Sahil Jain Vs KGN General Trading Co. Limited (NCLT Chandigarh)
The application was filed by the financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor for a default amount of ₹1.60 crore along with 18% annual interest. The date of default was 01.05.2025.
The financial creditor, a proprietorship firm engaged in manufacturing hosiery goods, had a long-standing business relationship with the corporate debtor, a company in the same line of business. On the basis of mutual confidence, the financial creditor advanced short-term loans totaling ₹1.60 crore during the financial year 2024–25 through multiple transactions between 14.05.2024 and 20.03.2025. Out of this, ₹50 lakh was agreed to be repaid by 31.03.2025, which the corporate debtor failed to do. Consequently, both parties executed a Loan Agreement on 10.04.2025, under which the debtor undertook to repay the entire amount in ten equal monthly instalments of ₹16 lakh each with interest at 18% per annum. The first instalment was due on 25.04.2025, but the debtor defaulted on this payment, triggering a breach under the agreement.
As per Clause 4.1 of the Loan Agreement, upon such default, the financial creditor was entitled to recall the entire outstanding loan. Accordingly, on 06.05.2025, a Loan-cum-Recall Notice was issued demanding immediate repayment of ₹1.60 crore plus interest, followed by a reminder on 20.05.2025. Despite receipt of these communications, the corporate debtor failed to make payment or respond, resulting in continued default.
