The National Company Law Appellate Tribunal has clarified that the issuance of No Objection Certificates (NOCs) for satisfaction of charges does not extinguish financial debt under the Insolvency and Bankruptcy Code, 2016. This judgment reinforces that debt existence must be assessed through objective financial records, not merely through administrative acknowledgments.
Background & Facts
The Dispute
The appellant, Milan Aggarwal, a suspended director of Prayag Polytech Private Limited (the Corporate Debtor or CD), challenged the admission of a Section 7 insolvency application filed by Canara Bank. The Bank sought initiation of corporate insolvency resolution process (CIRP) claiming outstanding dues of Rs.34,14,92,212 as of 30.06.2024, arising from multiple credit facilities extended since 15.10.2011. The CD had availed aggregate credit facilities of Rs.157 crores, secured by hypothecation of assets and registered charges.
Key Facts
The CD’s account was classified as a Non-Performing Asset (NPA) on 03.10.2019.
Canara Bank filed OA No.609/2023 before the Debt Recovery Tribunal (DRT), New Delhi, for recovery; the CD filed a counterclaim for Rs.31,18,17,044.
The Section 7 application was filed on 09.08.2024, citing two loan accounts: 2009256010152 and 2009773010935 (later corrected to 2009773010930).
The appellant relied on four No Objection Certificates (NOCs) issued by Canara Bank:
29.06.2017: NOC for satisfaction of charge ID 100082624 (Adhoc OCC/ODBD limit of Rs.300 lakhs)
30.12.2017: NOC for satisfaction of charge ID 100109378 (Adhoc OCC/ODBD and Packing Credit limits aggregating Rs.6 crores)
22.02.2018: NOC for satisfaction of 20 charges with specified IDs and amounts
07.08.2018: NOC for satisfaction of charges created on 14.08.2014 (Rs.160.30 crores) and 30.12.2017 (Rs.6 crores)
The appellant cited a NeSL Certificate dated 23.08.2023 showing default of Rs.96,99,057.55 in account 2822261000063 - an account not referenced in the Section 7 application.
Canara Bank’s NeSL records for the two accounts cited in the Section 7 application showed defaults of:
Rs.18,63,346.72 (Account 2009773010930)
Rs.27,74,72,734.18 (Account 2009256010152)
The CD’s audited financial statements for FY 2017-18 to 2020-21 consistently disclosed secured borrowings from Canara Bank.
On 13.06.2022, the CD wrote to Canara Bank acknowledging its outstanding debt exceeding Rs.1 crore.
The Ministry of Corporate Affairs (MCA) Index of Charges as of 09.08.2024 showed six outstanding charges in favour of Canara Bank with no recorded date of satisfaction.
Procedural History
03.10.2019: CD’s account classified as NPA by Canara Bank
09.08.2024: Canara Bank filed Section 7 application before NCLT, Jaipur Bench (CP No.(IB)-68/7/JPR/2024)
09.12.2024: CD filed reply disputing debt, citing NOCs and withdrawal of SARFAESI notices
10.02.2026: NCLT, Jaipur Bench admitted Section 7 application, appointed Resolution Professional, and declared moratorium
12.02.2026: NCLAT issued interim order directing filing of complete Statement of Accounts (20 volumes)
23.04.2026: NCLAT delivered judgment on appeal
The Parties' Positions
For the Appellant
Argued that NOCs issued by Canara Bank constituted full discharge of debt.
Contended that withdrawal of SARFAESI notices under Section 13(2) nullified the Bank’s right to initiate CIRP.
Asserted that the NeSL Certificate of Rs.96,99,057.55 represented the only valid default.
Alleged that Canara Bank illegally retained Rs.30,91,60,044 in overseas remittances.
Relied on NCLT’s 13.02.2020 order directing bifurcation of assets between CD and M/s Agroha Colourtech Pvt. Ltd., alleging non-compliance.
For the Respondent
Maintained that NOCs pertained only to satisfaction of charges, not discharge of debt.
Presented NeSL records for the two accounts cited in the Section 7 application, proving defaults exceeding Rs.27 crores.
Cited CD’s financial statements (FY 2017-18 to 2020-21) and the 13.06.2022 letter as clear acknowledgments of liability.
Stated that withdrawal of SARFAESI notices does not extinguish the underlying debt.
Clarified that the Rs.30,91,60,044 retention claim was part of the pending DRT counterclaim and not relevant to Section 7 admission.
Relief Sought
The appellant sought quashing of the NCLT’s order dated 10.02.2026, setting aside the admission of the Section 7 application, and a declaration that no financial debt or default existed.
The Legal Issue
The central question was whether the issuance of No Objection Certificates for satisfaction of charges under the Companies Act, 2013, constitutes discharge of financial debt under Section 7 of the Insolvency and Bankruptcy Code, 2016, and whether withdrawal of SARFAESI notices nullifies the creditor’s right to initiate corporate insolvency proceedings.
Arguments Presented
For the Appellant
The appellant relied on the four NOCs issued by Canara Bank to argue that all dues had been settled. He contended that the Bank’s act of issuing NOCs to the Registrar of Companies demonstrated its acknowledgment of no outstanding liability. He further argued that the withdrawal of multiple Section 13(2) notices under the SARFAESI Act indicated abandonment of the claim. He cited the NeSL Certificate for account 2822261000063 as the sole authoritative record of default, asserting that the Bank’s claim of Rs.34 crores was inflated and unsupported. He also referenced the NCLT’s 2020 order on asset bifurcation to allege that the Bank had failed to reconcile its accounts properly.
For the Respondent
Canara Bank countered that NOCs were strictly for the purpose of facilitating charge satisfaction with the Registrar of Companies and did not imply debt discharge. It submitted that the MCA Index of Charges as of 09.08.2024 showed six outstanding charges in its favour, proving the debt remained unsatisfied. The Bank produced authenticated NeSL records for the two accounts cited in the Section 7 application, demonstrating defaults exceeding Rs.27 crores. It relied on the CD’s audited financial statements from FY 2017-18 to 2020-21, which explicitly recorded secured borrowings, and the 13.06.2022 letter acknowledging debt. It emphasized that withdrawal of SARFAESI notices does not extinguish the underlying liability and that the DRT counterclaim was a separate proceeding.
The Court's Analysis
The NCLAT undertook a meticulous review of the documents submitted by both parties. It observed that the NOCs issued by Canara Bank were addressed to the Registrar of Companies and explicitly stated: "We have no objection if the satisfaction for the following charge is filed as there are no dues against this charge as on date." The Court held that such language pertains only to the removal of encumbrances on assets, not to the extinguishment of the underlying financial obligation. The Court emphasized that a charge satisfaction does not equate to debt repayment.
"The said letters cannot be read to mean that the Bank has communicated that it has no outstanding dues against the CD."
The Court further noted that the MCA’s Index of Charges as of the date of the Section 7 application showed multiple charges in favour of Canara Bank without any recorded date of satisfaction, directly contradicting the appellant’s claim of full discharge.
Regarding the NeSL Certificate, the Court clarified that the Rs.96,99,057.55 default cited by the appellant pertained to an account (2822261000063) not referenced in the Section 7 application. In contrast, the Bank’s NeSL records for the two accounts cited in the application showed defaults of Rs.18,63,346.72 and Rs.27,74,72,734.18 respectively - collectively exceeding Rs.27 crores. The Court held that the Bank had discharged its burden of proving financial debt and default.
The Court also examined the CD’s financial statements for FY 2017-18 to 2020-21, which contained explicit disclosures of secured borrowings from Canara Bank. The Court relied on textual note 44 in the FY 2018-19 statement, which acknowledged non-payment of dues from April 2019 onwards and classification of loans as NPAs. The 13.06.2022 letter, wherein the CD acknowledged its debt exceeding Rs.1 crore, was held to be a clear admission of liability.
"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 Court rejected the argument that withdrawal of SARFAESI notices extinguished the debt, citing settled law that such withdrawal is procedural and does not affect the creditor’s right to initiate CIRP under Section 7. The Court also declined to entertain the claim of Rs.30,91,60,044 retention, noting it was already the subject of a pending DRT counterclaim.
The NCLAT affirmed that at the admission stage under Section 7, the Adjudicating Authority need only be satisfied of a prima facie case of default. The quantum of debt is to be determined by the Resolution Professional during the claims process.
The Verdict
The appeal was dismissed. The NCLAT upheld the admission of the Section 7 application by the NCLT, Jaipur Bench. The Court held that the financial debt of Rs.34,14,92,212 was prima facie established through NeSL records, financial statements, and the 13.06.2022 acknowledgment letter. The Resolution Professional was directed to collate all claims, including those submitted by the appellant, and determine the final quantum of debt. Parties were directed to bear their own costs.
What This Means For Similar Cases
NOCs Are Not Debt Discharge
Practitioners must distinguish between charge satisfaction and debt settlement. Issuing an NOC to ROC for removal of a charge does not extinguish financial liability.
In Section 7 applications, creditors must produce evidence of actual repayment - not merely administrative clearances.
Debtors cannot rely on NOCs to defeat insolvency proceedings unless accompanied by bank statements, receipts, or settlement deeds.
Financial Statements Are Binding Acknowledgments
Audited financial statements containing disclosures of secured borrowings constitute legally binding acknowledgments of debt under Section 7.
Any subsequent denial of debt in insolvency proceedings will be rejected if contradicted by prior financial disclosures.
Practitioners should treat financial statement footnotes as critical evidence in insolvency disputes.
NeSL Records Must Be Account-Specific
A NeSL Certificate for an unrelated account cannot be used to dispute the quantum of debt in a Section 7 application.
Creditors must produce authenticated NeSL records for the exact accounts cited in the application.
Debtors must challenge NeSL data with certified records from the creditor’s system, not selective extracts.
