# In the matter of Prapti Fashions Private Limited CP (IB) No. 1275-KB-2019

> NCLT judgment dated 2022-10-18. Citation: TCN-2022-NCLT-00690. Reliance Commercial Finance Limited filed a petition under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 18 Oct 2022
- **Citation:** TCN-2022-NCLT-00690
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/prapti-fashions-private-limited-cp-ib-no-1275-kb-2019-15c01d28

## Summary

### Background

Reliance Commercial Finance Limited filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Prapti Fashions Private Limited. The petition was filed due to the Corporate Debtor's alleged default in payment of Rs. 5,46,74,948 as of June 1, 2019. The Financial Creditor claimed that Madhuri Commodities Private Limited had approached Reliance Capital Limited for trade facilities, which later defaulted. A settlement agreement was entered into, and the remaining amount was restructured as a new loan in favor of Prapti Fashions Private Limited. The Commercial Finance Division of Reliance Capital Limited was transferred to Reliance Commercial Finance Limited. The Corporate Debtor initially

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## Facts

Reliance Commercial Finance Limited (Financial Creditor) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Prapti Fashions Private Limited (Corporate Debtor). The Corporate Debtor was incorporated on July 2, 2001. The petition was filed due to the Corporate Debtor's alleged default in payment of Rs. 5,46,74,948 as of June 1, 2019. Madhuri Commodities Private Limited had approached Reliance Capital Limited for trade facilities, which later defaulted. A settlement agreement was entered into between Reliance Capital Limited and Madhuri Commodities Private Limited, and the remaining amount was restructured as a new loan in favor of Prapti Fashions Private Limited. The Commercial

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## Issues and analysis

### Issue 1: Whether there was a loan agreement between the …

**Ratio:** A loan agreement is a fundamental requirement for establishing a financial debt under the

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**Reasoning:** The court examined the Facility Agreement, replies to recall notices, and the Corporate

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**Interpretation:** The court interpreted the conduct of the Corporate Debtor, specifically the

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**Application:** The court applied the principle that conduct implying acknowledgment of debt

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## Parties

- **Judges:** RohitKa…; Balraj…
- **Appellants:** Reliance Commercia…
- **Respondents:** Prapti Fashions…
- **Advocates:** Anirban…; Arnab Basu…; +3 more

## Timeline

- **2016-01-01 — Enactment…**: The Insolvency and…
- **2016-12-09 — Bombay High Co…**: The Hon'ble Bombay High Court sanctioned a scheme of arrangement transferring the…

## 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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