NCLT orders banks to remove NPA tag for Mcnally Bharat
The tribunal dismissed the company's application but directed mandatory compliance with a resolution plan clause and ordered respondent banks to de-classify the loan as NPA within a week.
What's new
- Kolkata NCLT dismissed Mcnally Bharat's application under IBC Section 60(5).
- Tribunal directed the company to comply with Clause 5.5.2.2 of its resolution plan.
- Ordered respondent banks to remove NPA tag and issue no-objection certificate within a week.
Why this matters
For a nano-cap with a market cap of just ₹2 crores, NPA removal is a lifeline. It clears the company's credit history and should restore normal banking access — an outsized impact relative to its size. The dismissal of the application is a procedural setback, but the substantive relief is what matters.
What we're watching
- Whether banks comply with the one-week deadline for NPA removal and NOC.
- Any appeal or clarification sought by either party on the order.
- If normal banking operations resume and enable the company to raise working capital.
The full read
Kolkata NCLT handed Mcnally Bharat a mixed verdict on Monday. It dismissed the company's application under IBC Section 60(5) but ordered the respondent banks to remove the NPA tag and issue a no-objection certificate within 7 days. For a nano-cap with a market cap of ₹2 crores, this is the substantive win. The NPA designation had choked off normal banking. Removing it can restore credit access and working capital. The tribunal also directed the company to immediately comply with Clause 5.5.2.2 of its resolution plan, a procedural condition the company has said it is taking steps to meet. The dismissal of the application is a setback, but the relief is real. The question now is whether banks meet the one-week deadline.
Questions answered
- What did the NCLT order actually say?
- The Kolkata NCLT dismissed Mcnally Bharat's application under IBC Section 60(5) but directed the company to comply with Clause 5.5.2.2 of the resolution plan. It also ordered respondent banks to remove the NPA status and provide a no-objection certificate within one week.
- Why is NPA removal significant for Mcnally Bharat?
- With a market cap of just ₹2 crores, NPA classification would block access to bank credit and normal operations. Removing the tag can restore the company's ability to function, raise capital, and execute its resolution plan.
- What is Clause 5.5.2.2 of the resolution plan?
- The filing does not specify the clause's content, but the NCLT has mandated its immediate compliance. It likely relates to payment or operational obligations under the court-approved plan.
- What happens if banks don't comply within a week?
- The NCLT order gives banks one week to act. Non-compliance could invite contempt proceedings, but the filing does not specify consequences.
- Is this final or can it be appealed?
- The order is from a single bench. Either party could appeal to a higher forum, though the filing does not indicate any intention to do so.