TaxTMI 
TaxTMI 
2026 (3) TMI 417
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.... Petition (IB) No. 973/MB/2020. Bank of India, who is the Financial Creditor of the Corporate Debtor, is the Respondent No.1 herein. Frost International Ltd., who is the Corporate Debtor, is Respondent No. 2, herein, represented by Mr. Amit Chandrakant Shah, Resolution Professional of the Corporate Debtor. 2. The Appellant submitted that Corporate Debtor is a company incorporated in the year 1995 and has been engaged in the business of trading commodities for more than two decades. Its primary activity is Merchanting Trade. It is a government-certified 3-star rated Export and Trading House dealing in a wide range of commodities including agricultural products, electronic and computer items, minerals and metals. The Appellant further submitted that the Merchanting Trade operations of the Corporate Debtor were regularly scrutinised and audited by the consortium of 14 banks - Bank of India, Punjab National Bank, Allahabad Bank, Indian Overseas Bank, Bank of Baroda, UCO Bank, Central Bank of India, United Bank of India, Oriental Bank of Commerce, Canara Bank, BOB (erstwhile Vijaya Bank), Syndicate Bank, Andhra Bank and Union Bank of India - as well as by the Reserve Bank of In....
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....en mid-March and early April 2018, the banks suddenly stopped extending fresh LCs, which were essential for the continuous trade cycle by the Corporate Debtor. The Appellant conceded that this was the first time the accounts went into stress. The Appellant stated that on 03.04.2018, a high-level meeting of top management of all lender banks was held, where it was resolved that normal operations would be allowed up to sanctioned limits and that a forensic audit would be conducted from FY 2012-13 onwards. The Appellant alleged that the decision of the Banks to allow normal operations of the Corporate Debtor was never implemented by the Banks. 8. The Appellant submitted that on 30.06.2018, the Respondent No. 1 declared the account of the Corporate Debtor as NPA. The Appellant pleaded that the Corporate Debtor, as directed by the banks, submitted a resolution plan on 09.07.2018, providing clear timelines of the irregularities to be cleared by December 2018 and overall exposure to be reduced thereafter. The Appellant submitted that on 17.07.2018, the consortium rejected the plan on frivolous grounds and called for a revised plan, and in the same meeting, the banks themselves noted th....
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....ation, the Financial Creditor filed the second Section 7 petition being CP(IB) No. 973/MB/2020 claiming default of Rs. 872,58,08,402/-. The Corporate Debtor filed IA No. 2001/2022 under Section 60(5) of the Code raising preliminary objections of maintainability, res judicata and violation of RBI guidelines dated 07.06.2019, default caused by banks' arbitrary conduct, violation of fair play and that actions under the quashed 2018 circular were void, however the Adjudicating Authority rejected the submission of the Appellant in the Impugned Order. 14. The Corporate Debtor held 20% participating interest in Oil Block in the Cambay Basin under the Product Sharing Contract with the Government of India. Commercial production was expected to commence in FY 2022-23 and was to generate substantial cash flows sufficient to clear all dues. The Appellant pleaded that initiation of CIRP results in automatic termination of the Product Sharing Contract under Article 30.3, wiping out the value of this prime asset. 15. The Appellant submitted that the impugned order dated 09.02.2023, is a non-speaking order as it merely states that default above threshold is established and does not deal with....
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....rate Debtor, not to liquidate a healthy entity. 21. Concluding its arguments, the Appellate requested this Appellate Tribunal to set aside the Impugned Order and allow this appeal and to restore its pre-CIRP status forthwith. 22. Per contra, the Respondent No. 1 and the Respondent No. 2, denied all averments made by the Appellants as misleading and baseless. 23. The Respondent No. 1 contended that the Corporate Debtor had availed credit facilities under sanction letters dated 25.08.2015, 09.03.2016, 07.12.2016 and 05.09.2017. The sanctioned facilities aggregated to Rs. 756.75 crores, comprising Cash Credit Rs. 0.75 crore, EPC/FBP Rs. 30.00 crores (total fund- based Rs. 30.75 crores), LC Rs. 700.00 crores, LOC for Buyers Credit Rs. 150.00 crores, ILC Rs. 30.00 crores, Bank Guarantee Rs. 50.00 crores and credit equivalent exposure Rs. 26.00 crores. The Corporate Debtor executed all loan and security documents including the Supplemental Working Capital Consortium Agreement dated 26.11.2015, undertakings, omnibus counter guarantees, omnibus indemnity, board resolution dated 26.11.2015, memoranda of entry creating mortgage and charge on pari passu basis dated 26.11.2015, 14.12.....
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....ght out that the writ petition challenging the forensic report was dismissed by the Hon'ble Delhi High Court on 26.07.2019. The Letters Patent Appeal No. 564 of 2019 is pending before the Hon'ble High Court of Delhi without any stay and pendency of the Letters Patent Appeal is irrelevant for the present proceedings. 28. The Respondent No. 1 submitted that the judgment in Vidarbha Industries (Supra) is not applicable to the facts of this case as the Corporate Debtor is not viable at all. The Corporate Debtor failed to take any steps to recover its own trade receivables and continued to carry on business in a manner detrimental to the interest of the Corporate Debtor and its stakeholders, thereby necessitating the initiation of CIRP. 29. The Respondent No. 1 contended that the documents relied upon are fully admissible. The issue of stamping cannot be raised in the summary proceedings under the Code. The Corporate Debtor itself has admitted the debt and default and has offered settlement proposals, which were rejected as not viable and on the lower side. 30. The Respondent No. 1 submitted that the CIRP is at an advanced stage. The Resolution Plan has already been approved by....
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....ution Plans during 40th meeting of the CoC held on June 3, 2025. Thus, the Appellant was given an equal opportunity, at par with other Prospective Resolution Applicants. This fact was also acknowledged by Mr. Sujay U. Desai in the 46th CoC meeting held on November 6, 2025. The Respondent No.2 clarified that the minutes of the 46th meeting of the CoC clearly record and reaffirm that the Resolution Plan of Greensward Enterprise Private Limited stands approved by the CoC, while all other resolution plans as well as the Section 12A proposal submitted by the expromoter were not approved. The CoC further resolved to proceed with issuance of the Letter of Intent to the Successful Resolution Applicant and filing of the application before the Adjudicating Authority, Mumbai for approval of the Resolution Plan. 35. The Respondent No. 2 submitted that the Resolution Plan, having been found compliant with Section 30(2) of the Code, was duly placed before the CoC and has been approved by the CoC with the requisite majority in exercise of its commercial wisdom under Section 30(4) of the Code and pursuant to the approval of Resolution Plan by the CoC, the Respondent No. 2 has filed an Interlocu....
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....ntertaining belated challenges by ex-promoters would defeat the very object of the Code, which mandates timely resolution and certainty in insolvency proceedings. The Respondent No.2 submitted that permitting such challenges at this stage would open floodgates for disgruntled promoters to endlessly litigate and delay resolution, thereby eroding creditor confidence and frustrating the value maximisation objective of the Code. 39. Concluding his arguments, the Respondent No. 2 requested this Appellate Tribunal to dismiss the appeal. Findings 40. After recording all the rival contentions of all the parties, we shall now deal the issues raised by the Appellant in the present appeal before us. 41. We note that one Section 7 application was filed under Section 7 of the code by the Respondent No. 1/ Bank of India Limited, seeking to initiate CIRP against Frost International Limited ('the Corporate Debtor'). The present petition was filed on 25.03.2022 on the ground that a loan for a sum of Rs. 756.75/- Crore was advanced by the Financial Creditors i.e. along with interest of Rs.238,39,26,438.43/- are payable by the Corporate Debtor and the Corporate Debtor has defaulted in rep....
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....n 7 application against Vidarbha Industries Power Ltd. for financial default; however, Vidarbha contended that a substantial sum had been awarded in its favour by the Appellate Tribunal for Electricity, which, if realized, would enable it to clear the dues. The Supreme Court interpreted the word "may" in Section 7(5)(a) as conferring discretionary power on the NCLT, unlike the mandatory language used in Section 9 for operational creditors, and held that the financial health and overall circumstances of the corporate debtor can be considered before admitting insolvency proceedings. Accordingly, the Court set aside the NCLAT's order and remanded the matter, emphasizing that insolvency should not be triggered mechanically when viable grounds exist to justify non- admission. 45. In this connection, we asked the Appellant to substantiate the arguments as to how the ratio of Vidarbha (Supra) is applicable w.r.t. the financial position of the Corporate Debtor. The Appellant submitted that the Corporate Debtor had huge turnover between 2010-2018 of approximately 92, 000 Crores and paid taxes of Rs. 360 Crores. The Appellant submitted that as on 31.08.2018, the Corporate Debtor had trade....
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....esent along with Appellant and in the same meeting IOB advised that they had sanctioned FLC limit of Rs. 1500 Crores and the present devolvement amount was Rs. 439 Crores. The Appellant also referred to Para 12 of the said meeting dated 17.07.2018 where the UCO Bank raised issues that some banks has adjusted amount received during the stress period and not allowed to open fresh LC's of the Corporate Debtor. The Appellant tried to develop this as case where other banks were willing to support the Corporate Debtor to revive the Corporate Debtor whereas the Respondent No. 1 along with the few selected banks were bent upon to take the Corporate Debtor into CIRP and later into liquidation. 48. In this background, we take into consideration the relevant portion of the minutes of the consortium meeting of banks dated 17.07.2018 which reads as under: - 49. From above, we note that Para 12, in fact, was adjustment issue of the proceeds from the Corporate Debtor, inter-se among the banks as lenders, rather than any alleged support to the Corporate Debtor. We further note from para 7 of the said minute that the Resolution Plan submitted by the Corporate Debtor dated 09.07.2018 was in....
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.... legal proceedings for insolvency or recovery against the Corporate Debtor. Thus, we are of the view that it is a commercial decision of the banks like the Respondent No. 1 and no one else including the Adjudicating Authority or even this Appellant Tribunal, can look into the reason for acceptance or rejections of the Resolution Plan by the lender's banks in terms of RBI Circular dated 07.06.2019. 51. We find that debt and default was crystallised and remain undisputed. The Appellant has also not denied the debt and default, therefore, the Adjudicating Authority was required to admit the same in terms of the schemes of the Code as well as judicial pronouncement by the Hon'ble Supreme Court of India especially in view of Innoventive (Supra). 52. As regard, the plea of the Appellant regarding res judicata since, first application filed by the Respondent No. 1 was rejected by the Adjudicating Authority, we note that the first Section 7 application filed by the Respondent No. 1 was rejected by the Adjudicating Authority since the RBI Circular dated 12.02.2018 was declared as ultra-vires in the case of Dharani Sugar (Supra) and not on merit of the case. 53. We note that the ....
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.... thus the Order dated 09.02.2023, is as per the Code and the initiation of CIRP against the Corporate Debtor was rightly commenced. The Respondent No.1 and No.2 brought to our notice that the CIRP process of the Corporate Debtor is at advanced stage the Resolution Plan for the Corporate Debtor has been approved by requisite majority vote of CoC and the Interlocutory Application No.135 of 2025, is pending for Resolution Plan approval from the Adjudicating Authority. We do not find any reason to interfere in this process at this stage. 58. We note that the Corporate Debtor has pleaded that the present CIRP is in violation of the RBI circular dated 07.06.2019 as no opportunity was given to the Corporate Debtor to submit a resolution plan or restructure its debt under an inter creditor arrangement. The Corporate Debtor submits that the Corporate Debtor on 09.07.2018, had submitted a resolution plan which was rejected by the Respondent No. 1 arbitrary grounds. Further the Corporate Debtor had submitted a revised resolution plan which was also rejected by the Respondent No. 1 without any consideration. The Corporate Debtor once again proposed OTS on 07.09.2018 which was also not rejec....
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....bha Industries Power Ltd. v. Axis Bank Ltd, it is contended that the Section 7 application ought not to have been admitted. ..... 21. The Respondents also submit that the Appellant's emphasis on the Corporate Debtor's alleged viability is legally misplaced at the admission stage under Section 7, IBC. They contend that the Adjudicating Authority's role at that stage is limited to examining whether a financial debt exists and whether a default has occurred, and once those requirements are met, the Adjudicating Authority has scarcely any discretion to refuse admission. Proceedings under Section 7 cannot be expanded into a broad inquiry on business viability, equities, or surrounding circumstances. Reliance is placed on Innoventive Industries Ltd. v. ICICI Bank and M. Suresh Kumar Reddy v. Canara Bank ..... 23. Analysing the submissions of the parties, it appears the Appellant has assailed the admission of Section 7 application on the following issues: i. Whether date of default fell between 25.03.2020 to 24.03.2021, and was thereby barred under Section 10A, IBC? ii. Whether common loan agreement had been novated by 1st ....
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.... feasibility of initiation of CIRP, against an electricity generating company operated under statutory control, the impact of MERC's appeal, pending in this Court, order of Aptel referred to above and the overall financial health and viability of the corporate debtor under its existing management. ........................................................................... 90. We are clearly of the view that the adjudicating authority (NCLT) as also the Appellate Tribunal (NCLAT) fell in error in holding that once it was found that a debt existed and a corporate debtor was in default in payment of the debt there would be no option to the adjudicating authority (NCLT) but to admit the petition under Section 7 IBC." 36. However, in review, this Court clarified that observations made in Paragraph 90 are restricted to the facts of Vidarbha (supra): - "6. The elucidation in para 90 and other paragraphs [of the judgment under review] were made in the context of the case at hand. It is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial utterances and/or pronouncements are in the setting of ....
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....t International Ltd. Purpose of Meeting: As per Agenda attached Date / Time: 17.07.2018/12.30 PM Venue: Hotel Ramada, Lucknow Bankers Present: Names Designation/ Organization Contact numbers Mr. Khursheed Anwar DGM, BOI, NBG, Lucknow 7043453185 Mr. R. Algarsamy DGM, BOI, NBG, Lucknow 9443674440 Mr. Prashant Kumar Singh Zonal Manager, BOI, Kanpur 9838202081 Mr. Rajeev Lai AGM, BOI, NBG, Lucknow 9599698323 Mr. A.R. Satpute AGM, BOI, Kanpur 8600434590 Mr. K.B.Shrivas Chief Manager, BOI, Kanpur 9454792876 Mr. ShankarnandJha AGM, IOB, Kanpur 9810575492 Mr Sanjay Kumar Mandal AGM, Union Bank of India 8779047275 Ms ShaliniMenon AGM, Union Bank of India 9820109395 Mr Selvaraj S AGM, Bank of Baroda 7045616944 Mr. Mithilesh Kumar AGM, Bank of Baroda 022-66985641 Mr. S.K.Das CM, Bank of Baroda Mr. Rajesh Mehra AGM. Central Bank of India 7985833247 Mr. Sanjeet Kumar CM, Canara Bank 9987554499 Mr. S.K.Garg AGM, Punjab National Bank 8130694737 Mr. Bobby Tanwar AGM, Oriental Bank of Commerce 9599919122 Mr. UmakantPadhi CM, Vijaya Bank 7842268238 Mr. Kapil Bishnoi CM, UCO Bank 8437029206 Mr. A.K.Kaul AGM, Allahabad Bank, Kanpur....
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....e accounts at member Bank: Lead Bank urged member banks to share the latest updated position in respect of account in the format provided by lead bank. It has been advised that there are LC devolvement with all member Banks. Bank of India. Allahabad Bank, Indian Overseas Bank, Oriental Bank of Commerce, UCO Bank, Union Bank of India and Vijay Bank has classified the account as NPA as on 30.06.2018. 7) Status of Devolvement of LCs, regularization of devolvement of LC, Resolution Plan: Lead Bank advised that Company has submitted resolution plan vide their letter dated 09.07.2018 and same was shared with member banks. Detail deliberation was undertaken on the resolution plan submitted by the Company. The members banks come to the conclusion that: Document 3 1. The resolution plan is not prepared as por RBI guidelines is Specified time is not mentioned. iii. Company has to bring 20% of devolvement amount upfront. iv. The Company has stated in resolution plan that as some banks has not open the LCs/not allowed them to utilize unutilized LCa resulted in disruption of trade cycle and hence LCs started devolving. This views was opposed/objected by the member Banks Compa....
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....5%) 00 Energy Ltd ( 90 & 80%) Globiz Exim 128 (87.50 96) 10.27 150 (90%) 7.00 278.0 0 17.27 Pvt Ltd Olympic Oil Industries Ltd 235 (87.50 1 7.76 250 (85%) 38.80 485.0 0 46.56 Viva Merchant Pvt Ltd 10.14 3.50 13.64 Total 169.40 69.30 4.43 243.13 225.0 O Viva Merchant 8) Progress of forensic Audit: Lead Bank advised that Forensic Audit is in advance stage and expect that interim report to be received by July end. The company has been requested to submit the pending data, information, documents immediately to the forensic auditors for finalization of forensic audit report. . Document 4 9) Investment in Mohan Steel Pvt. Ltd .: The Company advised that they are filing application in NCLT against the Mohan Steel Pvt. Ltd. within a week. Lead bank advised that Company has submitted their letter dated 25.06.2018 (received on 30 06 2018) in response to the letter issued by lead bank to the company . The company's reply was shared to the member banks. IOB advised that the Directors of FILs were authorized signatory in the account of Mohan Steels Pvt. Ltd. and were handing all operations of the Mohan Steel Pvt. Ltd. Member banks asked IOB ....