Majority's Consideration Of Debt Restructuring With Corporate Debtor Does Not Bar Individual Member From Filing Petition U/S 7 Of IBC: NCLAT
Mohd Malik Chauhan
18 May 2025 6:30 PM IST
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that the fact that a majority of consortium lenders are considering debt restructuring with the Corporate Debtor does not preclude an individual member from independently initiating insolvency proceedings under Section 7 of...
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) has held that the fact that a majority of consortium lenders are considering debt restructuring with the Corporate Debtor does not preclude an individual member from independently initiating insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) as per the facility agreement.
Brief Facts:
The Corporate Debtor (“CD”) – M/s Agson Global Private Limited obtained various Financial Facilities through a Joint Consortium of Lenders. The Joint Consortium Agreement was executed on 25.10.2017.
The Indian Bank has sanctioned Term Loan of working capitals limit in Import and Processing and Distributions Division of Rs.29.40 crores (Fund based Rs.15.40 crores and non-fund based Rs.14 crores). Under the Consortium, the IOB was the lead Bank. The CD has executed various security documents to ensure the repayment of the loan. Additional loans were also sanctioned.
Indian Bank filed an application under section 7 of the Code seeking recovery of ₹51.07 crore from Twenty First Century Castings Pvt. Ltd. The Corporate Debtor opposed it, citing a consortium resolution dated 23.01.2024 wherein 90% of lenders agreed to transfer the loan account to NARCL for restructuring.
However, the Adjudicating Authority held that since the loan account was not yet transferred and default remained undisputed, it had no option but to admit the Section 7 application and appointed Shailesh Verma as Resolution Professional.
Against the above, the present appeal has been filed.
Contentions:
The Appellant submitted that the Indian Bank who has filed Section 7 Application held only minor share of 2.47% in the Consortium of Lenders and when 90% of the Lenders were considering debt restructuring of the CD, there was no justification for Indian Bank to file Section 7 Application.
Per contra, the Respondent submitted that the Indian Bank was one of the Member of the Consortium and was fully entitled to initiate proceedings under Section 7 for default committed by the Appellant.
It was further submitted that the restructuring proposal submitted by the Appellant, could not be accepted on account of credit rating of the CD. The credit rating of the CD being RP-5, the CD was not eligible for restructuring under the provisions of the RBI Circular.
Observations:
The Tribunal after referring to the relevant materials noted that JLM was very much conscious that all Members are independent to follow recovery measures as per their own Bank's recovery policy. Thus, all Lenders have their independent rights to take such measures as per their Bank's policy regarding realisation of their debt.
Based on the above, it held that the fact that Consortium Members in-principle has decided to transfer the account to National Asset Reconstruction Company Limited (“NARCL”), in no manner can hamper the proceedings under Section 7 initiated by the Indian Bank, even much before 29.01.2024.
Accordingly, it held that the fact that Indian Bank has 2.47% proportion in the lending, in no manner preclude the Indian Bank to take its measures as per facility document.
The Tribunal further held that the communication dated 15.03.2025 sets out clear reasons for rejecting the settlement proposal—namely, the lack of tied-up funding, its dependence on a long-pending insurance claim, and funds from an unidentified investor. The promoters had proposed an upfront payment of Rs. 5 crores. Upon review, NARCL has adequately considered the proposal, and the communication does not suffer from any infirmity warranting further directions.
The Tribunal concluded that NARCL, as the assignee of the entire debt from all consortium members including Indian Bank, has not accepted the Appellant's settlement proposal. Given the circumstances, the resolution of the Corporate Debtor must proceed under the IBC. No error was found in the Adjudicating Authority's order admitting the Section 7 application. Accordingly, the appeal was dismissed.
Case Title: Apresh Garg Versus Indian Bank (erstwhile Allahabad Bank) & Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 396 of 2024 & I.A. No. 1822, 1977, 6619 of 2024
Judgment Date: 15/05/2025
For Appellant : Dr. Abhishek Manu Singhvi, Sr. Advocate, Mr. Abhijeet Sinha, Sr. Advocate with Mr. Sumit K. Batra, Mr. Avishkar Singhvi, Mr. Manish Khurana and Ms. Priyanka Jindal, Mr. Yash Johri, Advocates
For Respondents : Mr. Gopal Jain, Sr. Advocate with Mr. Rajesh Kumar Gautam and Mr. Deepanjal Choudhary, Advocates for Indian Bank/ NARCL.
Mr. Sumesh Dhawan, Ms. Vatsala Kak and Ms. Ankita Bajpai, Advocates for IRP.