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2022 (11) TMI 756 - AT - Insolvency and Bankruptcy


Issues Involved:
1. Locus standi of IDBI Bank for filing application under section 7 of IBC.
2. Whether non-disbursement by Standard Chartered Bank of the additional amount after restructuring of debt has materially changed the restructuring package and consequently the guarantee stands discharged.

Detailed Analysis:

Issue 1: Locus Standi of IDBI Bank for Filing Application Under Section 7 of IBC

The primary issue revolves around whether IDBI Bank had the authority to independently declare an 'Event of Default' and file an application under section 7 of the Insolvency and Bankruptcy Code (IBC) against the corporate debtor, Fivebro International Private Limited (FIPL). The relevant agreements for this issue are the Inter-se Agreement, Deed of Guarantee, and Security Trustee Agreement.

The Security Trustee Agreement, executed on 26.11.2013, stipulates that any lender proposing to take action regarding an 'Event of Default' must intimate the Security Trustee, who then informs other lenders. This procedure ensures coordinated action among the consortium members. Clause 7.1(b) of the Inter-se Agreement also mandates consultation with other lenders before declaring an 'Event of Default.'

IDBI Bank sent a recall notice to Doshion on 20.9.2016 and a demand letter to FIPL on 4.11.2016 without informing the Lead Bank (Bank of Baroda) or the Security Trustee. This unilateral action by IDBI Bank contravenes the stipulated procedures in both the Inter-se Agreement and the Security Trustee Agreement. The Adjudicating Authority erred by relying on clause 7.5 of the Inter-se Agreement, which allows individual action on matters not expressly stated in the agreement. However, clauses 7.1 and 7.2 clearly cover the declaration of an 'Event of Default,' requiring coordinated action.

The Tribunal concluded that IDBI Bank's declaration of 'Event of Default' was invalid as it did not follow the required procedures, thereby lacking the locus standi to file the section 7 application independently.

Issue 2: Non-Disbursement by Standard Chartered Bank and Its Impact on the Guarantee

The second issue concerns whether the non-disbursement of additional loan amounts by Standard Chartered Bank after the restructuring materially altered the restructuring package, thereby discharging the guarantee.

The Appellant argued that the restructuring package did not materialize due to Standard Chartered Bank's failure to disburse its share, thus invalidating the default claim. The Deed of Guarantee, executed on 27.6.2014, guaranteed the repayment of loans up to Rs. 408.64 crores. The Appellant contended that the guarantee was conditional upon the full disbursement of the restructured loan amount.

The Tribunal noted that the argument concerning the applicability of sections 129 and 133 of the Indian Contract Act, which deal with the discharge of surety, was not directly relevant to the adjudication of the section 7 application. The Tribunal also referenced the judgment in the matter of IDBI Bank vs. Manoj Gaur, which held that lenders must act collectively under a Security Trustee Agreement.

The Tribunal found that the restructuring package's failure did not discharge the guarantee as per the terms of the Deed of Guarantee. However, the Tribunal did not delve deeply into this issue, focusing instead on the procedural lapses by IDBI Bank.

Conclusion:

The Tribunal concluded that IDBI Bank acted unilaterally in declaring an 'Event of Default' and filing the section 7 application, violating the Inter-se Agreement and Security Trustee Agreement. Consequently, the Impugned Order admitting the application was set aside, and the corporate debtor FIPL was freed from the Corporate Insolvency Resolution Process (CIRP) and related provisions of IBC.

 

 

 

 

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