The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has clarified that service of a Section 7 IBC petition on the corporate debtor’s registered email address available in MCA records constitutes valid and sufficient service, particularly when accompanied by attempts at service at the registered office and publication in accordance with the NCLT Rules. The NCLAT said that a corporate debtor cannot later challenge an ex parte admission order on grounds of non-service where it has failed to maintain or update its statutory contact details.
The Tribunal also laid down that for admission of a Section 7 application, the Adjudicating Authority is concerned only with the existence of financial debt and default above the statutory threshold. Even where the principal is said to have been paid, a default consisting of unpaid interest can sustain Section 7 proceedings if the amount exceeds the threshold limit under the Code.
Further, the NCLAT held that a one-time settlement does not extinguish the underlying financial debt in an absolute sense when the settlement is conditional. If the borrower breaches the OTS terms and the settlement stands withdrawn in accordance with its terms, the financial creditor is entitled to revive and claim the entire dues under the original loan arrangement.
The Division Bench comprising Justice N Seshasayee (Judicial Member) and Arun Baroka (Technical Member) rejected the argument that the Section 7 proceedings were vitiated for want of notice. It observed that service of the petition had been effected on the registered email address of the corporate debtor as reflected in MCA records, and that such service is valid and sufficient under the NCLT Rules, 2016. The Tribunal also noted that service had been attempted at the registered office and later through publication, and therefore the plea of violation of natural justice could not be accepted.
The Tribunal emphasized that under Section 12 of the Companies Act, 2013, the burden lies on the company to maintain a functional registered office capable of receiving notices and to update MCA records if its office changes. The corporate debtor could not take advantage of its own failure to keep its registered office and contact details operative.
Also Read US DOJ Tells Court Gautam Adani Case Was ‘Primarily Foreign’ and Should Be Permanently Dismissed
On the merits, the NCLAT held that the existence of debt and default was clearly established. It specifically recorded that even on the appellant’s own case, an admitted amount of Rs. 2.98 crores remained due towards interest, which was above the Section 4 threshold of Rs. 1 crore. The Tribunal therefore found that a Section 7 petition was maintainable even where the default related to the interest component, so long as the threshold was crossed.
The Tribunal also rejected the submission that IBC could not be invoked because the matter should have gone before the DRT or because only interest remained unpaid. It held that the Code is a self-sufficient legislation and there is no legal bar to initiating Section 7 proceedings for default in payment of interest, provided debt and default are established.
The Tribunal further accepted IREDA’s case that the OTS was a conditional arrangement, and once the corporate debtor breached its terms, the financial creditor was entitled to withdraw the OTS and revive its claim under the original loan documents. Accordingly, payments made after withdrawal of the effective OTS had to be adjusted against the full outstanding dues under the loan agreement, and not merely against the reduced OTS amount.
Briefly, an appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the NCLT Kolkata Bench’s order dated April 07, 2025 admitting a Section 7 application filed by Indian Renewable Energy Development Agency Limited (IREDA) against JHV Sugar Limited and commencing CIRP, with Alok Kumar Agarwal appointed as IRP. The appellant, Gaurav Jaiswal, a suspended board member of JHV Sugar Limited, argued that the admission order was passed ex parte without proper opportunity of hearing and in breach of natural justice. He also contended that IREDA had sanctioned a term loan of Rs. 57.10 crore in 2011 for expansion of the sugar plant and a co-generation project, but had disbursed only a part of it, which according to him led to project distress, defaults, and eventual disputes over the actual amount payable.
The appellant further relied on subsequent one-time settlements, especially OTS-2, to argue that the principal amount had already been repaid and that only an interest component of about Rs. 2.98 crore remained outstanding. On that basis, he submitted that Section 7 proceedings were being wrongly used as a recovery mechanism and that the proper remedy lay elsewhere, including before the DRT.
IREDA, on the other hand, maintained that the company petition had been duly served on the corporate debtor through its registered email address appearing in MCA records, through registered post at the registered office, and thereafter through newspaper publication, after which the NCLT had validly proceeded ex parte. IREDA also contended that the corporate debtor had defaulted under the effective OTS, that the OTS stood withdrawn, and that the entire dues under the original loan arrangement revived.
