# In the matter of Somerset Construction Private Limited

> NCLT judgment dated 2023-07-25. Citation: TCN-2023-NCLT-02337. The case involves an application filed by Unity Small Finance Bank Limited, the Financial…

- **Court:** NCLT
- **Order date:** 25 Jul 2023
- **Citation:** TCN-2023-NCLT-02337
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/somerset-construction-private-limited-007f71a9

## Summary

### Background

The case involves an application filed by Unity Small Finance Bank Limited, the Financial Creditor, under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Somerset Construction Private Limited, the Corporate Debtor, for initiating the Corporate Insolvency Resolution Process (CIRP). The Corporate Debtor had availed financial services in the form of a Mortgage Overdraft Limit of Rs. 200,00,00,000/-. The Corporate Debtor committed a default on 30.05.2018, and the account was declared as NPA on 31.08.2018. The applicant issued notices under SARFAESI Act. The original lender was merged with Unity Small Finance Bank Limited, and substitution of the name of the merged entity was allowed.

## Facts

Unity Small Finance Bank Limited, the Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Somerset Construction Private Limited, the Corporate Debtor. The Corporate Debtor availed financial services in the form of a Mortgage Overdraft Limit of Rs. 200,00,00,000/-. The Sanction Letter was dated 22.03.2018. The Corporate Debtor committed a default on 30.05.2018, and the account was declared as NPA on 31.08.2018. The Applicant claimed a total debt of Rs. 295,60,86,327.40, including a principal amount of Rs. 199,99,46,786/- and interest of Rs. 95,61,39,541.40/- as on 31.05.2021. The Corporate Debtor had hypothecated book debts as the primary security by entering Hypothecation Deed in ADV 70 with the Original Lender

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## Issues and analysis

### Issue 1: Whether the application filed by the Financial Creditor under Section 7 of the I&B Code is …

**Ratio:** Section 7 of the I&B Code allows a financial creditor to initiate CIRP against a

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**Reasoning:** The Corporate Debtor failed to file a reply despite multiple opportunities. The Financial

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**Interpretation:** Section 7 of the I&B Code provides the mechanism for a financial creditor

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**Application:** The NCLT found that the Corporate Debtor had defaulted on its financial

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## Parties

- **Judges:** Prabhat…; KISHORE VEMULAPALL…
- **Appellants:** Unity Small…
- **Respondents:** Somerset Construct…
- **Advocates:** Kriya…; Maulik Ch…

## Timeline

- **2018-03-22 — Sanction Lett…**: Sanction Letter dated 22.03.2018 along with other documents, were executed in the name of…
- **2018-04-18 — Hypothecati…**: The Corporate Debtor had hypothecated book debts as the primary security by entering…

## 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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