# In the matter of Nikhil Footwear Private Limited Company Petition No. (IB)-106(ND)-2022

> NCLT judgment dated 2023-02-28. Citation: TCN-2023-NCLT-04418. The case pertains to a company petition filed under Section 7 of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 28 Feb 2023
- **Citation:** TCN-2023-NCLT-04418
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/nikhil-footwear-private-limited-company-petition-no-ib-106nd-2022-c1c1196b

## Summary

### Background

The case pertains to a company petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, by CFM Asset Reconstruction Private Limited (the applicant/financial creditor) against Nikhil Footwears Private Limited (the respondent/corporate debtor). The applicant sought to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor based on a default in payment of Rs. 1025,53,60,198.71/-. The corporate debtor was a guarantor for credit facilities availed by Action Ispat & Power Pvt. Ltd. (Principal Borrower) from a consortium of banks, including State Bank of India (SBI). The account of the Principal Borrower was classified as Non-Performing Asset (NPA) on 31.03.2017. SBI had assigned its rights, title, and interest in the

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## Facts

1. CFM Asset Reconstruction Private Limited filed a company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Nikhil Footwears Private Limited.
2. The claim was based on a default of Rs. 1025,53,60,198.71/-
3. Nikhil Footwears Private Limited is the Corporate Debtor with CIN: U19201DL1987PTC026643, incorporated on 09.01.1987.
4. Nikhil Footwears Private Limited acted as a guarantor for Action Ispat & Power Pvt. Ltd. (Principal Borrower), who had availed credit facilities from a consortium of banks including SBI.
5. The Principal Borrower's account was classified as NPA on 31.03.2017.
6. SBI issued a demand notice on 31.07.2017 for Rs. 672,04,53,823.33/-
7. SBI issued a notice under Section 13(2) of the SARFAESI Act, 2002, on 20.09.2017.
8. SBI

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## Issues and analysis

### Issue 1: Whether the applicant qualifies as a 'Financial Creditor' under Section 5(7) of the Insolvency and …

**Ratio:** Section 5(7) of the IBC defines a 'financial creditor' as any person to whom a financial

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**Reasoning:** The NCLT reasoned that the assignment of debt is essentially a transaction between the

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**Interpretation:** The interpretation of Section 5(7) emphasizes that the assignment of debt is a

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**Application:** The NCLT applied this principle to the case, concluding that CFM Asset

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## Parties

- **Judges:** SH. P.S.N.…; BINOD KUMAR…
- **Appellants:** M/s. CFM Asset…
- **Respondents:** M/s. ΝΙΚΗIL…

## Timeline

- **1987-01-09 — Incorporation of…**: Nikhil Footwears Private…
- **2007-02-05 — Credit Facilities…**: Action Ispat & Power Pvt. Ltd. availed credit facilities from a consortium of banks…

## 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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