TaxTMI 
TaxTMI 
2026 (1) TMI 117
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....Carbon Pvt. Ltd. under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) assailing the impugned order dated 18th October 2024 passed by Ld. Adjudicating Authority, New Delhi, Court- IV in Company Petition No. 595 of 2023 under section 7 of the IBC, whereby the application filed by the petitioner / Respondent No.1 has been accepted and the CIRP process has been initiated against the CD namely Good Luck Carbon Pvt Ltd. 2. Necessary facts required for disposal of this appeal are that a petition under Section 7 of the IBC was presented by the respondent No. 1 before Ld. Tribunal against the CD, which is an MSME Company, which has been accepted by passing the impugned order and CIRP has been initiated against the CD and Mr Ashok Kumar Gulla, Respondent No.2, was appointed as Interim Resolution Professional (IRP) for the corporate debtor. 3. It is stated by the Appellant that the Corporate Debtor was incorporated as M/s Good Luck Impex Pvt. Ltd. in the year 1993 and thereafter in the year 2007 the name of it was changed to Good Luck Carbon Pvt Ltd. The Company is having its unit located at Village Jitwal Kalan, Tehsil Malerkotla, District Sangrur, Punjab-148019, and is e....
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....nd corrective action plans were agreed by the JLF. It is further stated that for preservation of the economic value of the Corporate Debtor a request was made to the Lenders for extension of the Commercial Operation Date (COD) of the project by one year i.e. to July 2016 in view of the pending statutory clearance for extracting groundwater for power generation project from the concerned department of the state government. It is further stated that in the JLF meeting dated 24.09.2015, amongst other Agendas discussion on request of the CD for financing of part of interest during implementation of project as a term loan and charging of common rate of interest by all lender banks was discussed and the JLF sought for a proposal on the issue of extension of COD from the corporate debtor. It is stated that while PNB, the lead bank and Canara bank approved the extension of COD and sanctioned its share in fresh term loan, the other members of the consortium failed to follow and the other members of the consortium informed the JLF that the proposal of extension of the COD and sanction of term loan is under consideration with the competent authority of the respective banks. In February 2016, ....
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....ers that efforts are being made pursuant to which an OTS may be offered and he also requested the lead bank of the consortium for restructuring of limits for rehabilitation of the unit of the CD. 11. It is further stated that the rehabilitation/restructuring scheme was submitted by the CD to the consortium of banks on 27.01.2020 wherein the CD has shown its intent to run the company as valuable unit and has requested the member banks to consider the restructuring on merits as proposed in the Draft Restructuring Scheme, however the consortium of banks did not take any step towards implementation of the plan for restructuring of the company as proposed by the CD and thereafter on 24.01.2023 an OTS offer of Rs. 39,00,00,000/- (Thirty-Nine Crore) was provided on behalf of the CD for settlement of the outstanding dues. This OTS was discussed by the Lenders at the joint lenders meeting held on 30.01.2023 where in the appellant was also invited to join and it was decided that a decision on this OTS would be taken on the basis of fresh valuation of the mortgaged assets. After the meeting of the JLM held on 08.05.2023 further information and clarification was submitted and a new OTS offe....
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....f various members of the consortium the initiation of CIRP should not be done at the instance of that bank which had earlier approved the OTS proposal of the Appellant. 14. It is further case of the appellant that during the pendency of this appeal Respondent No. 3 has filed an affidavit stating that the OTS proposal dated 24.05.2023 is under consideration before the competent authority of Respondent N0. 3 however during the pendency of the appeal the OTS earlier sanctioned by the Respondent No. 1 bank was illegally cancelled. 15. It is pertinent to mention here that Respondent No. 2 and Respondent No. 3 did not file their Reply and they have argued on the basis of the material which is already on record. Respondent No. 1 however has filed reply and also an application bearing IA No. 2165 of 2025 for vacating the stay granted by this Tribunal at the time of first hearing, however later on he also consented to argue the appeal finally. 16. Respondent No. 1 in his reply has stated that all the facts pertaining to the non-consideration of the OTS Proposal in right perspective and also with regard to the non-sanctioning of financial facilities as and when desired by the appell....
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....taken in the appeal with regard to the dates of default. 22. It is further stated that as per the settled law the Respondent No. 1 is not required or bound to take any authorisation/permission of any member/bank of consortium to initiate insolvency proceedings as it is having a statutory right to avail the mechanism of IBC, reliance in this regard has been placed on 'Asian Natural Resources (India Ltd.) vs. IDBI Bank Ltd.', CA (AT) (Ins) No. 60 of 2017. 23. It is also stated that the Respondent is the custodian of the public money and cannot disburse funds at the wish and will of the appellant without following the due procedure/policy established. In fact the appellant or the CD are not having any means to settle the dues of the Respondent and that is why the whole amount of the OTS proposal has not been deposited. 24. It is also stated that in normal course the limitation would have expired on 30.09.2018 as the account of the CD was classified as NPA on 30.09.2015 within which the lead Bank i.e. Punjab National Bank has issued a notice under Section 13(2) of the SARFAESI Act, 2002, asking the appellant to pay the dues within 60 days which expired on 29.08.2017. However, ....
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.... in approval of OTS by other lender banks. 28. It is submitted with considerable force that the cancellation of the OTS by the respondent number one is arbitrary and unlawful and without any reason, no default has occurred in the OTS on the part of the appellant. It is also highlighted that the bonafide of the appellant may be assessed by the fact that the Appellant has settled the Car loan which was exclusively sanctioned by the Canara Bank by paying the entire due amount of Rs. 59.98 Lakhs. It is emphasised that the Respondent No. 1 after reaching on an OTS, which was awaiting approval of other member banks of consortium of lenders was not empowered to withdraw the same without approval of other member banks of consortium of lenders. It is also submitted that on 13th June 2024 when the order was reserved by the NCLT the OTS sanction by Respondent No. 1 was subsisting and was not withdrawn as may be assessed by the minutes of JLM dated 22.05.2024 and 25.09.2024. 29. It is also submitted that the appellant has deposited Rs. 1.68 Crore with the Respondent No. 1 in order to prove its bonafide which is about 20% of the OTS amount which was approved by the Respondent No. 1 and af....
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....ounsels for the Respondent No. 1 and 3 vehemently opposes the submissions made by Ld. counsel for the appellant and submit various credit facilities and loan was granted to the Appellant by it and other member banks of consortium pertaining to which the consortium agreements were also executed by them. 34. It is also submitted that the project of the CD was running behind schedule and his account came under stress and as such a Joint Lenders Meeting (JLM) was called on 10.08.2015 and a joint unit was formed comprising of all consortium members who thereof made necessary inspection of the plant site of the Corporate Debtor and observed that the new line of production related to the production of carbon black was not in operation and that the Co-generation plant of 6 megawatt was yet to be set up and soon thereafter the loan accounts of the corporate debtor was declared as non-performing assets (NPA) on 30.09.2015. 35. It is also submitted that as no payment was forthcoming from the CD to the financial creditor along with other consortium member banks the Punjab National Bank being the lead Bank of the consortium issued a demand notice dated 20.06.2017 under SARFAESI Act, 2002 ....
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....enience and the appellant was not a party to these agreements and the purpose of these agreements was only to regulate the internal rights and obligations of the members and the same may not stand in the way of an application moved under Section 7 of the Code and for initiation of CIRP no permission or consent of any other member bank is required, reliance in this regard has been placed on 'Asian Natural Resources India limited vs IDBI Bank Ltd.', CA (AT) (Ins) No. 60 of 2017. 42. It is also submitted that although the account of the appellant was classified as NPA on 30.09.2015 and the period of limitation would have expired on 30.09.2018 however the period stood extended due to the execution of the fresh working capital consortium agreement dated 01.03.2017 between the appellant and the consortium of banks and thus the limitation period extended by 3 years till 01.03.2020 and thereafter various OTS were proposed by the appellant on 06.12.2019, 28.01.2020, 26.02.2021, 18.03.2021, 15.05.2021, 17.03.2021, 07.12.2022, 24.01.2023, 06.05.2023, 06.05.2025, 19.05.2025 and 10.05.2025 therefore keeping in view the fact that the acknowledgement of the debt has been made up to 10.05.2025 ....
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....y the Central Pollution Control Board and the Punjab Pollution Control Board. 46. It is not in dispute that pursuant to grant of credit facilities Consortium agreements were executed at first on 05.08.2013 between the appellant and Punjab National Bank, Oriental Bank of commerce now merged with PNB, UCO Bank, Punjab and Sindh Bank and Canara Bank and they together constitute a consortium of banks. On sanctioning of another term loan another consortium agreement was executed on 10.03.2014. On the request of Corporate Debtor, the existing working capital credit facilities were again renewed and enhanced wide sanctioned letter dated 30.03.2015. 47. There is also no dispute with regard to the fact that the loan accounts of the corporate debtor were declared as NPA on 30.09.2015, however the credit facilities appear to have further renewed and working capital consortium agreement was executed on 01.03.2017 between Appellant and consortium of banks. In the event of default, a notice appears to have been issued by the lead bank Punjab National Bank on 20.06.2017 to the Corporate Debtor under section 13(2) of SARFAESI Act, 2002 on behalf of the consortium of banks there after possess....
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....e Appellant in para number 31 of the appeal the many OTS proposals were submitted by the CD on 6th December 2019, 28th January 2020, 26th February 2021, 18th March 2021, 15th May 2021 and 17th March 2023 and all these proposals were rejected by the consortium of banks. 50. Coming to the fate of the OTS proposal given by the appellant on 24th May 2023, it was discussed in the meeting of JLM on 25th May 2023 and after discussing the offer and on the appellant showing his inability to comply improvements suggested by the consortium members, the appellant was informed that decision on the OTS offer will be subject to approval from the respective competent authorities of the member banks and all the member banks unanimously decided to forward this OTS proposal to their respective competent authorities for their approval and decision. The minutes of this meeting would reveal that it is recorded therein that no improvement has been made by the appellant in its original proposal and this proposal was simply forwarded by the member banks to their higher authorities for consideration. 51. In our considered view, by any standards the decision of the consortium of banks to forward the OT....
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....s and also that the Account was earlier reported as Fraud. 55. The Appellant appears to have written a letter to the Respondent No. 3, Punjab National Bank on 6th may 2025 informing to have made certain improvements in the OTS offer amount and with a further request to revival of the earlier OTS sanction, however he was informed pertaining to the rejection of the OTS proposal by Respondent No.1 Canara Bank. 56. Thus the above facts would sufficiently demonstrate that the OTS offer/proposal of the appellant was discussed many times in the JLM meetings and once upon a time the said OTS proposal was also send for approval of the higher authorities of the banks, however the same was never approved by the Consortium of Banks as a whole, may be because the account at some point of time was labelled as Fraud. Respondent No.1, Canara Bank appears to have approved the OTS proposal subject to its approval by other members of the consortium especially the Lead member of the Consortium i.e. PNB. In nutshell it appears to be an admitted situation that the OTS proposal of the appellant was never approved, at any point of time, by all members of consortium of banks and the approval of the R....
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....f it a fresh agreement of working capital was executed on 01.03.2017 between CD and consortium of banks, demand notice under Section 13(2) of SARFAESI Act, 2002 was also issued on 20.06.2017, possession notice was issued by PNB on 08.12.2017 and 11.12.2017 and various OTS proposal in writing were moved by the appellant ranging from 06.12.2019 till 06.05.2023, which amounts to acknowledgment of debt under Section 18 of the Indian Limitation Act and continuous acknowledgment of the debt by the appellant by moving various OTS proposals, has extended the limitation as provided under Section 18 of the Indian Limitation Act and the application appears to have been filed under the extended limitation, therefore only because the other members of the consortium have not joined the Respondent No.1 in the petition, the petition moved by one of the member of the consortium, Respondent No.1, may not be rejected only on this score, if the same is fulfilling all other conditions required for initiation of CIRP against the Corporate Debtor. The part IV of the Form 1 submitted by the Respondent No. 1 clearly show the debt and also the dates of default and we do not find any infirmity therein. The c....
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....articulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it ma....
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.... occurred, it has to admit the application unless it is incomplete. Speaking through Rohinton F. Nariman, J., the Court has observed: (SCC pp. 438-39, paras 28 & 30) '28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the applicat....
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....hese consent terms did not cover all the original petitioners who were before the adjudicating authority. The adjudicating authority was apprised of the fact that the claims of 140 investors had been fully settled by the respondent. The respondent also noted that of the claims of the original petitioners who have moved the adjudicating authority, only 13 have been settled while, according to it '40 are in the process of settlement and 39 are pending settlements'. Eventually, the adjudicating authority did not entertain the petition on the ground that the procedure under IBC is summary, and it cannot manage or decide upon each and every claim of the individual homebuyers. The adjudicating authority also held that since the process of settlement was progressing "in all seriousness", instead of examining all the individual claims, it would dispose of the petition by directing the respondent to settle all the remaining claims "seriously" within a definite time-frame. The petition was accordingly disposed of by directing the respondent to settle the remaining claims no later than within three months, and that if any of the remaining original petitioners were aggrieved by the settlement ....
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....t is an admitted fact, the NARCL, who was assigned the entire debt by all the Consortium Members, including the Indian Bank, having not accepted the settlement proposal submitted by the Appellant, it was decided that in these circumstances the resolution of the CD has to take place in accordance with the IBC. 62. In 'Amitabh Kumar Jha vs. Bank of India & Anr.' [Company Appeal (AT)(INS) No. 1392 of 2019], a coordinate bench of this appellate tribunal, while considering the identical issue held as under: - "6. Per contra, it is submitted on behalf of the 'Financial Creditor'- 'Bank of India' that the 'I&B Code' empowers a single 'Financial Creditor' to initiate 'Corporate Insolvency Resolution Process', for which consent of other 'Financial Creditors' is not required. It is submitted that since the factum of debt and default has not been disputed, the independent right of 'Bank of India' as individual lender to enforce its rights and seek triggering of 'Corporate Insolvency Resolution Process' is not affected by the terms of CLA. 9. ...It would be a travesty of justice to raise a plea that since the creditors has an inter se agreement in regard to enforcement of ....
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...., then, the 'Application', is 'maintainable'. 85. It is to be remembered that a reason for inability of 'Corporate Debtor', to pay its 'Debt', is not required to be looked into, by an 'Adjudicating Authority'. To put it succinctly, the circumstances, under which, a 'Corporate Debtor', could not 'repay', the 'Financial Debt', need not be taken as a 'defence', in a 'Proceeding(s)', under the 'Code'. 86. That apart, a mere 'Dispute', about the 'Quantum of Payment', does not affect the 'Right' of a 'Financial Creditor'. Moreover, an 'Adjudicating Authority'/'Tribunal', is not a 'Civil Court', to determine the 'Violation of Contract', between the 'Parties', in the considered opinion of this 'Tribunal'. 121. It is to be remembered that the Corporate Debtor, cannot seek an 'umbrage', under the 'Inter Creditor Agreement', with a view to avoid, evade, circumvent and supplant its obligation(s), in terms of the 'Loan Facility Agreement'. Continuing further, the I & B Code, 2016 (vide Section 238 of the I & B Code, 2016), will have an 'overriding effect', in regard to anything inconsistent therewith contained in any other 'Law', for the time being in force. ....
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.... get one-time settlement in its/his favour. Who would not like to get his liability reduced and pay lesser amount than the amount he/she is liable to pay under the loan account? In the present case, it is noted that the original writ petitioner and her husband are making the payments regularly in two other loan accounts and those accounts are regularised. Meaning thereby, they have the capacity to make the payment even with respect to the present loan account and despite the said fact, not a single amount/installment has been paid in the present loan account for which original petitioner is praying for the benefit under the OTS Scheme." Thus it is clear from the above placed legal precedents that the statutory right of a Financial Creditor bestowed under Section 7 of the 'IBC' cannot be curtailed or made subservient to any 'Inter-Creditor Agreement' or Consortium agreement executed between the lender banks, as the same was only for regulating the inter se affairs of the consortium and the OTS proposal cannot be claimed by a borrower as a matter of right. Thus the 'Petition/Application moved under Section 7 of the IBC, 2016 must be decided within the purview of Section 7 of the C....