# In the matter of Laxmi Engineering Industries (Bhopal) Pvt. Ltd.

> NCLT judgment dated 2023-07-28. Citation: TCN-2023-NCLT-02296. Canara Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016,…

- **Court:** NCLT
- **Order date:** 28 Jul 2023
- **Citation:** TCN-2023-NCLT-02296
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/laxmi-engineering-industries-bhopal-pvt-ltd-1078d5f9

## Summary

### Background

Canara Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Laxmi Engineering Industries (Bhopal) Pvt Ltd, seeking to initiate Corporate Insolvency Resolution Process (CIRP) due to a default in debt repayment. The Financial Creditor had sanctioned various credit facilities to the Corporate Debtor, including Open Cash Credit (OCC), Letter of Credit (LC), and term loans. The Corporate Debtor's account was declared as Non-Performing Asset (NPA) on 04.06.2018 due to irregular payments. Despite multiple One Time Settlement (OTS) offers from the Corporate Debtor, the Financial Creditor rejected them. The Corporate Debtor contended that the NPA declaration was premature and in contravention of RBI guidelines, and that the Financial

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## Facts

Canara Bank (Financial Creditor) filed CP (IB)8/(MP)2022 under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Laxmi Engineering Industries (Bhopal) Pvt Ltd (Corporate Debtor) for initiating Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor defaulted on a debt of Rs. 61,02,00,000/- approximately, inclusive of interest and other charges as of 30.11.2021, for Loan Account No. 3457261000001 and 3457773000011. The date of default was stated as 04.06.2018. The Financial Creditor sanctioned loan to the Corporate Debtor on 22.12.2010, comprising of Open Cash Credit (OCC) limit, Letter of Credit (LC) limit, and bank guarantee (BG). On 10.01.2011, a master facility loan agreement was executed. During 2013-2017, credit facilities were enhanced.

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## Issues and analysis

### Issue 1: Whether the application under Section 7 of the IBC is maintainable given the Corporate Debtor's …

**Ratio:** The Insolvency and Bankruptcy Code (IBC) allows a financial creditor to initiate CIRP

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**Reasoning:** The NCLT found that the Corporate Debtor had admitted to the debt in its reply dated

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**Interpretation:** Section 7 of the IBC provides a mechanism for financial creditors to initiate

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**Application:** In this case, the Corporate Debtor's admission of the debt and the failure to

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## Parties

- **Judges:** MAHENDRA KHANDELWA…; KAUSHALENDRA…
- **Appellants:** Canara…
- **Respondents:** Laxmi Engineering…
- **Advocates:** Abhishek…; Rushil S…

## Timeline

- **2010-08-01 — Initial C…**: DGM of Financial Creditor Canara Bank made first contact with the respondent/Corporate…
- **2010-12-22 — Loan San…**: Financial Creditor sanctioned loan to…

## 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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