# In the matter of Raasi Refractories Limited

> NCLT judgment dated 2023-03-13. Citation: TCN-2023-NCLT-04261. SREI Equipment Finance Limited, the Financial Creditor (FC), filed an application under Section…

- **Court:** NCLT
- **Order date:** 13 Mar 2023
- **Citation:** TCN-2023-NCLT-04261
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/raasi-refractories-limited-850b643d

## Summary

### Background

SREI Equipment Finance Limited, the Financial Creditor (FC), filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) against Raasi Refractories Limited, the Corporate Debtor (CD). The FC claimed that the CD defaulted on payments related to credit facilities extended under two Master Facility Agreements dated 01.07.2019, amounting to Rs.8,00,00,000/- and Rs.20,00,00,000/-. The CD denied the allegations, contending that the FC failed to provide evidence of disbursement of the loan amounts. The CD also argued that the amounts were transferred to M/s. Ram Laxman Parboiled Rice Pvt. Ltd., a related party, and subsequently remitted back to the FC.

## Facts

SREI Equipment Finance Limited (Financial Creditor) filed an application against Raasi Refractories Limited (Corporate Debtor) to initiate CIRP based on a default in repayment of credit facilities. Two Master Facility Agreements were executed on 01.07.2019, with credit facilities of Rs.8,00,00,000/- and Rs.20,00,00,000/- for purchasing plant and machinery. A personal guarantee was provided by Mr. Konda Laxmaiah, and a supplemental deed of hypothecation was executed. The Corporate Debtor allegedly failed to repay installments, leading the Financial Creditor to issue demand notices on 24.11.2020 and 17.05.2021 for outstanding liabilities. The Corporate Debtor denied the allegations, claiming the Financial Creditor failed to provide evidence of disbursement. The Corporate

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## Issues and analysis

### Issue 1: Whether a financial debt of a sum over rupees one crore is due and payable by the respondent to the …

**Ratio:** The existence of a financial debt is a prerequisite for initiating CIRP under Section 7

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**Reasoning:** The NCLT reasoned that the Financial Creditor failed to provide sufficient evidence of

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**Interpretation:** The interpretation of Section 7 of the IBC requires the adjudicating authority

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**Application:** In this case, the NCLT applied the principle that the Financial Creditor must

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## Parties

- **Judges:** DR.VENKATA…; Satya Ranjan…
- **Appellants:** SREI EQUIPMENT…
- **Respondents:** Raasi Refractories…

## Timeline

- **2019-07-01 — Master Facility…**: Two Master Facility Agreements were executed between SREI Equipment Finance Limited and…
- **2020-11-24 — Demand No…**: SREI Equipment Finance Limited issued a demand notice to Raasi Refractories Limited for…

## 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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