NCLT Hyderabad Admits SBI Factors’ Insolvency Plea Against Prasanna Bio Molecules Over ₹1.98 Crore Default

Key Facts and Tribunal Findings

The National Company Law Tribunal (NCLT), Hyderabad Bench-II, has admitted a Section 7 application filed by SBI Factors Limited against M/s Prasanna Bio Molecules Private Limited, initiating the Corporate Insolvency Resolution Process (CIRP) over a default of approximately ₹1.98 crore. The Financial Creditor had extended a trade finance facility under a domestic/export factoring arrangement with a sanctioned limit of ₹5 crore in August 2024. The corporate debtor executed multiple financing and security documents, including a demand promissory note, deed of charge, and master factoring agreement, along with personal guarantees from its directors.

Under the arrangement, receivables of the corporate debtor were assigned to the financial creditor, with payments expected from a third-party debtor. However, the receivables remained unpaid, leading to default. The account was classified as a non-performing asset (NPA) on 10 March 2025, followed by issuance of demand notices seeking repayment. Despite partial payments aggregating ₹15 lakh and an acknowledgment of liability through a letter dated 16 April 2025, the corporate debtor failed to discharge the outstanding dues. The Tribunal noted that the debt and default remained unrebutted, particularly as the corporate debtor failed to appear despite substituted service through newspaper publication and was proceeded against ex parte. On examination, the Tribunal held that the existence of financial debt and occurrence of default were established, and the application was within limitation and not barred under Section 10A of the Code.

Accordingly, the petition was admitted, a moratorium under Section 14 was declared, and Mr. Chinnam Poorna Chandra Rao was appointed as Interim Resolution Professional to conduct the CIRP.

Legal Analysis

The Tribunal reiterated the limited scope of inquiry under Section 7 of the IBC, emphasizing that the Adjudicating Authority is required only to ascertain the existence of a financial debt above the statutory threshold and the occurrence of default. It further noted that acknowledgment of debt by the corporate debtor strengthens the creditor’s case, particularly where such acknowledgment is coupled with partial payments and failure to contest proceedings. The decision also underscores that assignment of receivables under factoring arrangements constitutes a valid financial debt, enforceable under the Code when repayment obligations are breached.

The order reflects the Tribunal’s adherence to summary admission standards in financial creditor applications, particularly where default is supported by documentary evidence and remains uncontested.