Tribunal quashes order, remits matter for further proceedings. Parties to appear before Adjudicating Authority.

The Tribunal allowed the appeal, quashed the Impugned Order, and remitted the matter back to the Adjudicating Authority for further proceedings. The parties were directed to appear before the Adjudicating Authority for necessary actions. The Appeal was disposed of with no costs involved in the process.

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Issues:
Dismissal of Application under Section 7 of Insolvency and Bankruptcy Code, 2016 based on Consortium Agreement.

Analysis:
1. The Appellant, a bank, filed an appeal against the dismissal of their Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Respondent - Corporate Debtor. The Appellant had extended a non-fund based Letter of Credit facility to the Corporate Debtor, resulting in outstanding dues. The debt amount was mentioned as &8377; 8,22,36,542/- as of the date of classifying the debt as NPA.

2. The Appellant Bank was part of a Consortium of Banks, and the credit facility granted to the Corporate Debtor was secured by various documents, including a Deed of Guarantee and Undertaking/Declaration. An Inter Se Agreement dated 27th January, 2012 was entered into between the Consortium of Banks to secure the credit facility granted by the Financial Creditor.

3. The Adjudicating Authority dismissed the Application citing the Inter-se Agreement and the requirement to give notice to the lead bank before filing the Application. The Application was dismissed with liberty to file a fresh petition.

4. The Counsel for the Appellant argued that the Consortium Agreement was between the Banks and the Corporate Debtor was not a party to it, emphasizing that nothing barred the Appellant from filing the Application under Section 7 of IBC when the debt was due and in default.

5. The Appellant relied on a judgment of the Tribunal to argue that the Consortium Agreement does not override Section 7 of the IBC, emphasizing that it is the right of the financial creditors to file an application under Section 7 individually or jointly.

6. The Respondent's Counsel argued that the Adjudicating Authority rightly dismissed the Application as the Appellant did not comply with the Inter-se Agreement by not giving notice to the lead Bank before filing the Application. The Corporate Debtor raised issues regarding the Appellant not following the Consortium's guidelines.

7. The Tribunal found that the Inter-se Agreement was between the Banks and the Corporate Debtor was not a party to it. The Appellant Bank had classified the account of the Respondent as NPA as per RBI guidelines, justifying their action against the Corporate Debtor.

8. The Tribunal held that the Corporate Debtor cannot benefit from the clauses in the Inter-se Agreement, which are binding only on the Banks. The judgment emphasized that the right of financial institutions to file an application under Section 7 of the IBC cannot be overridden by the Inter-se Agreement.

9. The Tribunal agreed with the observations of the Tribunal bench in a previous judgment and held that the dismissal of the Application based on the Consortium Agreement was not justified.

10. The Tribunal allowed the appeal, quashed the Impugned Order, and remitted the matter back to the Adjudicating Authority for further proceedings. The parties were directed to appear before the Adjudicating Authority for necessary actions.

11. The Appeal was disposed of with no costs involved in the process.

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