9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (5) TMI 570 - SC - Insolvency and BankruptcyInitiation of CIRP - NCLT admitted the application - Power of NCLT to refuse the application - Refusal of banks to extend the Bank Guarantees of the Corporate debtor - HELD THAT - Once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. Even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtoṛ. In such a case, an order of admission under Section 7 of the IB Code must follow. If the NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application. A Review Petition was filed by the Axis Bank Limited seeking a review of the decision of Vidarbha Industries 2022 (7) TMI 581 - SUPREME COURT on the ground that the attention of the Court was not invited to the case of E.S. Krishnamurthy 2021 (12) TMI 683 - SUPREME COURT - it was clarified by the order in review that the decision in the case of Vidarbha Industries1 was in the setting of facts of the case before this Court. Hence, the decision in the case of Vidarbha Industries 1 cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innoventive Industries 3 and E.S. Krishnamurthy 2 . The view taken in the case of Innoventive Industries 3 still holds good. A demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 dated 29th August 2018 was issued by the first respondent. As the Corporate Debtor did not honour the said notice, the original application for recovery has been filed by the first respondent before the Debt Recovery Tribunal at Hyderabad. Moreover, the Corporate Debtor acknowledged the debt on 5th May 2019 to the extent of Rs. 63,36,61,897.26. Moreover, the Balance Sheet as of 31.03.2019 of the Corporate Debtor reflects the said liability of the Corporate Debtor. It is true that as far as Bank Guarantees are concerned, the Executive Engineer of the Government of Telangana addressed letters to the Bank requesting the Bank to revalidate the Bank Guarantees. On 8th January 2020, the Government addressed a letter to Syndicate Bank to extend the seven Bank Guarantees mentioned therein. The letter mentions that if the action of revalidation or extension of the Bank Guarantees is not taken, the Bank Guarantees be realized and the amount be paid by Demand Drafts to the State Government. Thus, Bank Guarantees were invoked by the State Government - the first respondent called upon the Corporate Debtor to clear the outstanding immediately. Thus, there is no doubt that the Corporate Debtor committed a default within the meaning of Section 3(12) of the IB Code due to non-payment of the amounts due to the Bank. There are a large number of Guarantees issued by the Bank. The interim order of the Telangana High Court does not relate to all Bank Guarantees. Moreover, there is no finding recorded in the interim order that the Corporate Debtor is not liable to pay the dues. The interim order only prevents coercive action against the Corporate Debtor - Even assuming that NCLT has the power to reject the application under Section 7 if there were good reasons to do so, in the facts of the case, the conduct of the appellant is such that no such good reason existed on the basis of which NCLT could have denied admission of the application under Section 7. There is no merit in the appeal, and the same is, accordingly, dismissed.
Issues Involved:
1. Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IB Code). 2. Admission of application by NCLT and dismissal by NCLAT. 3. Financial debt and default by Corporate Debtor. 4. One Time Settlement (OTS) proposal. 5. Extension of Bank Guarantees and alleged default by Corporate Debtor. 6. Judicial interpretation of Section 7 of the IB Code. Summary: Application under Section 7 of the IB Code: The respondent Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IB Code) before the National Company Law Tribunal (NCLT), Hyderabad, against a Corporate Debtor. The NCLT admitted the application and declared a moratorium. The appellant, a suspended Director of the Corporate Debtor, appealed to the National Company Law Appellate Tribunal (NCLAT), which dismissed the appeal. Admission of Application by NCLT and Dismissal by NCLAT: The NCLT admitted the application filed by the respondent Bank and declared a moratorium as per Section 14 of the IB Code. The NCLAT dismissed the appellant's appeal against this order. Financial Debt and Default by Corporate Debtor: The Syndicate Bank, later merged into Canara Bank, sanctioned credit facilities to the Corporate Debtor, including a Secured Overdraft Facility and Bank Guarantees. The Corporate Debtor's liabilities included Rs. 74,52,87,564.93 under the Secured Overdraft Facility and Rs. 19,16,20,100 towards outstanding Bank Guarantees. The Corporate Debtor acknowledged the debt and defaulted on payments. One Time Settlement (OTS) Proposal: The appellant submitted a proposal for settlement under a One Time Settlement Scheme, depositing Rs. 6 crores with the respondent Bank. However, the proposal was rejected by the Bank. Extension of Bank Guarantees and Alleged Default by Corporate Debtor: The Government of Telangana requested the Bank to extend the Bank Guarantees, but the Bank did not extend them. The appellant argued that the Bank's failure to extend the Guarantees forced the Corporate Debtor to default. The Bank, however, communicated the rejection of the extension request and called upon the Corporate Debtor to clear the outstanding amounts. Judicial Interpretation of Section 7 of the IB Code: The Supreme Court reiterated the scope of Section 7 of the IB Code as explained in Innoventive Industries Limited v. ICICI Bank and Another, stating that once NCLT is satisfied that a default has occurred, it must admit the application unless it is incomplete. The Court emphasized that the decision in Vidarbha Industries Power Limited v. Axis Bank Limited was specific to its facts and did not override the principles established in Innoventive Industries and E.S. Krishnamurthy and others v. Bharath Hi Tecch Builders Private Limited. The Court held that the Corporate Debtor's default was established, and there was no good reason for NCLT to refuse admission of the application under Section 7. Conclusion: The Supreme Court found no merit in the appeal and dismissed it, stating that the conduct of the appellant did not provide any good reason to deny the admission of the application under Section 7 of the IB Code. The appeal was dismissed with no order as to costs.
|
