The Insolvency Appellate Tribunal NCLAT has dismissed the plea of Panshul Agro Food filed under Section 10 to bring the company under the insolvency process, noting that it was moved with malicious intent.
A two-member NCLAT bench upheld the order of the Ahmedabad bench of the National Company Law Tribunal (NCLT), which has not only dismissed the petition but also imposed a fine of Rs 10 lakh.
However, the National Company Law Appellate Tribunal (NCLAT) reduced the penalty imposed on the company from Rs 10 lakh to Rs 5 lakh, citing lack of proportionality in the original order.
“We are in agreement with the conclusion drawn by NCLT that the application under Section 10 of the Code has been moved with malicious intent and therefore the same has been correctly dismissed, and to that extent the impugned order is liable to be affirmed,” it said.
Rejecting the appellant’s contention that the NCLT was bound to admit the plea on mere proof of debt and default, the NCLAT said it was the duty of the tribunal to examine the bona fides of such applications and that it could not “act like a rubber stamp”.
Panshul Agro Food LLP had sought to initiate Corporate Insolvency Resolution Process (CIRP) against itself, citing default of Rs 42.20 crore.
Section 10 of the IBC allows a debtor to initiate an insolvency resolution process against itself if it has committed any default.
Section 65 deals with the fraudulent or malicious initiation of voluntary Insolvency proceedings and grants power to the NCLT to impose a fine of up to Rs one crore.
SBI had extended a credit facility of Rs 28.44 crore to Panshul Agro Food in 2019, later enhanced to Rs 40.19 crore in July 2024. The account was declared a non-performing asset (NPA) on April 18, 2025.
SBI issued a notice under Section 13 (2) of the SARFAESI Act on June 20, 2025, and moved the Debt Recovery Tribunal (DRT) on August 20, 2025.
The company filed its Section 10 petition six days later on August 26, 2025.
The NCLAT noted that during a bank inspection in February 2026, substantial plant and machinery were found missing from the factory premises, though they were present during an earlier inspection in May 2025.
The company failed to produce purchase invoices or a fixed asset register to explain the discrepancy.
“The removal of hypothecated assets without the consent of the secured creditor during the pendency of recovery proceedings is a serious act which directly undermines the interest of creditors,” the tribunal observed.
The appellate tribunal held that the timing of the Section 10 filing, coming after SBI’s SARFAESI action, along with the missing machinery, indicated that the application was “not a bona fide invocation” of the insolvency framework, but “a calculated attempt” to derail recovery proceedings, satisfying the threshold of fraudulent intent under Section 65(1) of the IBC. PTI
