Omkara Assets Reconstruction Private Limited Vs Ego Flooring Private Limited (NCLT Mumbai)
National Company Law Tribunal (NCLT), Mumbai Bench, in Omkara Assets Reconstruction Private Limited vs. Ego Flooring Private Limited, admitted an application filed under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor, Ego Flooring Pvt. Ltd. The case revolved around a financial debt originally extended by IndusInd Bank Ltd., later assigned to the applicant, Omkara Assets Reconstruction Pvt. Ltd., and the respondent’s objections on limitation, Section 10A applicability, and alleged procedural abuse.
Background and Facts
Ego Flooring Pvt. Ltd. had availed cash credit facilities of ₹825 lakhs from IndusInd Bank under sanction letters issued in May 2016 and modified in June 2016. The debt was secured by hypothecation and mortgage of properties through several agreements, including a Deed of Hypothecation, Master General Terms Agreement, and Memorandum of Deposit of Title Deeds. The facility was renewed for ₹475 lakhs through a sanction letter dated 14 May 2018. The renewal was valid for one year, expiring on 13 May 2019, and no further renewal was produced.
The debtor defaulted in repayment, and the bank issued a demand notice under Section 13(2) of the SARFAESI Act on 18 June 2021 demanding ₹4.63 crore. Subsequently, IndusInd Bank assigned the debt to Omkara ARC under an Assignment Agreement dated 30 September 2021. Despite repeated notices, the corporate debtor failed to pay, leading to this Section 7 petition claiming a default amount of ₹6.49 crore (including interest) as on 31 December 2023.
Respondent’s Objections
Ego Flooring opposed the petition, arguing primarily that it was barred under Section 10A of the IBC, which prohibits CIRP initiation for defaults occurring during the Covid-19 suspension period (25 March 2020 to 25 March 2021). The debtor stated that its account was declared NPA on 1 November 2020, implying a default date around August 2020, and hence the application was hit by the Section 10A moratorium.
It further contended that the financial creditor had earlier filed CP No. 245 of 2023 for the same debt, which was withdrawn to circumvent the Section 10A bar—amounting to abuse of process. The respondent also alleged that the default date in the NeSL certificate (1 November 2020) contradicted the petitioner’s claimed default date (31 January 2020). Additionally, it accused the creditor of unlawful appropriation of fixed deposits worth ₹2.61 crore to manipulate the account and extend limitation artificially.
Applicant’s Rejoinder
Omkara ARC clarified that the earlier petition (CP 245/2023) was withdrawn merely to correct factual errors regarding the NPA date. It maintained that the actual default occurred on 31 January 2020, before the Covid moratorium, supported by account statements and NeSL records. It argued that the RBI’s Covid circulars only deferred NPA classification and did not alter the date of default. The applicant also relied on the Supreme Court’s suo motu orders extending limitation periods (Suo Motu W.P. (Civil) No. 3 of 2020) to assert that the petition filed on 20 January 2024 was within the limitation period.
Tribunal’s Findings
The NCLT reviewed the sanction and renewal letters, ledger accounts, correspondence, and payment records. It found that the cash credit facility expired on 13 May 2019, as no renewal was shown beyond that date. Consequently, default occurred on 14 May 2019, when the facility became repayable on demand. A letter from the lender’s legal counsel dated 15 January 2019 also indicated substantial outstanding dues of ₹4.81 crore and a payment demand within seven days.
The Tribunal noted that no withdrawals, except interest debits, were recorded post expiry of the facility. Therefore, it rejected the applicant’s assertion that default occurred on 31 January 2020, holding instead that the default date was 14 May 2019. Importantly, this placed the default outside the purview of Section 10A, since it predated 25 March 2020.
On Limitation
The NCLT next considered the limitation period. Based on the default date of 14 May 2019, the three-year limitation would ordinarily expire on 13 May 2022. However, the Tribunal considered part payment of ₹10,03,342 made on 24 December 2019, which under Section 19 of the Limitation Act, 1963, extends the limitation.
Citing the Supreme Court’s rulings in Suo Motu Writ Petition (Civil) No. 3 of 2020 and M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. (2004 INSC 155), the NCLT held that the limitation clock was suspended from 15 March 2020 to 28 February 2022 due to Covid-19 extensions. The period remaining on 15 March 2020 resumed from 1 March 2022, extending limitation until 9 December 2024. Therefore, the application filed on 20 January 2024 was within limitation.
Admission of Petition and Appointment of IRP
Since the existence of debt and default was established, and the application was found within limitation, the NCLT admitted the petition under Section 7 of the IBC. It appointed Mr. Santanu T. Ray (IBBI Reg. No. IBBI/IPA-002/IP-N00360/2017-18/11055) as the Interim Resolution Professional (IRP) to carry out CIRP functions under Sections 15–21 of the Code.
A moratorium under Section 14 was declared, prohibiting:
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Institution or continuation of suits or proceedings against the corporate debtor;
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Transfer or disposal of assets;
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Enforcement of security interests under SARFAESI; and
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Recovery of property by owners or lessors.
The Tribunal directed immediate public announcement of CIRP and required Omkara ARC to deposit ₹3,00,000 towards interim finance for public notice and claim verification expenses. The IRP was instructed to take control of management, collect information and assets, and file periodical progress reports. The Registrar of Companies was directed to update the corporate debtor’s master data.
Key Judicial References
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Suo Motu W.P. (Civil) No. 3 of 2020, Supreme Court — Excluded limitation periods during Covid-19 pandemic.
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M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. (2004) 3 SCR 73 — Clarified computation of limitation when suspended by judicial orders.
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The decision reaffirmed that NPA classification deferment does not shift the actual date of default under IBC and that part payment restarts limitation under Section 19 of the Limitation Act.
Outcome
The NCLT Mumbai held that the debt and default were proven, the limitation period was validly extended, and Section 10A did not apply. Consequently, CIRP was admitted against Ego Flooring Pvt. Ltd., with moratorium orders and appointment of the IRP.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
Brief Facts:
1. This Company Petition is filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) by Omkara Assets Reconstruction Private Limited (CIN: U67100TZ2014PTC020363) (“hereinafter referred to as the Financial Creditor /Applicant”) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Ego Flooring Private Limited (CIN: U26933MH2005PTC151646)(“hereinafter referred to as the Corporate Debtor/Respondent”).
2. The Applicant is a Private Limited Company registered under the Companies Act, 2013 incorporated on 19th March 2014 having registered address at No. 9, M P Nagar First Street, Kongu Nagar Extension, Tirupur -641607, Tamil Nadu and having corporate office at Kohinoor Square, 47th Floor, N.C Kelkar Marg, R.G. Gadkari Chowk, Dadar West, Mumbai 400028.
3. The Respondent is incorporated under the Companies Act, 1956 on 28th February 2005 having CIN: U26933MH2005PTC151646 with its registered office at Gala no. A/1, Sagar Ind Estate 1. S.no. 35 Dhunal Nagar, Waliv, IP-9859, Vasai East, Thane: 401208. It is a Limited Company having authorized share capital Rs. 30,00,000/- and Paid up share Capital Rs. 29,70,000/-.
4. The total default amount is stated to be 6,49,53,183.26/- (Rupees Six crore forty Nine lakhs Fifty Three Thousand One Hundred Eighty Three and Paise Twenty-six only) in Part IV of the Application as on 31st December 2023 together with further interest @11.61% p.a and the date of default is 31st January 2020.
Submissions of the Applicant:
5. The Corporate Debtor had initially approached IndusInd Bank Limited (hereinafter referred to as “IBL” or “the Assignor of the Petitioner”) seeking financial assistance in the form of cash credit limits to the extent of Rs.825 Lakhs. Pursuant to the Sanction Letter dated 06th May 2016, IBL sanctioned the said credit facilities in favor of the Corporate Debtor.
6. In furtherance thereof, various loan and security documents were executed by the Corporate Debtor from time to time in favor of IBL to secure the sanctioned limits. These, inter-alia, included –
a. Board Resolution dated 06th May 2016 passed by the Corporate Debtor authorizing the availing of the sanctioned credit facilities of Rs.825 Lakhs;
b. Deed of Hypothecation dated 20th May 2016 executed by the Corporate Debtor in favor of IBL securing the said facilities;
c. Master General Terms Agreement dated 20th May 2016;
d. Multi-Facility Loan Agreement dated 20th May 2016;
e. Letter of Undertaking dated 20th May 2016;
f. Agreement for Foreign Exchange Transactions dated 20th May 2016; and
g. Agreement for Accepting Deposits dated 20th May 2016 executed as margin for L.C./Guarantee Limits.
h. The Corporate Debtor further executed a Declaration for Takeover of Properties dated 27th May 2016 in favor of IBL, and a Memorandum of Entry for Deposit of Title Deeds dated 23rd June 2016 recording the deposit of title deeds of the mortgaged properties, followed by a Notice of Intimation of Mortgage Receipt dated 03rd November 2016.
7. Subsequently, on 30th June 2016, the Corporate Debtor sought modification of the terms and conditions governing the aforesaid credit facilities aggregating to Rs.825 Lakhs. Upon such request, IBL issued a Sanction Letter dated 30th June 2016, thereby modifying the earlier terms.
8. To secure the modified credit facilities, the Corporate Debtor executed additional documentation, inter-alia including;
a. Term Loan Agreement dated 30th June 2016,
b. Application for Advance-cum-Letter of Authority Against Deposit Advice dated 03rd February 2017,
c. Master Agreement together with its Schedule dated 03rd February 2017, and
d. Fresh Agreement for Foreign Exchange Transactions dated 03rd February 2017, all executed in favor of IBL.
9. Thereafter, the Corporate Debtor approached IBL once again for renewal of its existing credit facilities to the extent of Rs.475 Lakhs. Accordingly, IBL, vide Sanction Letter dated 14th May 2018, renewed the said credit facilities on the terms and conditions stipulated therein.
10. The Corporate Debtor is stated to have defaulted in repayment of its dues on 31st January 2020. It is submitted that in view of circular dated 27th March 2020 and 23rd May 2020 issued by Reserve Bank of India granting a moratorium on loan accounts and Order dated 03rd September 2020 passed by Hon’ble Supreme Court in wake of Covid Pandemic, the account could not be declared NPA until 01st November 2020, and was classified as NPA with effect from 01st November 2020 retrospectively after expiry of such moratorium and cessation of stay in terms of Order dated 03rd September, 2020.
11. Following the continued default, IBL issued a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act on 18th June 2021, calling upon the Corporate Debtor to repay its outstanding dues amounting to Rs.4,62,93,917.39.
12. Thereafter, by an Assignment Agreement dated 30th September 2021, IBL assigned, transferred, and conveyed all its rights, title, and interest in the debt of the Corporate Debtor in favor of the Petitioner herein, thereby constituting the Petitioner as the absolute assignee and Financial Creditor entitled to recover the said dues.
13. Despite repeated demands, the Corporate Debtor failed to liquidate its outstanding liability. Consequently, the Petitioner, being the lawful assignee of the debt, has preferred the present Company Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for an aggregate sum of Rs.6,49,53,183.26/-(Rupees Six Crore Forty-Nine Lakhs Fifty-Three Thousand One Hundred Eighty-Three and Paise Twenty-Six only), inclusive of principal and accrued interest, in accordance with law.
Submissions of the Respondent:
14. The respondent Corporate Debtor filed its reply challenging the admission on following grounds :
14.1. The Corporate Debtor’s account was declared NPA on 01st November 2020, implying the default occurred around 01st August 2020, hence, the Petition is barred under Section 10A and liable to be dismissed.
14.2. The Financial Creditor had earlier filed Company Petition No. 245 of 2023 for the same debt, which was withdrawn to cure defects arising from the Section 10A bar. The present Petition is a colourable attempt to re-agitate the same cause, amounting to abuse of process. The filing of this petition in 2024 renders it beyond the limitation period.
14.3. No COVID-19 related relief or concession, including any Funded Interest Term Loan, was granted by the lender. Therefore, the claim that the account was protected from NPA classification is false and misleading. The arbitrary fixation of 01st November 2020 as the NPA date is unjustified and intended to bypass legal restrictions.
14.4. There exists a clear inconsistency between the default date in the Petition and the NeSL certificate, which continues to record 01st November 2020 as the default date. Since the NeSL record constitutes proof of default under Section 7(3) of the Code, the Petition is barred under Section 10A and cannot be sustained.
14.5. The Financial Creditor unlawfully appropriated fixed deposits of Rs.2.61 Crores to keep the account artificially active and extend limitation, constituting unfair and coercive conduct.
15. In view of the above, the Respondent submits that the Petition is malicious, devoid of bona fide, and filed with fraudulent intent in violation of Section 65 of the Code.
Submissions of the Applicant vide its rejoinder:
16. The earlier CP No. 245 of 2023 was withdrawn only to correct the inadvertent mention of the NPA date; the correct date of default is 31st January 2020, supported by payment and account records.
17. The Additional Affidavit (April 2025) includes updated NeSL records, bank statements, and a Board Resolution authorizing representation, all confirming the correct default date and debt quantum.
18. The RBI’s COVID-19 circulars merely deferred NPA classification and do not affect the actual default that occurred before 25th March 2020; hence, Section 10A does not bar this Petition.
19. The Petition filed on 20th January 2024 is within limitation, as the period from March 2020 to February 2022 stands excluded by the Hon’ble Supreme Court’s extension of limitation.
20. The Applicant denies allegations of unlawful appropriation or suppression of facts, asserting that all transactions were transparent and supported by documentary evidence.
Findings-
21. Heard learned counsel for both the parties and perused the material produced on record.
22. It is noted that the applicant creditor has earlier filed an Application C.P. (IB)/245(MB)2023 under section 7 of the code in relation to the debt claimed to be in default in the present application and the said application was withdrawn in terms of order dated 08th September 2023. On perusal of the order dated 08th September 2023 it is noted that, the said application came to be dismissed as withdrawn with a liberty to come back with the better facts and this Tribunal had allowed the withdrawal as prayed.
23. Admittedly, the corporate debtor was granted the cash credit facility at last vide Sanction renewal letter dated 14th May 2018 which states that
“The facilities (unless expressly stated otherwise) are repayable/ determinable on demand, and are presently being made available for a period of one year from the month of sanction (Facility will expire on the last date of 12″ month), however subject to a review by the Bank at any time. The Bank may, at its sole discretion choose to continue/ renew the facilities for a period beyond the period aforesaid.”
No sanction renewal letter after expiry of one year has been placed on record, accordingly, the said credit limit stood expired on 13th May 2019 and the default occurred on 14th May 2019. In this context it is pertinent to refer to a letter dated 15th January 2019 sent by legal attorney of IBL to the corporate debtor as well as both the guarantors to pay an amount of Rs.6,74,707/- within seven days and also informing them that they are liable to pay an amount of Rs.4,81,74,707/-. In view of these facts, the cash credit limit, in the absence of further sanction renewal, becomes due and payable on 13th May 2019. The corporate debtor had paid a sum of Rs. 10,03,342.98/-on 24th December 2019 apart from other payments made pursuant to letter dated 15th January 2019. The applicant has pleaded the date of default as 31th January 2020 contending that the corporate debtor had defaulted in repayment in loan and interest from that date. However, we do not agree with this submission as the sanctioned cash credit expired on 13th May 2019 and hence became due and payable on that day. It is noted from the ledger account of that period placed with the application that no debit/withdrawal, except levy of interest/ charges, are seen in the ledger account since expiry of the tenure of cash credit facility.
24. Section 10A specifies suspension of CIRP for a period from 25th March 2020 till a period not exceeding one year from such date hence, the date of default determined by us does not fall within that period, hence, we do not find any merit in the contention of the applicant in relation to bar in terms of section 10A, more particularly for the reason that the amount of balance outstanding in cash credit account as on 13th May 2019 was Rs.4,84,58,488.90/- and this amount is more than the threshold limit provided under section 4 of the code.
25. The limitation period, accordingly, would expire on 13th May 2022 and shall further get extended till 23th December 2022 in view of part payment made on 24th December 2019. The present application has been filed on 20th January 2024. The period from 15th March 2020 to 28th February 2022 is to be excluded in view of decision in the case of Suo Moto WP (Civil) No. 3 of 2020, as further explained in the decision in case of M/s Arif Azim Co. Ltd. Vs M/s Aptech Ltd.* (2004) 3 S.C.R. 73: 2004 INSC 155, holding at Para 84 that “the effect of the above-referred order of this Court in the fact of the present case is that the balance limitation left on 15th March 2020 would become available w.e.f. 1st March 2022. The balance period of limitation remaining on 15th March 2020 can be calculated by computing the number of days between 15th March 2020 and 27th March 2021, which is the day when the limitation period would have come to an end under ordinary circumstances. The balance period thus comes to 1 year 13 days. This period of 1 year 13 days become available to the Petitioner from 01st March 2022, thereby meaning that the limitation period available to the petitioner for invoking arbitration proceedings would have come to an end on 13th March 2023”. In other words, the limitation period would stop to run from 15th March 2020 and shall again start running from 01st March 2022. Accordingly, the period from 15th March 2020 till 28th February 2022 is to be added to the period from 24th December 2022, thereby the limitation would stand extended till 9th December 2024. Accordingly, the petition is within limitation.
26. The Financial Creditor has proposed the name of Santanu T Ray, Registration No. IBBl/IPA-002/IP N00360/2017-2018111055, as the Interim Resolution Professional of the Corporate Debtor. He has filed his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
ORDER
The Petition bearing CP(IB)/661(MB)/2024 filed by Omkara Assets Reconstruction Private Limited, the assignor of the original financial creditor, under section 7 of the IBC read with rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Ego Flooring Private Limited is admitted.
27. There shall be a moratorium under section 14 of the IBC, in regard to the following:
a. The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
b. Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;
c. Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;
d. The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. Notwithstanding the above, during the period of moratorium: –The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator;
28. The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be.
29. Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
30. Mr. Santanu T. Ray, Registration No. IBBl/IPA-002/IP N00360/2017-18/11055, having registered address at 144, 14th Floor, Mittal Court, B Wing, Nariman Point, Mumbai -400021, Maharashtra, Email: [email protected], is hereby appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the IBC. The fee payable to IRP or, as the case may be, the RP shall be compliant with such Regulations, Circulars and Directions issued/as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the IBC.
31. During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.
32. The IRP shall submit to this Tribunal periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor.
33. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the Financial Creditor shall deposit a sum of Rs.3,00,000/-(Rupees Three Lakhs only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims and such amount shall be treated as Interim Finance. These expenses are subject to approval by the Committee of Creditors (CoC).
34. The Registry is directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.
35. IRP is directed to send a copy of this Order to the Registrar of Companies, Maharashtra, Mumbai, for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.
36. Ordered accordingly.
