2020 (2) TMI 1303 - AT - Insolvency and Bankruptcy

Declaration of Allahabad Bank as NPA - CIRP process - appellant s grievances is that the Allahabad Bank was part of Consortium in which the leading Bank was IDBI and Allahabad Bank - It is stated that it was necessary that Respondent No. 1 Allahabad Bank should have given notice and only thereafter it could have filed the application under Section 7 of the I B Code 2016 - HELD THAT - There are no reason here also in the present Appeal to interfere. Here also there is Consortium Agreement between the Banks to which the Corporate Debtor was not party. There is no bar in law for the Bank which has declared NPA to proceed and file proceedings under Section 7 of the I B Code 2016 notwithstanding consortium agreement between Banks. Appeal dismissed.

Summary

Issues:
Appeal against order admitting application under Section 7 of the Insolvency and Bankruptcy Code, 2016 based on Consortium Agreement.

Analysis:
The Appellant filed an Appeal against the order passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, admitting the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 filed by Respondent No. 1 Allahabad Bank, leading to the initiation of Corporate Insolvency Resolution Process (CIRP).

The Appellant raised grievances regarding the Consortium Agreement involving Allahabad Bank and IDBI, stating that as per the agreement, if Allahabad Bank intended to take action, permission from IDBI Bank should have been obtained after giving a 15-day notice. The Appellant argued that Allahabad Bank should have given notice before filing the application under Section 7 of the I&B Code.

Respondent No. 2 contended that Allahabad Bank had declared the debt as Non-Performing Asset (NPA) on a specific date and filed the application under Section 7 of the I&B Code within the required timeline.

The Tribunal referred to the judgment in the matter of Oriental Bank of Commerce Vs. M/s Ruchi Global Limited, emphasizing that the Inter-se Agreement between the Banks did not involve the Corporate Debtor and that the Corporate Debtor could not benefit from the clauses in the agreement binding only the Banks. The Tribunal held that if there was a default by any member of the Consortium, it would be a matter for the other banks to address, and the Corporate Debtor could not raise grievances based on the agreement.

The Tribunal further cited the judgment in the matter of Asian Natural Resources (India) Ltd. & Anr. Vs. IDBI Bank Ltd., stating that the Inter-se Agreement between financial creditors could not override the right of any Financial Institution to file an application under Section 7 of the I&B Code. The Tribunal agreed with the observations made in previous judgments and concluded that the dismissal of the application under Section 7 due to the Consortium Agreement was not sustainable.

Ultimately, the Tribunal found no legal impediment for a Bank that had declared a debt as NPA to proceed with filing proceedings under Section 7 of the I&B Code, irrespective of any Consortium Agreement between Banks. Consequently, the Appeal was dismissed, and no costs were awarded.