# In the matter of Mithra Yarns Private Limited

> NCLT judgment dated 2024-01-12. Citation: TCN-2024-NCLT-03134. The case pertains to an application filed under Section 10 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 12 Jan 2024
- **Citation:** TCN-2024-NCLT-03134
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/mithra-yarns-private-limited-2376c4b0

## Summary

### Background

The case pertains to an application filed under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016, by a Corporate Applicant seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Mithra Yarns Private Limited, the Corporate Debtor (CD). The CD was incorporated on 22.05.2017 and is registered as a Small Enterprise. It entered into a lease agreement on 31.08.2017 with M/s. Sai Damodhar Spinners. The CD established a spinning unit on the leased land and commenced manufacturing cotton yarn. To fund machinery, the CD approached Union Bank of India (formerly Andhra Bank) for a term loan and working capital loan, which were sanctioned on 07.04.2018. The CD commenced commercial production in January 2020, but operations were affected by

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## Facts

M/s. Mithra Yarns Private Limited (Corporate Debtor) was incorporated on 22.05.2017 and registered as a Small Enterprise. On 31.08.2017, it entered into a lease agreement with M/s. Sai Damodhar Spinners. The Corporate Debtor established a spinning unit on the leased land and commenced manufacturing cotton yarn. To fund machinery, it approached Union Bank of India (formerly Andhra Bank) for a term loan and working capital loan, which were sanctioned on 07.04.2018. Commercial production began in January 2020, but COVID-19 and cotton price fluctuations led to financial losses. The Corporate Debtor defaulted on EMI payments, becoming an NPA on 28.11.2022. Union Bank of India issued a demand notice on 03.12.2022 under the SARFAESI Act and another notice on 27.02.2023 to

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## Issues and analysis

### Issue 1: Whether the application under Section 10 of the IBC for initiating CIRP against M/s. Mithra Yarns …

**Ratio:** Section 10 of the IBC allows a corporate applicant to initiate CIRP against a corporate

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**Reasoning:** The Adjudicating Authority considered the financial statements, auditor's report, and the

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**Interpretation:** Section 10 provides a mechanism for initiating CIRP when a corporate debtor is

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**Application:** The Adjudicating Authority applied Section 10 to the facts of the case,

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## Parties

- **Judges:** Rajeev Bh…; Sanjay…
- **Respondents:** Mithra Yarns…

## Timeline

- **2017-05-22 — Incorporatio…**: M/s. Mithra Yarns Private…
- **2017-08-31 — Lease Agr…**: CD entered into a lease agreement…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14 — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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