# In the matter of Mithra Yarns Private Limited

> NCLT judgment dated 2024-01-12. Citation: TCN-2024-NCLT-03102. 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-03102
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/mithra-yarns-private-limited-67eebdc6

## 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 and obtained financial assistance from Union Bank of India (formerly Andhra Bank), which sanctioned a term loan and working capital loan. The CD commenced commercial production in January 2020, but its operations were affected by COVID-19 and fluctuations in cotton prices, leading to financial losses. The

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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, whose partners are also promoter shareholders of the CD, for land in Thangapally Mandal, Rajanna Siricilla District, Telangana, to set up a spinning unit. The lease was for 15 years at Rs. 10,000 per month. The CD established the spinning unit and commenced manufacturing cotton yarn. To fund machinery, the CD approached Union Bank of India (formerly Andhra Bank) and obtained a term loan of Rs. 4.5 Crores and an Open Cash Credit (OCC) of Rs. 1.0 Crore on 07.04.2018. The FC created a security interest through hypothecation of stock, finished goods, receivables, plant,

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## Issues and analysis

### Issue 1: Whether the application under Section 10 of the IBC for initiating CIRP against the Corporate …

**Ratio:** Section 10 of the IBC allows a corporate applicant to initiate CIRP if a default has

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**Reasoning:** The NCLT considered the financial statements, the Auditor's report, and the submissions

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**Interpretation:** Section 10 of the IBC provides a mechanism for corporate debtors to initiate

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**Application:** In this case, the NCLT found that the Corporate Debtor had defaulted on its

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## Parties

- **Judges:** SHRI. RAJEEV…; SHRI. SANJA…
- **Appellants:** M/s. Mithra Yarns…
- **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 10 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-10)

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