Mr. Milan Aggarwal (Suspended Director ... vs Canara Bank & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 298 of 2026 (Arising out of Order dated 10.02.2026 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench, in CP No.(IB)-68/7/JPR/2024)

IN THE MATTER OF:

Milan Aggarwal (Suspended director of Prayag Polytech Private Limited) ...Appellant

Versus

Canara Bank & Anr. ...Respondents

Present:

For Appellant : Mr. Virender Ganda, Sr. Adv. with Vipul Ganda, Arpita Sahu, Nitu Barik, Adv. For Respondents : Mr. Abhijeet Sinha, Sr. Adv. with Anju Jain, Hitesh Sachar, Rifat Touhid, Bhavya Khosla, Adv. for R1 Dr. RC Lodha, IRP

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by Suspended Director of the Corporate Debtor ("CD") -

M/s Prayag Polytech Pvt. Ltd. has been filed challenging order dated

10.02.2026 passed by National Company Law Tribunal, Jaipur Bench

admitting Section 7 application filed by Canara Bank. By the impugned

order while admitting Section 7 application the Adjudicating Authority

appointed Resolution Professional ("RP") and has declared moratorium.

The Appellant aggrieved by the order has come up in this Appeal.

2. Brief facts of the case necessary to be noticed for deciding the

Appeal are:

Company Appeal (AT) (Ins.) No.298 of 2026 1

(i) The CD was incorporated in the year 1982 and is in business

of manufacturing and exporting plastic coloring additives,

known as Masterbatches. The CD has availed various credit

facilities from Canara Bank since 15.10.2011. Facilities were

renewed from time to time. Total amount of facilities granted

by the Bank was to the extent of Rs.157 crores. In addition,

ad-hoc credit facilities were also granted in the year 2016-17

to the CD. Various security documents and Hypothecation

Agreements were executed. Charges were registered with

regard to various assets of the CD.

(ii) The account of the CD slipped into Non-Performing Asset

("NPA") on 03.10.2019, the Bank filed an OA No.609 of 2023

before the Debts Recovery Tribunal ("DRT"), New Delhi for

recovery of the amount from the CD, which OA is pending

consideration. In the OA filed by the Bank, the CD has also

filed counter claim.

(iii) An application under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the "IBC")

was filed by the Canara Bank on 09.08.2024 claiming

outstanding dues against the CD totaling to

Rs.22,02,72,528/- as on 03.10.2019. As on 30.06.2024, total

amount claimed was Rs.34,14,92,212/-. The credit facilities

which were relied in Section 7 application were with respect

Company Appeal (AT) (Ins.) No.298 of 2026 2 to two accounts, i.e. 2009256010152 and 2009773010935

(which was corrected subsequently as 2009773010930).

(iv) Along with Section 7 application various documents and

evidence of default were annexed. Notice was issued by

Adjudicating Authority to the CD. The CD appeared and filed

its reply dated 09.12.2024. The CD in its reply relied on

various No Objection Certificates ("NOCs") issued by the Bank

dated June 29, 2017, December 30, 2017 and August 7,

2018. The debt claimed by the Bank in Section 7 application

was disputed. It was pleaded that the Bank has discharged

its debt towards the CD by issuing various NOCs. No debt is

outstanding. It was pleaded that various Section 13 sub-

section (2) notices were issued, which were subsequently

withdrawn. In OA No.609 of 2023, the CD has filed its

counter claim for an amount of Rs.31,18,17,044/-.

(v) The Adjudicating Authority heard the parties and by the

impugned order dated 10.02.2026 admitted Section 7

application. The Adjudicating Authority came to the

conclusion that financial debt exists, default has occurred

and the application was within the limitation. The Appellant

Aggrieved by the said order filed this Appeal.

3. We have hard Shri Virender Ganda, learned Senior Counsel

appearing for the Appellant; Shri Abhijeet Sinha, learned Senior Counsel

Company Appeal (AT) (Ins.) No.298 of 2026 3 with Anju Jain, learned Counsel and Shri Hitesh Sachar have appeared

for Canara Bank.

4. Learned Counsel for the Appellant challenging the order submits

that present is a case where Bank itself has issued various No Due

Certificates/ NOCs to the CD, which were referred to in the reply filed in

Section 7 application. No Dues Certificates/ NOCs having been issued,

there is no outstanding debt against the Appellant. In notice under

Section 13(2) dated 02.11.2019, the amount shown was Rs.22,02,72,528.

Several other notices were issued mentioning different amounts, which

were all withdrawn by the Bank. Last notice under Section 13(2) was

issued on 03.05.2024, which was also withdrawn. In Section 7

application incorrect account number was mentioned, which was sought

to be corrected by an affidavit filed by the Bank. In the NeSL Certificate,

default was only for Rs.96,99,057.55 paisa. In the affidavit filed by the

Appellant in compliance of order dated 12.02.2026, the Appellant has

given details of credit facilities and date of NOCs issued, which clearly

proved that there was no outstanding debt existing against the Appellant.

Learned Counsel for the Appellant has also referred to and relied on an

order passed by NCLT on 13.02.2020 in Sections 241 and 242 petition

with respect to CD and another Company M/s Agroha Colourtech Pvt.

Ltd. The Lenders were directed to bifurcate securities and assets of both

the Companies to run. There is no compliance of the said order by the

Canara Bank. All credit facilities stood fully repaid and discharged, which

has been acknowledged by the Bank by issuing No Dues Certificates/

Company Appeal (AT) (Ins.) No.298 of 2026 4 NOCs as well as Memorandum of Satisfaction of charge in respect of

facilities. The Respondent has illegally retained a sum of

Rs.30,91,60,044/-, which has neither been duly reflected nor reconciled

in the books of CD and no explanation has been given. The amounts

remitted by overseas buyers of the Company were not credited to the OCC

account of the CD totaling to Rs.7,25,98,131/-. It is submitted that the

Bank has failed to prove debt and default and the Adjudicating Authority

committed error in admitting Section 7 application.

5. Learned Counsel appearing for the Respondent refuting the

submissions of the Appellant submits that the Bank has fully proved the

debt and default on the part of the CD before the Adjudicating Authority

by filing relevant statement of accounts and other materials. The reliance

of the Appellant on No Dues Certificates dated 29.06.2017, 30.12.2017,

22.02.2018 and 07.08.2018, cannot lead to the conclusion that there was

no outstanding debt against the Appellant. The said letters, at best be

treated with respect to satisfaction of certain charges. It is, however,

submitted that in the Ministry of Corporate Affairs ("MCA") website,

charges against the Bank are still reflected and various charges in favour

of the Bank are continuing in the MCA website. Hence, the submission of

the Appellant that satisfaction of all charges has been done is incorrect.

It is submitted that NeSL certificate relied by the Appellant of

Rs.96,99,057.55 pertains to only one account, i.e. 2822261000063,

whereas there was default by the CD in two other accounts. NeSL

certificate which is alleged, has been brought on record. Thus, the

Company Appeal (AT) (Ins.) No.298 of 2026 5 submission of the Appellant that NeSL Certificate, which is relied by

learned Counsel for the Appellant relates to an account, which is not

relied in Section 7 application by the Bank. It is submitted that the CD

has acknowledged the debt in its Financial Statements for the year 2017-

18, 2018-19, 2019-20 and 2020-21, which acknowledgements clearly

acknowledge debt. Hence, it is not open for the Appellant to contend that

there is no debt outstanding against the CD. By letter dated 13.06.2022,

the CD has acknowledged its debt and its outstanding amount in two loan

accounts, which is clear acknowledgement of debt. In view of the

acknowledgement in the balance sheets and acknowledgement letter

dated 13.06.2022 it is not open for the CD to contend that there is no

outstanding liability against the CD. It is submitted that in pursuance of

the order dated 12.02.2026 of this Tribunal, the entire Statement of

Accounts of all the three accounts have been brought on record (in 20

volumes), which Statement of Accounts amply proves default in the loan

accounts. It is submitted that with regard to allegation of the Appellant

that the amount of Rs.31,18,17,044/- has been illegally retained, the said

statement is incorrect. The CD has already filed its counter claim in

proceedings under Section 19 before the DRT relying on the said

allegations, which shall be examined in DRT proceedings. The Bank has

explained all remittances in his account. In Section 7 application, the

Adjudicating Authority has to look into the debt and default and Financial

Creditor having proved debt and default by bringing ample material on

record, no error has been committed by the Adjudicating Authority in

admitting Section 7 application.

Company Appeal (AT) (Ins.) No.298 of 2026 6

6. We have considered the submissions of learned Counsel for the

parties and have perused the records.

7. Challenge to the admission of Section 7 application has been made

by the Appellant on various grounds as noted above. We need to proceed

to examine the said grounds of challenge in seriatim.

(1) Canara Bank having issued No Dues Certificates/ NOCs dated 29.06.2017, 30.12.2017, 22.02.2018 and 07.08.2018, there exist no outstanding amount to be paid.

8. We need to first look into the No Dues Certificates relied by the

Appellant. The copies of the aforesaid No Dues Certificates/ NOCs have

been brought on the record by the Appellant in Volum-5 of the Appeal.

1ST letter which is relied on, is dated 29.06.2017, which is as follows:

"29th June, 2017

The Registrar of Companies Rajasthan, Jaipur

Reg: PRAYAG POLYTECH PRIVATE LIMITED C U28994RJ1982PTC012328

Sir,

We have no objection if the satisfaction for the following charge is filed as there are no dues against this charge as on date:

Charge created on 15.02.2017 for Adhoc OCC/ODBD limit of Rs.300.00 lakhs and registered vide id-100082624.

Thanking you, Yours faithfully Sd/-

CANARA BANK"

Company Appeal (AT) (Ins.) No.298 of 2026 7 9. Similarly, letter dated 30.12.2017 was also relied:

"30th December, 2017

The Registrar of Companies Rajasthan, Jaipur

Reg: PRAYAG POLYTECH PRIVATE LIMITED C U28994RJ1982PTC012328

Sir,

We have no objection if the satisfaction for the following charge is filed as there are no dues against this charge as on date:

Charge created on 29.06.2017 for Adhoc OCC/ODBD limit of Rs.3.00 crores and Adhoc Packing Credit limit of Rs.3.00 crores aggregating to Rs.6.00 crores granted to the Company and registered vide Id-100109378.

Thanking you,

Yours faithfully Sd/-

CANARA BANK"

10. Another letter issued by the Canara Bank dated 22.02.2018 has

been relied by the Appellant, by which the Appellant has stated that Bank

has no objection, if the satisfaction for the charges are filed as there are

no dues against these charges as on date. The said letter mentions about

20 Charge ID, date of creation and amount. The letter dated 07.08.2018

with respect to charge created on 14.08.2014 and 20.12.2017, states as

follows:

"30th December, 2017

The Registrar of Companies Rajasthan, Jaipur

Company Appeal (AT) (Ins.) No.298 of 2026 8 Reg: PRAYAG POLYTECH PRIVATE LIMITED CIN: U28994RJ1982PTC012328

Sir,

We have no objection if the satisfaction for the following charges are filed as there are no dues against these charges as on date:-

1) Charge created on 14.08.2014 for various credit facilities aggregating to Rs. 160.30 crores and registered on 12.09.2014 (Id-10519288).

2) Charge created on 30.12.2017 for Adhoc OCC/ODBD limit of Rs. 3.00 crores and Adhoc PC limit of Rs. 3.00 crores and registered on 17.01.2018 (Id-100147217).

Thanking you

Your faithfully

Sd/-"

11. When we look into the above letters, the above letters were written

to the Registrar of Companies to record satisfaction for the charges

created with the ROC. The said letters cannot be read to mean that the

Bank has communicated that it has no outstanding dues against the CD.

When we look into Section 7 application and particulars of financial debt

and evidence on record, apart from hypothecation and charges on various

residential properties, hypothecated stock in trade and other details of

charges available with the MCA were all mentioned. Learned Counsel for

the Respondent Bank replying to the said submission has relied on

details available with the MCA as on 09.08.2024, where in Index of

Charges, several charges in favour of Canara Bank are shown to not have

been discharged. Date of satisfaction regarding various charges in favour

of Canara Bank are not mentioned, whereas satisfaction of charges with

respect to several charges have been mentioned. The above details are in

Company Appeal (AT) (Ins.) No.298 of 2026 9 the Appeal at page 1007 Vol.-4 of the Appeal. When we look into the

Index of Charges at Item No.10, 11, 16, 17, 27 and 29, which are in

favour of Canara Bank, it does not mention date of satisfaction of charge.

It is useful to extract the above entries from Index of Charges, which are

as follows:

Sr. SB Charg Charge Date Dat Dat Amou Address Whet Ass No e Holder of e of e of nt her et N Id Name creat Mo Sati charg Hol ion dific sfac e der atio tion releas Na n ed by me other entity 10 G08 10004 Canara 11/0 - - 6,00,0 H-54, 402 1406 Bank 7/20 00 Connaught No - 612 16 Circus, New Delhi, Delhi, India, 110001 11 G08 10004 Canara 06/0 - - 16,00, H-54, 403 1409 Bank 7/20 000 Connaught No - 529 16 Circus, New Delhi, Delhi, India, 110001 16 C32 10529 Canara 21/1 - - 6,05,0 H-54, 359 260 Bank 0/20 0,000 Connaught No - 101 14 Circus, New Delhi, Delhi, India, 110001 17 C32 10529 Canara 21/1 - - 4,43,0 H-54, 359 262 Bank 0/20 0,000 Connaught No - 739 14 Circus, New Delhi, Delhi, India, 110001 27 C32 10438 Canara 25/0 - - 3,41,4 H-54, 360 333 Bank 6/20 3,440 Connaught No - 638 13 Circus, New Delhi, Delhi, India, 110001 29 C64 10356 Canara 25/0 - 19/ 3,00,0 H-54, 785 025 Bank 4/20 09/ 0,000 Connaught No - 645 12 201 Circus, New 5 Delhi, Delhi, India, 110001

Company Appeal (AT) (Ins.) No.298 of 2026 10

12. Thus, the above clearly indicates that all charges created in favour

of Canara Bank by the CD have not been satisfied and inspite of various

charges having been satisfied, still several charges as indicated above are

still outstanding. The index contains details of various charges, which

have been satisfied. Thus, No Due Certificate/ NOC regarding

satisfaction of charge as relied by the Appellant, cannot mean firstly that

all charges in favour of Canara Bank have been satisfied and secondly

there is no outstanding debt against the CD.

(2) In the NeSL Certificate, amount outstanding shown as Rs.96,99,057.55 paisa.

13. NeSL Certificate, which is relied by the Appellant is brought on

record of the paper book at Page 1013. When we look into the said

Certificate, the said Certificate mentions Account No. 2822261000063

and the total outstanding shown was Rs.96,99,057.55 paisa as on

23.08.2023. Learned Counsel for the Bank replying to the said

submission has contended that said NeSL Certificate was with respect to

only one account of the CD, whereas there was outstanding debt as per

NeSL record in other two accounts of the CD, i.e. 2009773010930 and

2009256010152. In reply filed on behalf of Respondent Bank, NeSL

record of the above two accounts have been brought on record at Pages

78 and 92 of the reply. NeSL record at Page 78 is with respect to Account

No. 2009773010930, which was last authenticated, mentions default

amount of Rs.18,63,346.72. Further at Page-91 of the reply, default with

respect to Account No. 2009256010152 has been brought on record,

Company Appeal (AT) (Ins.) No.298 of 2026 11 which was authenticated, wherein as per last authentication dated

23.08.2023 default of Rs. 27,74,72,734.18 has been mentioned. NeSL

certificate, which is authenticated, clearly proves the default in other two

accounts. Hence, the submission of the Appellant that the default is only

Rs.96,99,057.55 paisa, is incorrect. The said NeSL certificate relied by

the Appellant relates to only one account. It is relevant to notice that in

Section 7 application, the account with respect to which NeSL Certificate

has been relied by the Appellant was not even mentioned. We, thus, are

satisfied that NeSL Certificate brought on record by the Bank clearly

proves default on the part of the CD of more than Rs.1 crore and the

submission of the Appellant that default was only Rs.96,99,057.55 paisa

has to be rejected.

(3) The submission of learned Counsel for the Appellant that Canara Bank has retained a sum of Rs.30,91,60,044/-, which details has been elaborated in affidavit filed by the Appellant dated 28.02.2026

14. Learned Counsel for the Canara Bank has denied the said

statement and has submitted that in the relevant accounts, all amount

received and remitted have been properly explained.

(4) The notice under Section 13 sub-section (2) issued from time to time was withdrawn by the Bank.

15. The Bank has claimed that liability of the borrower does not absolve

at withdrawal of Demand Notice under Section 13(2) of the SARFAESI Act.

It is already submitted by the Appellant that proceeding before the DRT

Company Appeal (AT) (Ins.) No.298 of 2026 12 has already been initiated for recovery of the amount. Withdrawal of

notice under Section 13(2), thus, cannot have any effect on right of the

Bank to initiate proceedings under Section 7 for its debt and default.

16. Learned Counsel for the Bank has also in support of its argument

that debt and default has been amply proved has relied on financial

statements of the CD, which according to the Bank reflects borrowings.

Financial Statements with respect to 2018-19, 1019-20 and 2020-21 have

been brought on the record. Notes on borrowing clearly contain details of

secured borrowing. It is useful to notice textual information 44 with

respect to Financial Year 2018-19 at Page 977 of the Paper book, where

following has been stated:

"Textual information (44) Terms of repayment of term loans and other loans

"Due to the internal dispute between the management, the repayments to banks/ SIDBI/ NBFCs (which were due from April 19 onwards) as stated above could not be made and all the lenders have classified the loans as Non Performing Assets during subsequent financial years under RBI regulations. The Company's current liabilities exceeded its current assets and net worth of the Company was also eroded as at March 31, 2019. Canara Bank, Andhra Bank and State Bank of India have also issued notice under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. Andhra Bank and State Bank of India have also filed petitions with Hon'ble Debt Recovery Tribunal for recovery of their dues, detail of the same are as follows-: " Case Type/ Case No/ Year Status Original Application/ 16/2020 filed on 14/08/2019 by Andhra Bank Limited 'Proposal for restructuring under consideration Original Application/ 490/2020 filed on 18/08/2020 by State Bank of India 'OTS done

Company Appeal (AT) (Ins.) No.298 of 2026 13 subsequently and the application will be withdrawn by the bank after all payments as per schedule is made by the Company. However, as on date of signing of the financial statements, after settlement of the management disputes with the intervention of Hon'ble NCLT, Jaipur, the current management has applied for restructuring / reclassification of its debts. Restructuring with Siemens Financial Services Private Limited (NBFC) has already been agreed and onetime settlement (OTS) has been reached with State Bank of India. However restructuring proposals with Canara Bank, Andhra Bank and SIDBI are still pending for lender's approval. The management is confident and hopeful that restructuring proposals of the Company shall be approved."

17. The above statement in the Financial Statement clearly records that

the CD due to internal dispute between the Management failed to make

repayments to Banks, which were due from April 2019 onwards and

Lender have classified the loan as Non-Performing Assets. The statement

further mentions that current Management has applied for restructuring/

reclassification of its debt.

18. Learned Counsel for the Respondent has also further submitted

that letter dated 13.06.2022 written by the Appellant to the Bank clearly

acknowledge the debts of the Bank of more than Rs.1 crore. Copy of the

letter dated 13.06.2022 is on the record of the paper book at page 1006.

19. Acknowledgement in the balance sheet as well as acknowledgement

letter given on behalf of the CD, clearly indicate that CD has

acknowledged the debt in the Financial Statements upto 2020-21 and the

acknowledgement letter dated 13.06.2022. The Adjudicating Authority in

the impugned order has also noticed the Financial Statements upto

Company Appeal (AT) (Ins.) No.298 of 2026 14 31.03.2021 reflecting dues. The acknowledgment letter dated 13.06.2022

and restructuring request of 16.09.2022 have also been noticed by the

Adjudicating Authority. In Paragraph 12.5 of the impugned order,

following pleading on behalf of the Bank has been noticed:

"12.5 On a prima facie appreciation, in view of the pleaded acknowledgements (financial statements up to 31.03.2022 and letter dated 13.06.2022, and restructuring request of 16.09.2022 as asserted), we are satisfied at this stage that the petition cannot be rejected as time-barred at the threshold. The Corporate Debtor's allegations of fabrication and selective annexures can be examined by the Resolution Professional while collating claims and by the competent forum if the Corporate Debtor seeks appropriate relief; but they do not justify dismissal at admission stage when prima facie acknowledgements are pleaded and placed."

20. After having considered the submissions of learned Counsel for the

parties and looking to the materials on record, we are satisfied that

decision of Adjudicating Authority to admit Section 7 application and

findings on debt and default, cannot be faulted.

21. There are no grounds made out in this Appeal to interfere with the

order of admission passed in Section 7 application. As far as quantum of

debt is concerned, the Adjudicating Authority has already observed that it

is for the RP to collate the claims, and it is at that stage that amounts due

on the CD can be looked into.

22. The Appellant before the Adjudicating Authority has also repeated

the same arguments regarding, NOCs and Satisfaction of charge, NeSL

record, SARFAESI notices, which were all dealt with in Paragraph 11.2 of

Company Appeal (AT) (Ins.) No.298 of 2026 15 the impugned order by the Adjudicating Authority. We only observe that

it shall be open for the Appellant to place before the RP all relevant record

and documents for collation of actual amount of debt due on the CD of

the Bank. It shall be open for the RP after considering all relevant

materials to collate the claims as per relevant materials brought by the

CD before him.

23. We do not find any good ground to interfere with the impugned

order. Subject to observations as made above, the Appeal is dismissed.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

23rd April, 2026

Ashwani

Company Appeal (AT) (Ins.) No.298 of 2026 16