# In the matter of Mohan Steels Limited

> NCLT judgment dated 2023-12-07. Citation: TCN-2023-NCLT-00369. The case involves an application under Section 7 of the Insolvency and Bankruptcy Code, 2016,…

- **Court:** NCLT
- **Order date:** 7 Dec 2023
- **Citation:** TCN-2023-NCLT-00369
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/mohan-steels-limited-1aa56c33

## Summary

### Background

The case involves an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Rotomac Exports Pvt. Ltd. (through its liquidator, Anil Goel) against Mohan Steels Limited, seeking initiation of the Corporate Insolvency Resolution Process (CIRP). Rotomac Exports, claiming to be a financial creditor, alleges that Mohan Steels defaulted on a loan. Mohan Steels contested the application, arguing that Rotomac Exports is not a financial creditor, there was no financial debt, and the application is barred by Section 10A of the IBC. The application was initially filed on 23.03.2021.

## Facts

Rotomac Exports Pvt. Ltd. (through its liquidator, Anil Goel) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Mohan Steels Limited, claiming to be a financial creditor. Rotomac Exports had advanced a loan of Rs. 9.90 crores to Mohan Steels, secured by a Hypothecation Deed dated 19.04.2007. Mohan Steels made some repayments, but a significant amount remained outstanding. Mohan Steels argued that Rotomac Exports was not a financial creditor because the funds were disbursed under a Memorandum of Understanding (MOU) for rehabilitation, making Rotomac Exports a co-promoter and shareholder. The MOU was dated 12.03.2005. Mohan Steels also contended that the application was

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## Issues and analysis

### Issue 1: Whether the outstanding loan amount qualifies as a 'financial debt' under Section 5(8) of the …

**Ratio:** A 'financial debt' must be disbursed against the 'consideration for the time value of

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**Reasoning:** The NCLT found that the funds were disbursed under a Memorandum of Understanding (MOU)

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**Interpretation:** The 'time value of money' requires a clear agreement on repayment terms and

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**Application:** In this case, the absence of a financial contract and the disbursement of funds

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## Parties

- **Judges:** Praveen…; Ashish…
- **Appellants:** Rotomac Exports…
- **Respondents:** Mohan Steels…; M/S Mohan Steels…

## Timeline

- **2005-03-12 — Memorandum of…**: Rotomac Exports Pvt Ltd and Mohan Steels Ltd entered into a Memorandum of Understanding…
- **2007-04-19 — Hypothecation…**: Mohan Steels executed a Hypothecation Agreement dated 19.04.2007 in favor of Rotomac…

## 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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