Ammeet Kamal Agarwal Vs. Axis Bank Ltd. & Anr. - The submission of the Appellant that worth of the CD is much more then the amount claimed that may not be relevant for the application for rejecting the application under Section 7 when debt and default of more than 1 Cr. is established.

 NCLAT (2022.10.04) in Ammeet Kamal Agarwal Vs. Axis Bank Ltd. & Anr. [Comp. App. (AT) (Ins) No. 1216 of 2023 & I.A. No. 532, 6573 of 2024,150 of 2025] held that;

• In so far as the submission of the Appellant that sanction of Rs. 24.90 Cr. was given whereas disbursement was only Rs. 12.90 Cr. the fact that balance amount was not disbursed cannot be ground to reject the section 7 application. It is not disputed that subsequently the sanction was revised and was confined to Rs. 12.5 Cr. only.

• Mortgage is claimed by deposit of title and Bank can claim mortgage of only those assets for which titles deeds are deposited and if no title deeds are deposited the claim of mortgage cannot be raised.

• The submission of the Appellant that worth of the CD is much more then the amount claimed that may not be relevant for the application for rejecting the application under Section 7 when debt and default of more than 1 Cr. is established.

• The fact that the CD has given OTS during the pendency of the CIRP and also submitted 12A proposal itself indicate the acceptance of debt and default. We do not find any error in the order of Adjudicating Authority admitting under Section 7 application.

Excerpts of the Order;

06.10.2025: Heard Ld. Counsel for the Appellant. Ld. Counsel for the Financial Creditor as well as the RP.

# 2. The appeal has been filed against the order dated 08.09.2023 passed by the Adjudicating Authority by which the section 7 application filed by Axis Bank has been admitted.

# 3. The Axis Bank has filed an application under Section 7 against the CD claiming debt and default of Rs. 16,95,95,909 as on 16.03.2023.

# 4. The CD filed the reply opposing section 7 application. The Adjudicating Authority heard the parties and by impugned order admitted the section 7 application. Aggrieved by the said order, this appeal has been filed.

# 5. Counsel for the Appellant has submitted that he was directed to deposit the amount of claim Rs. 10,49,26,262/- which was noticed by this court on 15.09.2023. However, the Appellant has not deposited the amount and proposal under Section 12A has not been accepted which is recorded in the order dated 09.05.2024.

# 6. This Tribunal subsequently vacated the interim order on 25.07.2025 and thereafter the appeal has been heard.

# 7. Counsel for the Appellant has submitted that the financial creditor has sanctioned the loan of Rs. 24.90 Cr. but disbursement was only of Rs. 12.50Cr. as on 31.03.2017. It is further submitted that CD has given the documents pertaining to property by letter dated 29.03.2017, however,subsequently, Axis Bank informed that original documents are not with the Bank. He has further submitted that whereas Part IV of the section 7 application clearly mentioned about the mortgage of the said property and the original documents were received. It is submitted that worth of the CD was much more and Adjudicating Authority committed an error in admitting the application filed under Section 7.

# 8. Counsel for the Respondent opposing the submission of the Counsel for the Appellant and submitted that disbursement is not disputed and debt and default is admitted and finding have been returned by the Adjudicating Authority. It is submitted that with regard to the non-disbursement of full amount as sanctioned it cannot be ground for opposing the application under Section 7. It is further submitted that in so far as the document which bank subsequently communicated are not available, no steps were taken by the CD. It is submitted that debt and default having been found, section 7 was rightly admitted. It is submitted that OTS proposal has been given by the CD even during the pendency of the proceedings before the Adjudicating Authority which was not accepted by the Financial Creditor which itself indicate the existence of debt and default.

# 9. We have considered the submissions of the Counsel for the parties and perused the record.

# 10. In so far as the submission of the Appellant that sanction of Rs. 24.90 Cr. was given whereas disbursement was only Rs. 12.90 Cr. the fact that balance amount was not disbursed cannot be ground to reject the section 7 application. It is not disputed that subsequently the sanction was revised and was confined to Rs. 12.5 Cr. only.

# 11. In so far as the original documents of the property which was communicated by the Appellant to the Bank vide its letter dated 29.03.2017 which is at Annexure A2 to the appeal, it is true that Part IV of the Section 7 application referred to the mortgage property. There is no registered mortgage deed between the parties on record. Mortgage is claimed by deposit of title and Bank can claim mortgage of only those assets for which titles deeds are deposited and if no title deeds are deposited the claim of mortgage cannot be raised.

# 12. Ld. Counsel for the Appellant has submitted that mortgaged were registered. We are of the view that at this stage it is not necessary for us to express any opinion or record any finding with regard to mortgage or title of the property.

# 13. The Adjudicating Authority has returned a finding of debt and default, disbursement is not denied and it is not the case of the CD that amount has been repaid to the Financial Creditor. The submission of the Appellant that worth of the CD is much more then the amount claimed that may not be relevant for the application for rejecting the application under Section 7 when debt and default of more than 1 Cr. is established. The fact that the CD has given OTS during the pendency of the CIRP and also submitted 12A proposal itself indicate the acceptance of debt and default. We do not find any error in the order of Adjudicating Authority admitting under Section 7 application.

# 14. Counsel for the Appellant has lastly submitted that the Appellant has still communicated to the Bank that he is ready to offer the higher amount under 12A. We make it clear that it is always open for the CD to make appropriate proposal which can be considered in accordance with law by the CoC as per Section 12A of the IBC.

# 15. Counsel for the RP has submitted that certain assets were sold after mortarium. The said issues are not relevant for the present proceedings and can be considered by the Adjudicating Authority.

# 16. With these observations, we dismiss the appeal.

# 17. All I.As, are disposed of.

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CRC Infratech & Services LLP Vs.Fourth Generation Information Systems Ltd. - It is settled law that the existence of an acceleration clause gives the lender the discretion to declare the entire outstanding loan amount as immediately due upon default of any obligation. However, the presence of such a clause does not imply that the entire amount becomes automatically due upon a single default.

NCLY Hyd. (2025.04.24) in CRC Infratech & Services LLP Vs.Fourth Generation Information Systems Ltd. [(2025) ibclaw.in 525 NCLT, Company Petition (IB)/102/7/HDB/2024] held that-   

• It is settled law that the existence of an acceleration clause gives the lender the discretion to declare the entire outstanding loan amount as immediately due upon default of any obligation. However, the presence of such a clause does not imply that the entire amount becomes automatically due upon a single default.

• Therefore, in the absence of a proper and proven invocation of the acceleration clause, only the defaulted instalment(s) can be treated as a 'default' under Section 3(12) of the IBC for the purposes of satisfying the threshold under Section 4.

• Therefore, in the absence of a proper and proven invocation of the acceleration clause, only the defaulted instalment(s) can be treated as a 'default' under Section 3(12) of the IBC for the purposes of satisfying the threshold under Section 4.

• Accordingly, the validity of the Petitioner’s claim to treat the entire outstanding loan amount as defaulted hinges on whether the acceleration clause was duly and effectively invoked in accordance with the terms of the Agreement. Such invocation must be supported by clear, cogent evidence of communication to the Corporate Debtor.

Excerpts of the Order;

I. The instant Petition has been filed by M/s. CRC Infratech & Services LLP, the Financial Creditor (FC) under Section 7 of the Insolvency and Bankruptcy Code (IBC) r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Fourth Generation Information Systems Limited, the Corporate Debtor (CD).

II. Petition

1. The FC was incorporated on 22.11.2022 and is in the business of Storage and Warehousing. The CD was incorporated on 21.08.1998 and operates in the fields of Hardware & Software Product Development, publishing, consultancy, technology services and supply.

2. The CD availed financial assistance of Rs.1,00,00,000/- from the FC pursuant to a Loan Agreement dated 23.05.2023. The loan was agreed to be repaid at an annual interest rate of 15% over a period of 40 months, commencing from 31.07.2023.

3. The CD has defaulted on its obligations under the Loan Agreement, failing to make payments from 31.07.2023 to 31.03.2024, i.e. for a period of 9 months. The total due as on 31.03.2024 is Rs.1,32,67,534/- while the total unpaid loan amount along with 9 monthly instalments is Rs.1,22,50,000/- and interest due is Rs.10,17,534/-.

4. The Record of Default (RoD) was filed by the FC on 21.03.2024, and the Information Utility, M/s.National E-Governance Services Limited (NeSL) authenticated a total outstanding amount of Rs.1,25,67,295/- and a default amount of Rs.25,67,295/- as on 04.04.2024.

5. It is submitted that the FC issued a Demand Notice to the CD on 14.02.2024, demanding a sum of Rs.25,67,295/- alongwith the Principal Amount of Rs.1,00,00,000/-. Despite the demand notice, the CD failed to remit the required payment. Consequently, the FC filed the present Petition on 29.04.2024.

III.Counter

1. The present Petition is filed with the intent to recover the dues, however, it is devoid of merit due to pre-existing disputes between the FC and the CD.

2. The FC is a Limited Liability Partnership (LLP) involved in storage and warehousing activities. The loan, however, was provided in contravention of the objects clause of the FC, rendering it void ab initio.

3. The Demand Notice issued by the FC was not received by the CD, and the FC has failed to provide postal receipts or acknowledgments to support service of the Notice.

4. The FC also failed to submit the necessary bank statements, which are required for filing a Section 7 Petition under the Insolvency and Bankruptcy Code (IBC), 2016, to substantiate the debt. The CD relies on the judgment of the Hon’ble Supreme Court in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [(2022) 8 SCC 352] to argue that this Adjudicating Authority has the discretion to reject the Petition as incomplete.

5. The CD started its business by availing credit facilities from various sources. Revenue generation by the CD is evident from its profit and loss account for the financial year 2023-24.

6. Therefore, the present Petition is liable to be dismissed with exemplary costs imposed.

IV. Written Submissions by the Petitioner/FC

1. The FC reiterated the averments made in the Petition and relied upon the judgment of the Hon’ble Supreme Court in Innoventive Industries vs. ICICI Bank Limited to emphasize that the Adjudicating Authority's role is to ascertain whether a debt exists and whether a default has occurred.

2. The FC also placed reliance on the Order of this Tribunal in M/s. Aventine Software Private Ltd. vs. Baron Infotech Ltd. [C.P (IB) No. 164 of 2023], asserting that similar facts were present in that case.

V. Written Submissions by the Respondent/CD

The CD reiterated its contentions from the counter-affidavit and relied on the Order of the Hon’ble NCLAT in D.S Kulkarni And Company vs. Mr. Manoj Kumar Agarwal & Ors. (2024), asserting that MOU and ledger extracts alone are insufficient to substantiate a financial debt claim.

VI. Findings

1. It is an admitted position that the FC and the CD entered into a Loan Agreement dated 23.05.2023 for a sum of Rs. 1,00,00,000/- repayable over a period of 40 months at the agreed rate of interest.

2. The loan amount of Rs.1,00,00,000/-, being repayable with interest in 40 instalments, constitutes a financial debt within the meaning of Section 5(8) of the IBC. The records show that the money was borrowed against the payment of interest, thereby fulfilling the element of consideration for time value of money. However, for initiating proceedings under Section 7 of the Code, the amount of default must exceed the minimum threshold specified under Section 4.

3. As per the case of the Petitioner, the CD defaulted on the first instalment due on 31.07.2023, which is claimed as the date of default. As per the Financial Creditor’s own admission in the Petition, the total amount in default as on 31.03.2024 is Rs.1,32,67,534/-, comprising principal of Rs.1,22,50,000/- and accrued interest of Rs.10,17,534/-.

4. However, the authenticated RoD filed with the NeSL on 21.03.2024 reflects the defaulted amount as Rs.25,67,295/- and the total outstanding as Rs.1,25,67,295/- as on 31.07.2023. This reveals a material discrepancy between the default amount recorded in the NeSL filing and the amount claimed in the Section 7 Petition.

5. Under Section 7(3)(a) of the IBC, a Financial Creditor is required to furnish a Record of Default from the Information Utility. In Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India & Ors. [(2019) 4 SCC 17], the Hon’ble Supreme Court held that such record is only prima facie evidence of default, albeit rebuttable. Therefore, it was incumbent upon the Applicant to reconcile this inconsistency and substantiate the actual amount in default through cogent and corroborative evidence.

6. If the record of NeSL is to be taken as the basis for determining the default, the defaulted amount of Rs.25,67,295/- is significantly below the threshold limit of Rs.1,00,00,000/- as mandated under Section 4 of the IBC.

7. The Petitioner seeks to overcome this discrepancy by relying on Clause 6 of the Loan Agreement (Annexure-1), which contains an acceleration clause. The relevant clause reads:

Default “6. Notwithstanding anything to the contrary in this Agreement, if the Borrower defaults in the performance of any obligation under this Agreement, then the Lender may declare the principal amount owing and interest due under this Agreement at that time to be immediately due and payable.”

8. In Koncentric Investments Limited & Anr. vs. Standard Chartered Bank & Anr., Company Appeal (AT) (Insolvency) No. 911 of 2021, decided on 27.01.2022, the Hon’ble NCLAT held that although a Financial Creditor is entitled to file a Petition under Section 7 upon default, it is neither mandatory nor necessary to do so on the first instance of default. The statutory requirement is that the default must have occurred within three years prior to the filing of the Petition.

9. It is settled law that the existence of an acceleration clause gives the lender the discretion to declare the entire outstanding loan amount as immediately due upon default of any obligation. However, the presence of such a clause does not imply that the entire amount becomes automatically due upon a single default. The language used in Clause 6—specifically the word "may declare"—indicates that the clause requires affirmative action on the part of the lender to invoke it.

10. Therefore, in the absence of a proper and proven invocation of the acceleration clause, only the defaulted instalment(s) can be treated as a 'default' under Section 3(12) of the IBC for the purposes of satisfying the threshold under Section 4.

11. Accordingly, the validity of the Petitioner’s claim to treat the entire outstanding loan amount as defaulted hinges on whether the acceleration clause was duly and effectively invoked in accordance with the terms of the Agreement. Such invocation must be supported by clear, cogent evidence of communication to the Corporate Debtor.

12. The notice dated 14.02.2024 (Annexure-4), purportedly issued under the acceleration clause, states that due to non-payment of seven instalments of Rs.2,50,000/- each along with accrued interest of Rs.8,17,295/- (aggregating to Rs.25,67,295/- as of 31.01.2024), the entire loan amount along with interest would become due and payable. However, the Corporate Debtor has denied receipt of the said notice. The burden of proving the invocation of the acceleration clause—by way of evidence demonstrating that the demand notice was duly communicated—lies on the Applicant. In the absence of such proof, it cannot be held that the entire loan amount became due and payable. Consequently, the default, for the purposes of Section 7, remains confined to the instalments actually unpaid and duly established as defaulted.

13. Given the discrepancies in the default amount and the lack of proof regarding service of the notice (Annexure-4), we are of the view that the present Petition appears to be filed primarily for the purpose of recovery, rather than for triggering Insolvency Resolution under the Code.

14. Therefore, based on the above observations, this petition is hereby dismissed. 

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