NCLT Mumbai Admits Section 7 Petition After NeSL Confirms Debt Default

Union Bank of India Vs Heera Hospitality Private Limited (NCLT Mumbai)

Summary: Union Bank of India applied under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate the corporate insolvency resolution process (CIRP) against Heera Hospitality Private Limited. The bank stated that it had sanctioned facilities aggregating to Rs. 3,46,47,000 in 2019 and an additional Rs. 1.28 crore under the Union Guaranteed Emergency Credit Line (UGECL) in 2021. Although the corporate debtor later cleared the cash credit facility and Term Loans I and II, Term Loan III and the UGECL facility remained unpaid. The application claimed Rs. 3,45,11,940.74 outstanding as at 30.11.2025 and stated 10.04.2023 as the date of default.

The corporate debtor argued that its account had already become irregular during the COVID-19 period covered by Section 10A and that the bank had delayed NPA classification to bring the petition outside that period. It also alleged breach of RBI directions and the MSME revival framework before the account was classified as an NPA, disputed the stated default date, and urged that its solvency and prospects of revival be considered. It relied, among other decisions, on Pro Knits v. Board of Directors of Canara Bank and Vidarbha Industries Power Ltd. v. Axis Bank. The bank maintained that the accounts were standard when the UGECL loan was sanctioned, that the default was outside Section 10A, and that the authenticated NeSL record established default.