# In the matter of Micro Stock Holding Pvt. Ltd. (IB)-108(PB)-2022

> NCLT judgment dated 2022-05-11. Citation: TCN-2022-NCLT-02784. The case involves an application filed by CFM Asset Reconstruction Pvt. Ltd. (Financial…

- **Court:** NCLT
- **Order date:** 11 May 2022
- **Citation:** TCN-2022-NCLT-02784
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/micro-stock-holding-pvt-ltd-ib-108pb-2022-d3f792fe

## Summary

### Background

The case involves an application filed by CFM Asset Reconstruction Pvt. Ltd. (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Micro Stock Holdings Pvt. Ltd. (Corporate Debtor). The Corporate Debtor acted as a guarantor for loan facilities availed by Action Ispat & Power Private Limited from State Bank of India (SBI) and other banks. The borrower defaulted, leading SBI to declare the account as Non-Performing Assets (NPA) and invoke the guarantee. The Financial Creditor is an assignee of the debt owed by the Corporate Debtor to SBI. The application was filed on 03.02.2022.

## Facts

CFM Asset Reconstruction Pvt. Ltd. (Financial Creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Micro Stock Holdings Pvt. Ltd. (Corporate Debtor) on 03.02.2022. The Corporate Debtor acted as a guarantor for loan facilities availed by Action Ispat & Power Private Limited from State Bank of India (SBI) and other banks. The total outstanding amount was approximately ₹1025.53 Crore. The borrower defaulted, leading SBI to declare the account as Non-Performing Assets (NPA) w.e.f. 31.03.2017 and invoke the guarantee provided by the Corporate Debtor. SBI issued demand letters dated 29.08.2017 to the borrower and Corporate Debtor. The Financial Creditor is an

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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 court considered the documents and submissions made by the Financial Creditor,

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**Interpretation:** Section 7 of the IBC is interpreted to allow a financial creditor to initiate

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**Application:** The ratio and reasoning were applied to the facts of the case, where the

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## Parties

- **Judges:** Ramalingam…; AVINASH K.…
- **Appellants:** CFM Asset…
- **Respondents:** Micro Stock…

## Timeline

- **2022-02-03 — Application…**: CFM Asset Reconstruction Pvt. Ltd. filed…
- **2022-02-22 — Tribunal Issue…**: The Tribunal issued notice to…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 19 — Personnel to extend co-operation to interim…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-19)

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