Tribunal emphasizes limited summary jurisdiction under IBC Section 7; issues of fraud and forgery require full trial in civil/criminal courts
In a significant ruling dated July 15, 2026, the National Company Law Tribunal (NCLT), Mumbai Bench, dismissed the Corporate Insolvency Resolution Process (CIRP) petition filed by UC Inclusive Credit Private Limited (Financial Creditor) against Ganesh Benzoplast Limited (Corporate Debtor). The petition sought initiation of insolvency proceedings based on invocation of a corporate guarantee allegedly executed by the Corporate Debtor in favor of the Financial Creditor.
The Financial Creditor had sanctioned and disbursed a secured term loan of Rs. 5 crore to Agarwal Bulkactives Private Limited (Principal Borrower) in January 2024, with Ganesh Benzoplast Limited providing a corporate guarantee to secure repayment. Following defaults by the Principal Borrower starting April 2024, and unsuccessful recovery efforts including statutory notices, the Financial Creditor invoked the corporate guarantee, claiming an outstanding sum exceeding Rs. 6.25 crore.
However, the Corporate Debtor contested the invocation, alleging that the corporate guarantee deed and the accompanying board resolution dated January 31, 2024, were forged and fabricated. It contended that the former CEO, Mr. Ramakant Pilani, who had signed the documents, lacked authority to do so, and no valid board meeting was held on the relevant date. The Corporate Debtor had also filed a civil suit challenging the validity of the guarantee, and highlighted ongoing criminal proceedings against the former CEO and others for forgery and fraudulent transactions involving similar documents.
The NCLT scrutinized the evidence and noted that while the Financial Creditor demonstrated disbursement of loan funds and invocation of the guarantee, serious disputes existed regarding the authenticity and authority behind the corporate guarantee and board resolution. The tribunal emphasized that the adjudicatory role under Section 7 of the Insolvency and Bankruptcy Code (IBC) is limited to verifying the existence of financial debt and default. Issues involving allegations of fraud, forgery, and fabrication of documents fall outside the summary jurisdiction of the NCLT and require full trial in civil or criminal courts.
Further, the tribunal observed that the doctrine of indoor management protects third parties dealing in good faith with corporate documents, unless suspicious circumstances are apparent on the face of the documents. Given the discrepancies and ongoing litigation, the tribunal found that it could not conclusively establish the existence of undisputed financial debt owed by the Corporate Debtor.
Additionally, the NCLT acknowledged that the Corporate Debtor was a solvent and commercially viable entity with substantial market capitalization and workforce, and stressed that insolvency proceedings should not be misused as a coercive recovery mechanism.
The tribunal’s decision aligns with precedents including the judgments of the Hon’ble Supreme Court and NCLAT, which hold that allegations of fraud and forgery must be adjudicated by appropriate courts through full trials and cannot be resolved in summary insolvency proceedings.
In conclusion, the NCLT dismissed the petition, holding that the pending civil suit and criminal cases concerning the validity of the corporate guarantee and related documents limit the tribunal’s power to admit CIRP under Section 7 of the IBC at this stage.
Bottom line:-
Allegation of forged corporate guarantee and board resolution supported by multiple pending civil and criminal proceedings limits summary jurisdiction of NCLT under Section 7 of IBC; such disputes require full trial and cannot be adjudicated in CIRP admission stage.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 7; Companies Act, 2013 Section 186(5); Negotiable Instruments Act, 1881 Section 138; Indian Penal Code Sections 34, 406, 419, 465, 568; SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 Regulation 23(2)
This report summarizes the detailed judgment wherein the NCLT Mumbai Bench underscored the limited scope of insolvency proceedings under Section 7 of the IBC and declined to admit the petition due to serious factual disputes involving forgery and fraud pending adjudication in civil and criminal courts.
