NCLAT Sets Aside Raja Udyog CIRP After Pre-Admission Payments Cut Default Below ₹1 Crore Threshold

The National Company Law Appellate Tribunal has set aside the admission of corporate insolvency resolution proceedings against Raja Udyog Private Limited after finding that payments made before the admission order had reduced the amount in default below the ₹1 crore statutory threshold applicable for initiation of corporate insolvency under the Insolvency and Bankruptcy Code.

The ruling is a useful reminder that the threshold test is not merely about the amount originally claimed in an insolvency petition. Where material payments are received before the adjudicating authority admits the application, the current outstanding default can become decisive and should be placed before the tribunal.

What happened in the Raja Udyog case

The dispute arose from financial assistance advanced to Raja Udyog. Secondary reporting on the appellate decision records advances of ₹1 crore and ₹1.25 crore by the financial creditors. An application under the IBC was subsequently pursued before the National Company Law Tribunal.

Before the NCLT passed its admission order on July 20, 2026, however, payments were made toward the outstanding dues. The appellate record, as reported, showed payments totalling about ₹2.25 crore during June and July 2026. After giving effect to those payments, the amount remaining due on the date of admission was stated to be ₹93,88,310.

That figure is important because it is below the ₹1 crore minimum default threshold for initiating CIRP under the Code. NCLAT therefore examined the position existing when the insolvency application was actually admitted rather than looking only at the larger historical debt or the amount originally asserted.

Why the admission order was set aside

NCLAT's approach, as reported from the judgment, was that payments received before admission were material facts that ought to have been disclosed to the NCLT. Once those payments were taken into account, the remaining default did not meet the statutory floor for commencement of CIRP.

The appellate tribunal consequently set aside the NCLT's July 20 admission order. Reporting on the case also indicates that the creditors' claims were subsequently discharged through settlement. The appellate order directed that CIRP-related costs be borne by the appellant and disposed of the connected applications.

Why the timing of payments matters under IBC

For lenders, resolution professionals and corporate advisers, the case highlights the need to distinguish between the amount of debt and the amount of default that legally supports insolvency admission. A debt may originally exceed ₹1 crore, but a substantial pre-admission payment can change the statutory position if the unpaid default falls below the threshold before the tribunal admits the petition.

That does not mean every payment automatically defeats an IBC application. The exact result depends on the nature of the debt, the amount legally due and payable, the timing and appropriation of payments, disputes over the ledger, and the evidence before the adjudicating authority. The Raja Udyog ruling is therefore best read as a fact-specific application of the threshold requirement rather than a blanket rule for all settlement or repayment situations.

Practical points for creditors and advisers

- Update the outstanding figure before admission: creditors should reconcile receipts and payments up to the latest hearing and admission date.

- Disclose material repayments: payments received after filing but before admission should be brought to the tribunal's attention where they affect the default amount.

- Re-test the statutory threshold: the amount supporting the petition should continue to satisfy the applicable IBC minimum at the relevant stage.

- Preserve evidence: bank entries, acknowledgements, settlement communications and appropriation records can become important when the amount in default is contested.

- Avoid relying only on the original claim: a petition drafted around an earlier balance may become vulnerable if later receipts materially alter the outstanding default.

What insolvency professionals should take away

The decision reinforces the importance of current, accurate debt reconciliation in insolvency litigation. For CAs and insolvency professionals supporting creditors or corporate debtors, the practical work is not limited to proving that financial assistance existed; it also includes establishing the legally relevant default amount at the stage when the Code's admission conditions are tested.

Readers should review the full NCLAT order and case record for the exact factual matrix before applying the ruling to another matter. But the immediate lesson is clear: where pre-admission repayments bring the remaining default below ₹1 crore, the maintainability of a CIRP application can be directly affected.

Key takeaway

The fresh appellate ruling has practical significance for insolvency professionals, lenders and corporate-law advisers because it focuses on the amount actually in default when an insolvency application is admitted.