89/- as of 31.08.2018. The Financial Creditor sent a Demand Notice u/s 13(2) of the SARFAESI Act on

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## Issues and analysis

### Issue 1: Whether there is a clear debt and default on the part of the Corporate Debtor, Kharewali Steel …

**Ratio:** Section 7 of the Insolvency & Bankruptcy Code, 2016 allows a financial creditor to

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**Reasoning:** The NCLT observed that the Corporate Debtor had availed credit facilities from the

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**Interpretation:** The legal issue revolves around the interpretation of Section 7 of the I&B

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**Application:** The NCLT applied the ratio to the facts by examining the loan agreements, the

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## Parties

- **Judges:** Manoj Kumar…; KISHORE VEMULAPALL…
- **Appellants:** Union Bank of…
- **Respondents:** Kharewali Steel…

## Timeline

- **2014-11-10 — Working Capital Loan…**: Corporate Debtor approached the Financial Creditor for a Working Capital Loan of…
- **2015-02-12 — Sanction Lette…**: Financial Creditor issued a Sanction…

## 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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