Corporate Insolvency Proceedings Initiated Against S.S. Aluminium Pvt. Ltd. by Canara Bank

Corporate Insolvency Proceedings Initiated Against S.S. Aluminium Pvt. Ltd. by Canara Bank

“Understanding MSME claims during insolvency under IBC and Supreme Court rulings”

In a significant development under India’s insolvency framework, the National Company Law Tribunal, Cuttack Bench, has admitted an application filed by Canara Bank for initiating the Corporate Insolvency Resolution Process against S.S. Aluminium Private Limited. The application, filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, was based on a confirmed financial default exceeding ₹15.88 crore.

Background of the Case

Canara Bank, the financial creditor, extended credit facilities to S.S. Aluminium Pvt. Ltd. for the purpose of modernisation and expansion of its aluminium manufacturing unit located at Haldiapada. The sanctioned credit included both Cash Credit and Term Loan facilities, designed to support the respondent's venture into aluminium extrusion manufacturing for use in commercial, automotive, and industrial applications. Subsequently, the respondent approached the bank for additional financial assistance. On 11 July 2025, Canara Bank sanctioned an additional Term Loan of ₹88.64 lakhs to further support the expansion plans of the manufacturing facility.

Nature of Default

Despite the substantial financial support extended, the Corporate Debtor defaulted on repayment of instalments and interest obligations. The Financial Creditor issued several demand notices dated 25 February 2021, 25 March 2021, and 10 April 2021, requesting settlement of outstanding dues. However, persistent non-compliance led to the classification of the respondent’s loan accounts as Non-Performing Assets on 11 May 2021, in accordance with the Reserve Bank of India’s prudential norms.

Recovery Attempts and Acknowledgement of Debt

Following the defaults, Canara Bank proceeded under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002. A Section 13(4) notice was issued, followed by an auction notice for sale of mortgaged assets, which ultimately failed due to lack of bidders. Subsequently, additional notices under Sections 13(2) and 13(4) were issued in April and July 2022, respectively.

Significantly, S.S. Aluminium Pvt. Ltd. sought One Time Settlement (OTS) offers of ₹4 crore, ₹5 crore, and ₹6 crore at various stages—clearly acknowledging its liability to repay the debt. These acknowledgements were supported by documentation, including an instrument of debt acknowledgment dated 13 July 2021.

Assessment of Financial Debt and Limitation

The Financial Creditor presented conclusive documentary evidence to establish the existence and default of financial debt. This included:

• Form-C and Form-D certificates issued by the National E-Governance Services Ltd.
• Loan account statements maintained by the bank from 1 January 2021 to 16 March 2024
• The Debt Restructuring Agreement dated 29 June 2019
• Acknowledgement of debt under Section 18 of the Limitation Act, 1963

The NCLT held that the application was filed well within the prescribed limitation period and met all the statutory requirements under the IBC.

Respondent’s Plea and Tribunal’s Observations

During the proceedings, the respondent attempted to claim the status of a Micro, Small and Medium Enterprise under the MSMED Act, 2006. However, the Tribunal dismissed the argument, observing that the respondent had failed to provide authenticated documentation proving MSME status at the time its account was declared NPA. The NCLT cited the Supreme Court's ruling in Pro Knits to assert that the burden of establishing MSME status lies solely with the debtor and that belated claims raised during insolvency proceedings lack legal merit. Further, the Tribunal clarified that questions of debt disbursement and additional claims are to be examined by the Resolution Professional during the claim verification process and are not relevant at the stage of admission under Section 7.

Order of Admission and CIRP Initiation

A two-member bench comprising Mr. Deep Chandra Joshi (Judicial Member) and Mr. Banwari Lal Meena, Technical Member delivered the order admitting the Section 7 application. They held that: "It is conclusively established that the Respondent has defaulted in the payment of a financial debt exceeding ₹1 crore as per the documentary evidence submitted, and the present application has been filed within the prescribed period of limitation."

Accordingly, the Tribunal allowed the initiation of CIRP against S.S. Aluminium Pvt. Ltd., marking a formal commencement of the insolvency process under the IBC framework. The NCLT's order reinforces the robust mechanism established under the Insolvency and Bankruptcy Code, 2016, for the resolution of financial defaults. The Tribunal’s decision not only underscores the importance of timely repayment and transparency in borrower conduct but also serves as a precedent for dismissing unsubstantiated claims raised during insolvency proceedings. The matter will now proceed with the appointment of an Interim Resolution Professional who will oversee the resolution process as per the provisions of the Code.