February 28, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has dismissed an appeal filed by Uday J. Desai, ex-director of Frost International Ltd., and upheld the National Company Law Tribunal (NCLT), Mumbai order admitting the company into Corporate Insolvency Resolution Process (CIRP) on a petition filed by Bank of India.
The Appellate Tribunal, comprising Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha, held that once financial debt and default are established, admission under Section 7 of the Insolvency and Bankruptcy Code (IBC) is justified. The Bench ruled that the RBI’s Prudential Framework dated June 7, 2019 does not make restructuring mandatory and gives lenders discretion to initiate insolvency proceedings.
The appeal arose from the NCLT’s order dated February 9, 2023 in CP (IB) No. 973/MB/2020, admitting Bank of India’s Section 7 application against Frost International Ltd.
Bank of India had extended credit facilities aggregating ₹756.75 crore to the corporate debtor under various sanction letters. The company defaulted on April 12, 2018, and its account was classified as non-performing asset (NPA) with effect from June 30, 2018. As recorded in the judgment, the total amount claimed in default stood at ₹872.58 crore as on May 1, 2020.
The Tribunal noted that the corporate debtor had acknowledged its liability through revival letters, acknowledgment of debt letters dated January 23, 2017 and March 23, 2018, and in its audited balance sheets. The Bench held that debt and default stood crystallised and were never seriously disputed.
Before the Appellate Tribunal, the ex-director argued that the company was commercially viable and that the bank acted unfairly by refusing to consider restructuring proposals. It was contended that the RBI Prudential Framework for Resolution of Stressed Assets dated June 7, 2019 required lenders to examine restructuring before initiating insolvency.
Rejecting the contention, the Tribunal observed that the corporate debtor had not submitted any resolution plan under the 2019 RBI framework. It remarked:
“We wonder if the Corporate Debtor has not even submitted the Resolution Plan in terms of extant RBI guidelines of 07.06.2019, how the Appellant can at this stage accuse the Respondent No. 1 for not considering the same.”
The Bench further clarified that the RBI framework permits lenders to initiate insolvency proceedings and does not impose a mandatory obligation to restructure. The decision to accept or reject a resolution proposal falls within the commercial wisdom of the lenders and cannot be questioned in insolvency proceedings.
The appellant relied on the Supreme Court’s decision in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. to argue that admission of CIRP is not automatic even when default is established.
However, the NCLAT held that the ratio in Vidarbha was confined to its own facts and could not override the settled principle laid down in Innoventive Industries Ltd. v. ICICI Bank. The Tribunal also relied on the recent Supreme Court ruling in Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan, which reiterated that once debt and default are established, the Adjudicating Authority has limited scope to refuse admission under Section 7.
The Bench found that the corporate debtor failed to produce concrete financial material demonstrating viability or availability of unencumbered funds sufficient to discharge its liabilities.
The appellant argued that a prior Section 7 petition had been dismissed and that the second application was barred by res judicata. The Tribunal rejected this plea, noting that the earlier petition was dismissed following the Supreme Court’s decision in Dharani Sugars and Chemicals Ltd. v. Union of India, which had quashed the RBI circular dated February 12, 2018. The present petition was filed under the revised RBI framework dated June 7, 2019 and was therefore maintainable.
The Tribunal also took note that the CIRP had progressed substantially and that a resolution plan had already been approved by the Committee of Creditors with the requisite majority. An application seeking approval of the resolution plan is pending before the NCLT.
Finding no infirmity in the NCLT’s order dated February 9, 2023, the Appellate Tribunal dismissed the appeal and allowed the CIRP against Frost International Ltd. to continue.
Case Title: Uday J. Desai v. Bank of India & Anr.
Case No.: Comp. App. (AT) (Ins) No. 187 of 2023
Coram: Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member)
