Rajender Kumar Pahwa (Suspended ... vs Canara Bank

[Arising out of the Order dated 18.10.2024, passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi, Court-IV), in CP (IB) No. 595(ND)/2023 & IA 1285(ND)/2024]

IN THE MATTER OF: 1. RAJENDER KUMAR PAHWA (SUSPENDED DIRECTOR OF GOODLUCK CARBON PRIVATE LIMITED) RESIDENCE AT: FARM HOUSE No. 53/20, SILVER OAK LANE, JONAPUR, NEW DELHI - 110047 ...Appellant Versus

1. CANARA BANK HAVING HEAD OFFICE AT: 112, J.C. ROAD, BENGALURU KARNATAKA-560002 THROUGH STRESSED ASSETS MANAGEMENT (SAM) BRANCH: C-34, 3rd FLOOR, DDA OFFICE-CUM- SHOPPING COMPLEX, OPPOSITE MOOLCHAND HOSPITAL DEFENCE COLONY, NEW DELHI -110024 EMAIL-cb19208@canarabank.com ...Respondent No. 1 2. ASHOK KUMAR GULLA INTERIM RESOLUTION PROFESSIONAL FOR GOODLUCK CARBON PRIVATE LIMITED HAVING OFFICE AT: FLAT NO. 23, IAPL HOUSE, 2nd FLOOR SOUTH PATEL NAGAR, NEW DELHI - ...Respondent No. 2 110008 EMAIL- ashok.gulla@rsba.in 3. PUNJAB NATIONAL BANK HAVING HEAD OFFICE AT: PLOT NO. 4, 205 DELHI RD, SECTOR 10 DWARKA, NEW DELHI, DELHI, 110075 THROUGH: ZONAL SASTRA CENTRE, PLOT NO. 5 3rd FLOOR, FEROZPUR ROAD LUDHIANA, PUNJAB-141001 EMAIL- zs8352@pnb.co.in ...Respondent No. 3 Present: For Appellant : Mr. Gaurav Mitra, Ms. Lavanya Pathak, Ms. Ankita Bajpai, Ms. Vatsala Kak & Mr. Sagar Thakkar, Advocates. For Respondent : Mr. Abhishek Naik, Ms. Gulafsha Kureshi, Ms. Katyayani, Ms. Deepsikha Mishra, Mr. Falak Zaidi & Mr. Mojahid Karim Khan, for R-1. Mr. Santosh Kumar Root & Ms. Dharna Veragi, for R-3/ PNB.

JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been filed by Shri Rajender Kumar Pahwa

Suspended Director of the Corporate Debtor (CD) Good Luck 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 2 of38 Carbon Pvt Ltd. The Company is having its unit located at Village Jitwal

Kalan, Tehsil Malerkotla, District Sangrur, Punjab-148019, and is engaged

in the business of manufacturing all grade of furnace blacks, soft black and

hard black grades for the purpose of strengthening and reinforcing rubber

products, adding opacity to plastics and balancing colour formulations.

4. It is also stated in the Memo of Appeal that in the usual course of

business the CD sought credit facilities from various banks individually

under Consortium of lending between the year 2011 to 2013. The company

diligently met its repayment obligations to the concerned banks, against the

loan facilities sanctioned by the Lenders to the company.

5. In the year 2014, the Corporate Debtor, with the objective of

expansion of its business availed a project loan of Rs. 57.74 crores which

was sanctioned by a consortium of banks comprising of the Punjab National

Bank as the Lead Bank, Bank of Baroda, Canara Bank (Respondent No.1),

Vijaya Bank, vide consortium agreement dated 10.03.2014 by providing

adequate security.

6. It is further stated that the entire District of Sangrur, where the unit

of the corporate debtor was located, was placed in Red category with respect

to the extracting of ground water by the Central Pollution Control Board

(CPCB), the Punjab Pollution Control Board (PPCB) and they declined

consent to the CD to operate its co-generation plant whereas all the other

necessary permissions were obtained from respective authorities and despite

efforts made by the CD, due to the disapproval of statutory permissions

required for running the plant, the project of the CD could not be completed

Company Appeal (AT) (Insolvency) No. 1980 of 2024 3 of38 by July 2015. In addition to this the demand of carbon black reduced by

50%-60% resulted in further financial stress and there was erosion of

working capital funds, forcing the CD to operate the plant at a very low

capacity. Due to this the CD was unable to meet its payment obligations to

the lender banks and the account of the corporate debtor was categorised as

'under stress account' category and subsequently the lenders of the

corporate debtor formed a Joint Lender Forum ('JLF') as per the RBI

guidelines.

7. It is further stated that an agreement dated 10th August 2015 was

executed comprising of the Punjab National Bank as the lead bank, Canara

Bank /Respondent No. 1., Vijaya Bank (now amalgamated into Bank of

Baroda), Oriental Bank of Commerce, UCO Bank, Punjab and Sind Bank

and Bank of Baroda ('Consortium of Banks') and 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 4 of38 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, the

Corporate Debtor made a trial run of its plant with enhanced capacity for

manufacturing of the Carbon Black, however, on account of shortage of

working capital funds, the company failed to start the commercial

production.

8. It is further stated that the Punjab National Bank and the Canara

Bank approved the extension of the commercial operation date of the project

by one year and sanctioned its fresh term loan, the other member of the

consortium failed to follow. The delay in approval of the extension of the

COD and in sanction of term loan and also in disbursal of sanctioned credit

limits by the members of the consortium and due to various other

contributing factors, the Corporate Debtor came under tremendous

pressure, and in addition, the unit of the CD was sealed in October 2016 by

the Punjab Pollution Control Board, which could only be unsealed in

February 2017, but the plant could not operate at its full capacity.

9. The JLF in its meeting dated 25.05.2017, decided to initiate the

proceedings under Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) and a

demand notice was issued on 20th June 2017 under section 13(2) of the

SARFAESI Act, 2002. It is also stated that the JLF never tried to implement

its decision to resolve the stress of the corporate debtors account to preserve

its economic value. The request for extension of COD of the corporate debtor

Company Appeal (AT) (Insolvency) No. 1980 of 2024 5 of38 was not acceded to by the consortium of banks and disbursal of working

capital limits was also blocked however, the JLF sought for a revival plan

from the CD for restructuring the various facilities with detailed

restructuring scheme for revival of the unit.

10. It is further stated that the CD submitted its restructuring proposal in

the month of December 2017 and resubmitted the same in April 2018 on

the observations made by the members of the consortium. The lead bank of

the consortium has also submitted its report dated 15.06.2018 concluding

that the unit is technically feasible and financially viable. However, the said

restructuring proposal was not considered for the reasons best known to the

lenders, including the Respondent No.1 bank and thereafter an OTS offer

dated 06.12.2019 was also given to the lead bank of the consortium vide

email dated 07.12.2019. The CD at the JLF meeting held on 11.12.2019

informed the lenders 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 6 of38 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 offer of Rs. 39.50 Crore was provided by the CD and in its meeting held

on 25.05.2023 the OTS proposal of the CD was decided to be forwarded to

the competent authorities for their approval and decision. On 08.06.2023, it

was informed to the consortium that the company has arranged to deposit

5% OTS amount of Rs. 39.50 Crores i.e. Rs. 1,97,50,000/- from a

financer/investor and is ready to deposit the same in an escrow account to

be set up with Punjab National Bank. The PNB vide letter dated 13.06.2023

shared the escrow bank account details and the CD on 08.08.2023

deposited Rs. 1,97,50,000/- in this escrow account.

12. It is further stated that while the OTS proposal was pending before

the consortium of banks the Respondent No.1 preferred an Application

under Section 7 of the IBC alleging default of Rs. 90,43,74,091.45/- as on

31st August 2023, inclusive of interest, showing 30th September 2015 as

the date of default and also the alleged date of NPA. Appellant, has filed its

reply informing in detail the communications held with the consortium of

banks with regard to the OTS submitted by the Appellant and also wrote

various emails to the consortium of banks to show its bonafide and also

proposed to settle the Car loan account by paying the entire due amount of

Rs. 59.98/- lakhs but no fruitful result was achieved.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 7 of38

13. It is also stated that the Respondent No.1 vide letter dated 28.03.2024

was pleased to approve the OTS proposal of the CD for the car loan account

for an amount of Rs. 60 lakhs and the CD has duly made payment of the

said amount. It is further stated that the petitioner bank deliberately failed

to disclose the details of the OTS proposals before the Ld. Adjudicating

Authority and also did not inform that the Petitioner (Respondent No.1) has

also sanctioned the OTS proposal given by the CD subject to the condition

that the OTS proposal is also sanctioned by all other member banks of

consortium. It is further stated that no other bank has rejected the OTS

proposal given by the Respondent No.1/petitioner and the same is under

consideration of all other lender banks before their respective head office(s).

It is in this background Appellant claimed that the impugned order is liable

to be set aside as the same has been passed in utter disregard to the factual

matrix and while the OTS proposal floated by the appellant was under active

consideration of 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 8 of38 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 appellant are false, concocted and could not be believed and the same

have been levelled by the appellant in order to shield his inability and to

over shadow mishandling of the affairs of the CD resulting in its financial

breakdown.

17. It if further stated that the account of the CD and its Director

including of the appellant was declared as fraud vide notice dated

23.08.2024, however, the said notice was later on quashed by the Hon'ble

High Court of Delhi with the liberty to the Respondent to initiate fresh

action.

18. It is also stated that the OTS submitted by the CD which was pending

with the lead Bank of the consortium i.e. Punjab National Bank was in

principle was conditionally approved by the Respondent however, the said

OTS has now been withdrawn/cancelled by the Respondent, in view of the

appellant's inability to convince the Punjab National Bank to accept its OTS,

which was a pre-condition set out by the answering Respondent for

approving the OTS submitted by the appellant and this

cancellation/rejection of OTS has been duly conveyed to the lead bank vide

email dated 17.03.2025 as well as to the appellant on 19.03.2025.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 9 of38

19. It is also stated that the CD for the first time informed Adjudicating

Authority about the settlement talks on 02.02.2024 and had taken

adjournment multiple times and the impugned order could only have passed

on 18.10.2025 and neither during the course of pendency of the CIRP

application nor during the pendency of the instant appeal. The appellant

has taken the approval of the other members of the consortium.

20. It is also submitted that there is no statutory bar for initiation of

insolvency proceedings against the CD while an OTS is under consideration.

In this regard, the law laid down by this Appellate Tribunal in Ram Bhaj

Jain vs. Tarun Batra, Resolution Professional Vardhman Rice Mills

Pvt. Ltd & Anr. [Company Appeal (AT)(INS) No. 1011/2022], has been

relied.

21. It is also stated that in view of Section 12 A of the IBC and Regulation

30A, IBBI (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016, if the OTS of the appellant is approved by the all the

members of the consortium the recourse may be taken under these

provisions, as the CD is MSME he can also submit a resolution plan. It is

also stated that disbursal of loan and its default has not been denied and

hyper technical grounds have been 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 10 of38 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, thereafter a working capital consortium agreement was executed

between the CD and the consortium of Banks on 01.03.2017 renewing the

credit facilities to the CD and by this event the period of limitation was

further extended for three years i.e. till 01.03.2020 and this agreement was

also executed within three years from the date of declaration of account of

the appellant as NPA.

25. The CD failed to abide by the terms of repayment and sought

restructure of the loans by submitting several OTS proposals dated

06.12.2019, 28.01.2020, 26.02.2021, 18.03.2021, 15.05.2021, 17.03.2021,

07.12.2022, 24.01.2023 and 06.05.2023 whereby it has also acknowledged

the debt in writing whereby also the period of limitation has extended again

for three years from 06.05.2023 and the application under Section 7 of the

Company Appeal (AT) (Insolvency) No. 1980 of 2024 11 of38 IBC has been filed within limitation and the appeal of the appellant be

dismissed.

26. Ld. Counsel for the appellant while drawing our attention towards the

short note submitted by him submits that the appellant has made all efforts

to settle the dispute by submitting and OTS offer of Rs. 39.50 Crore to the

consortium of lenders including the Respondent No. 1 for the settlement of

the outstanding dues, as earlier OTS submitted by the CD were rejected by

the lead Bank of the consortium. It is further submitted that the OTS

submitted by the CD was discussed in the joint lenders meetings of the

consortium banks and all the members of the consortium decided to forward

the OTS proposal to their respective higher authorities for their approval and

decision on the same was yet to be taken in the next scheduled meetings of

the JLM but without waiting for the decision of the higher authorities the

Respondent NO. 1 has filed the insolvency petition.

27. It is further submitted that the dates of default which has been shown

by the bank in its application moved under Section 7 of the IBC are not

correct and no default has occurred on these dates, however this important

fact has been ignored by the Ld. Adjudicating Authority. The attention of

this Appellate Tribunal is drawn on the Affidavit dated 1st February 2025

filed by the Respondent No. 3/PNB, wherein the OTS Proposal of the

Appellant is shown, being considered and vide email dated 17.03.2025 the

Respondent No. 1/Canara Bank has now informed that the OTS has been

cancelled on account of purported inordinate delay in approval of OTS by

other lender banks.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 12 of38

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 after

deposition of this amount the Respondent No. 1 has taken a U turn from its

own stand taken on 22.05.2024 and 25.09.2024. It was also highlighted

that about 80% of the members of the consortium are still considering the

OTS proposal and therefore there was no urgency before the Respondent No.

3 to have initiated the CIRP.

30. It is also submitted that to show its bonafide the CD has made a

proposal to deposit 5% of the OTS amount of Rs. 39.50 Crores i.e. Rs. 1,97,5

0,000/- and for this purpose has also sought the details of an escrow

account from the Punjab National Bank and in fact Rs. 1,97,50,000/- was

Company Appeal (AT) (Insolvency) No. 1980 of 2024 13 of38 deposited by the CD in this escrow account in terms of OTS dated

13.06.2023, thus there was no occasion for the Respondent No.1 to have

filed the insolvency petition.

31. It is further submitted that the Adjudicating Authority has committed

a patent illegality in accepting the prayer of the petitioner for initiation of

CIRP against the Appellant as the filing of the petition was not sanctioned by

the other members of the consortium banks or even by the lead bank i.e.

Punjab National Bank. It is also submitted that when the CD was seriously

discussing the timeline for repayment of the outstanding dues and has also

deposited the settled amount of its car loan account and when the

Respondent No. 1 itself has sanctioned the OTS proposal of the CD subject

to the condition that it is sanctioned by all other member banks of

consortium, there was not at all any necessity or urgency to have filed the

petition. It is further submitted that so much so during the pendency of the

appeal the Respondent No. 1 has also cancelled the OTS proposal earlier

approved by it, which shows the utmost high handedness of the Respondent

No. 1.

32. It is also submitted that on the request of the Appellant the meeting of

the JLM was called on 19.05.2025 wherein the appellant was also invited at

the time of discussions on OTS however even then Respondent No. 1/bank

vide its letter informed the CD about the rejection of its OTS proposal. It is

submitted that once the OTS has been approved/sanctioned by the

Respondent No. 1, the same could not be cancelled. Reliance in this regard

has been placed on the law laid down by the Hon'ble High Court of Delhi in

Company Appeal (AT) (Insolvency) No. 1980 of 2024 14 of38 'Ambience Pvt. Ltd. and Another vs. Punjab and Sindh Bank and

Another' reported in 2024 SCC online Delhi 4571.

33. Ld. Counsels 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 on behalf of all

consortium members seeking payment of the amount within 60 days and

when no payment was made by the Corporate Debtor PNB also issued

possession notice dated 8.12.2017 and 11.12.2017 against the secured/

collateral properties.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 15 of38

36. It is also submitted that the Respondent No. 1 had also approached

the Debt Recovery Tribunal for enforcement of the securities however in the

meantime the CD attempted to settle the matter by offering several onetime

settlement proposals to the consortium and the last OTS was offered vide

letter dated 24.05.2023 for a total amount of Rs. 39.50 crores only but the

same was dismissed by the consortium considering that the amount is too

low and could not be accepted.

37. It is further submitted that as on 31.05.2023 the Corporate Debtor

owes financial debt of Rs. 90,43,74,091.45/- inclusive of interest to the

financial creditor however even after repeated demands, the CD failed to

make the repayment of disbursed loan and repeatedly assert that it is not in

a capacity to pay the huge amount and in this background the Application

under Section 7 of the IBC was filed.

38. It is submitted that since the CIRP was initiated on 18.10.2024 a

substantial time has elapsed and during this entire period the appellant has

failed to get the approval of the OTS proposal from the lead bank or any

other member of the consortium despite their repeated attempts. It is

submitted further that the answering Respondent No. 1 has already

withdrawn its earlier in principle approval and there is no clarity or

assurance that the PNB/ Respondent No. 3 or any other lender intends to

approve the proposal.

39. It is also submitted that mere pendency of an OTS proposal does not

create a right in favour of the appellant to indefinitely halt the CIRP

Company Appeal (AT) (Insolvency) No. 1980 of 2024 16 of38 proceedings. Moreover, consideration of an OTS proposal also does not

amount to its approval or sanction.

40. It is also submitted that the Appellant can also avail the liberty to

settle the dues with the consortium of banks, who will constitute the

committee of creditors and being a MSME, he can also file a Resolution Plan

for restructuring of the debt as provided under section 240 A of the IBC.

41. It is further submitted that the Punjab National Bank is the lead

Bank of the consortium and inter se agreement executed amongst the

member banks were only for their internal operational convenience 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,

Company Appeal (AT) (Insolvency) No. 1980 of 2024 17 of38 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 the application has been filed by the bank within the stipulated

time, as the limitation has extended by the acknowledgement of debt by the

appellant in terms of section 18 of the Limitation Act, Reliance in this regard

has been placed on 'Tejas Khandhar vs Bank of Baroda', CA (AT) (Ins) No.

371 of 2020 .

43. It is submitted with considerable force that to initiate CIRP, only the

existence of a legally payable debt and default is required to be proved by a

financial creditor, while in this case the debt is admitted to the appellant

and he has also admitted the default and his only defence is that when his

OTS scheme was being considered by the other member's banks of the

consortium the Respondent NO. 1 should not have filed an application

under Section 7 of the IBC. It is submitted that various OTS proposals have

been made by the CD and they were all rejected by the consortium of banks

as the amount proposed was very low and it is only for the purpose of

buying time a new OTS proposal was made by the CD and he never intended

to repay the loan taken by him and thus there was no option remained

available with the Respondent NO. 1 except to initiate the proceedings of

insolvency against the CD. It is submitted that there is no illegality in the

impugned order passed by the Tribunal and thus the Appeal is liable to be

dismissed. Reliance has been placed on the Law laid down by the Hon'ble

Supreme Court in 'Suresh Kumar Reddy versus Canara Bank and

others,' Civil Appeal No. 7121 of 2022.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 18 of38

44. Heard Ld. Counsels for the parties and peruse the record as well as

the written submissions filed by them.

45. At the outset it may be highlighted that present is the case wherein

neither the existence of a legally payable debt nor default in paying the said

debt is disputed. The Appellant in paragraph No. 1 to 7 of the Appeal has

admitted to have taken loan from a consortium of banks including the

Respondent No. 1 Canara Bank and in Paragraph No. 8 of the appeal stated

that the CD was unable to meet its payment obligations to the Lenders

banks and its account was categorised as 'under stress' Account. The

appellant in appeal has given various reasons resulting in low production of

its unit i.e. clearance not given by the concerned authorities and also

placing of the whole district of Sangrur in red category with respect to the

extraction of groundwater by 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.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 19 of38

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 possession notices also appears to have

been issued by the Punjab National Bank. The appellant in meantime has

proposed many OTS offers on various dates ranging from 06.12.2019 till

06.05.2023 and all these OTS proposals were rejected.

48. The case of the Appellant is that as per the Joint Lenders Forum here

in after called (JLF) dated 10.08.2015 it was agreed by the consortium of

banks under the correction action plan CAB that JLF shall explore various

options including restructuring of loan to resolve the stress in the Corporate

Debtors Account and shall also make effort to arrive at an early feasible

solution to preserve the economic value of the underlying assets of the

Corporate Debtor, however according to the appellant these corrective

measures has not been implemented by the consortium of banks. The

Corporate Debtor stated to have submitted its restructuring proposal in

December 2017 which was resubmitted on April 2018 however the shared

restructuring proposal was not considered by the consortium. Another OTS

offer was shared by the appellant wide email on 06.12.2019 which was also

not materialised. Thereafter a rehabilitation and restructuring scheme

stated to have been submitted by the corporate debtor to the consortium of

Company Appeal (AT) (Insolvency) No. 1980 of 2024 20 of38 banks on 27.01.2020, however the consortium of bank is stated to have not

taken any steps towards implementing the proposed plan for restructuring

of the company as proposed by the corporate debtor. Thereafter on

24.01.2023 an OTS offer of Rs. 39,00,00,000 (Thirty-Nine Crores) appears to

have been given by the Corporate Debtor to the consortium of lenders for

settlement of the outstanding dues. The said OTS dated 24th January 2023

is stated to have been discussed in the joint lenders meeting held on 30th

January 2023, where in the appellant was also invited to participate. The

minutes of this meeting has been placed on record and perusal of the same

would reveal that this OTS was discussed in the said meeting and the

decision was taken that any decision on OTS offer would be taken on the

basis of fresh valuation report of mortgaged assets, however the record

doesn't show about the further discussion on this OTS and it appears that

the same was not accepted.

49. The next OTS appears to have submitted by the Appellant on 24th May

2023 for Rs. 39.50 crores, for the settlement of the outstanding dues. Prior

to this as stated by the 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 21 of38 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 OTS proposal submitted by the

appellant to their higher authorities may not amount to acceptance of the

same.

52. The appellants claim is that vide letter dated 8th June 2023 it was

informed to the consortium of lenders that company has arranged deposit of

5% of the OTS amount i.e. Rs 39.50 crores (Rs.1,97,50,000/-) from a

financer/ investor and is ready to deposit the same in an escrow account

and request was made to the PNB to provide the details of this account.

Annexure 5 to the Appeal would reveal that on 13th June 2023 the details of

this account was shared by the Punjab National Bank and this amount is

also claimed to have been deposited.

53. In the meantime the petition under Section 7 of the IBC appears to

have been filed by the Canara Bank on 2nd September 2023 and during the

pendency of this petition a meeting of JLM was convened on 22nd May 2024,

wherein Respondent No.1, Canara Bank informed that their bank has

Company Appeal (AT) (Insolvency) No. 1980 of 2024 22 of38 sanctioned the OTS subject to the condition that OTS is also sanctioned by

all the member banks of the consortium, while the other member banks

informed that their proposal is pending at the level of the Head Office and

they are waiting for the sanction of the same by the lead bank and their

decision on the OTS will depend upon the sanction of OTS by the lead bank

i.e. PNB. To this the lead bank i.e. PNB informed that OTS proposal has

been forwarded to the head office and is under consideration.

54. Another meeting of the JLM appears to have been convened on 25th

September 2024, apparently on the request of Respondent No.1, Canara

Bank and it is stated there in that the account has been reported as fraud

on 19th August 2024 by Canara Bank while the PNB apprised that

competent authority has already declared the account as 'No Fraud' on 24th

April 2024. The representative of UCO bank also informed that the same

account has already been declared as fraud but as per revised guidelines re-

examination has been reinitiated and now they have recommended for 'No

Fraud' to the competent authority and expressed its views about invocation

of personal guarantee. The discussion taken place in the meeting as

recorded in the minutes dated 25th September 2024 will show that the

discussion has taken place with regard to the fact that Canara Bank has

approved the OTS proposal subject to the condition of approval by all the

member banks 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 23 of38 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

Respondent No.1, Canara Bank was also conditional as the same was

dependent on the approval by other members of the consortium specially

the lead bank, Punjab National Bank. It is also to be recalled that there were

some members of the consortium who have declared the account of the

appellant as 'Fraud account' though there was some confusion with regard

to the declaration of this account as fraud account, as in one of the meeting

of the consortium it was informed that decision has already been taken

pertaining to this account as no fraud account. Be that as it may the

proposal floated by the appellant was never approved by the higher

authorities of the other member banks of consortium and was rejected

subsequently by the Respondent No.1 Canara Bank also.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 24 of38

57. We are in agreement with the submissions made by Ld. counsel for

the Respondent No.1 Canara Bank and Respondent No. 3 Punjab National

Bank that in the guise of pending OTS the proceeding of CIRP may not be

kept in abeyance for a long time. The record would reveal that many

proposals of the appellant, made earlier have also been rejected by the

consortium and only one proposal was pending pertaining to which only one

member of the consortium i.e. Respondent No.1 Canara Bank has given its

approval, that too subject to the condition that the other members of the

consortium must also approve the same. Thus the same was conditional.

The other members of the consortium have sent the proposal to their Higher

authorities and till date the said proposal has not been approved by the

head office of any of the member Bank.

58. We are also in agreement with the submissions made by Ld. counsel

for the appellant that the consortium agreement executed between various

members of the consortium is an agreement of ease and convenience and it

is for the internal management of the consortium banks and also that this

inter se agreement entered between the consortium members would not

stand in the way of any application which may be moved by any of the

member of the consortium under Section 7 of the IBC. We are also of the

view that all the members of the consortium have advanced loan to the

corporate debtor and there is also a disbursement by all and there is

existence of a legally payable debt and admittedly there is also a default as

the loan account of the CD was declared as NPA on 30.09.2015 and within

three years of it a fresh agreement of working capital was executed on

01.03.2017 between CD and consortium of banks, demand notice under

Company Appeal (AT) (Insolvency) No. 1980 of 2024 25 of38 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 claim

of the appellant that he had deposited about 20% of the OTS amount is also

of no consequence as the OTS once approved by the Respondent No. 1 was

conditional i.e. subject to the approval of other member of the consortium

and no other member has approved the same, thus pendency of OTS could

not be termed or deemed as its approval. Admittedly the first restructuring

proposal was submitted in 2017, thus the financial creditor cannot wait for

ever to exercise his statutory right only on the score that the OTS proposal

of appellant has been forwarded to the higher authorities of some members

of consortium.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 26 of38

59. We are of the considered view that sufficient rather more than

sufficient time has been granted to the appellant as well as to the other

members of the consortium for the purpose of approval of the OTS proposed

by the appellant and since the various OTS proposals earlier proposed by

the appellant have already been rejected, we do not see any reason as to

why the Adjudicating Authority should have waited for the result of the

consideration of this OTS proposal by the superior authorities of the other

members of the consortium.

60. In 'M. suresh Kumar Reddy vs Canara Bank and others, reported

in (2023)8 SCC 387', Hon'ble Supreme Court, while considering the issue

with regard to the admission of a petition under section 7 of the IBC, has

held as under: -

"9. We have given careful consideration to the submissions. This Court in Innoventive Industries Ltd. v. ICICI Bank [Innoventive Industries Ltd. v. ICICI Bank, has explained the scope of Section 7. Paras 28 to 30 of the said decision read thus: (SCC pp. 438-39) "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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 27 of38 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 may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.

29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing-- i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such

Company Appeal (AT) (Insolvency) No. 1980 of 2024 28 of38 a dispute, the operational creditor gets out of the clutches of the Code.

30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

(emphasis supplied)

10. The view taken in Innoventive Industries has been followed by this Court in E.S. Krishnamurthy. Paras 32 to 34 of the said decision read thus: (E.S. Krishnamurthy case, SCC pp. 177-79) "32. In Innoventive Industries, paras 28 and 30, a Two- Judge Bench of this Court has explained the ambit of Section 7 IBC, and held that the adjudicating authority only has to determine whether a "default" has occurred i.e. whether the "debt" (which may still be disputed) was due and remained unpaid. If the adjudicating authority is of the opinion that a "default" has 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

Company Appeal (AT) (Insolvency) No. 1980 of 2024 29 of38 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 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 may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.

* * *

30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the

Company Appeal (AT) (Insolvency) No. 1980 of 2024 30 of38 debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.'

33. In the present case, the adjudicating authority noted that it had listed the petition for admission on diverse dates and had adjourned it, inter alia, to allow the parties to explore the possibility of a settlement. Evidently, no settlement was arrived at by all the original petitioners who had instituted the proceedings. The adjudicating authority noticed that joint consent terms dated 12-2-2020 had been filed before it. But it is common ground that these 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 process, they would be at liberty to approach the adjudicating authority again in accordance with law. The adjudicating authority's decision was also upheld by the appellate authority, who supported its conclusions.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 31 of38

34. The adjudicating authority has clearly acted outside the terms of its jurisdiction under Section 7(5) IBC. The adjudicating authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the adjudicating authority must then either admit or reject an application, respectively. These are the only two courses of action which are open to the adjudicating authority in accordance with Section 7(5). The adjudicating authority cannot compel a party to the proceedings before it to settle a dispute."

(emphasis in original and supplied)

11. Thus, 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.

"Default" is defined under sub-section (12) of Section 3 IBC which reads thus:

"3. Definitions. --In this Code, unless the context otherwise requires--

* * * (12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;"

Thus, 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 debtor. In such a case, an order of admission under Section 7 IBC must follow.

If 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."

(Emphasis given and also supplied by us)

61. A coordinate Bench of this Appellate Tribunal in 'Apresh Garg vs.

Indian Bank and Ors.', (2025) ibclaw.in 382 NCLAT, decided on 15th May

2025, in similar facts where the loan was given by many banks and a

Company Appeal (AT) (Insolvency) No. 1980 of 2024 32 of38 consortium was formed and a OTS proposal was also pending, which was

rejected subsequently, this Tribunal held that this is a case where the fact

that CD has failed to discharge its debt liability is not even disputed and the

default in payment is also not disputed, it was opined that there are

sufficient materials to indicate that debt and default 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 the liability of the debtor qua the creditor, an individual creditor should not be permitted to enforce its right arising under a contract in regard to discharge of liability for loan advanced by the creditor which is otherwise payable in law and not barred by any legal framework including the law of limitation. What transpires among the creditors in regard to 'Inter-Creditor Agreement' is a matter exclusively inter se the Creditors. The debtor

Company Appeal (AT) (Insolvency) No. 1980 of 2024 33 of38 has no locus to meddle with the internal arrangement and affairs of the creditors in regard to their joint or individual interests...

10. The statutory right across the ambit of Section 7 of the Code cannot be curtailed or made subservient to any 'Inter-Creditor Agreement'. The contractual rights, unless recognized by the statute as a permissible mode, would not override the statutory mechanism and right created and enforceable under statute.

12. In view of the foregoing discussion, we are of the considered opinion that the issue raised in this appeal is devoid of merit. The Financing Documents do not in any manner curtail or limit the rights of the 'Financial Creditor'- 'Bank of India' in its individual capacity to enforce its rights against the 'Corporate Debtor' in regard to the financial debt which is payable in law and in fact and in respect whereof default as alleged is not disputed."

63. Another coordinate bench of this appellate tribunal, while considering

the identical issue in Company Appeal (AT) (CH) (INS.) No. 385 of 2022,

M/s. 'GVK Energy Ltd. and Anr. vs Axis Bank Limited and Anr.', decided

on 24.04.2023 held as under: -

"83. It is to be pointed out that the `Petition / Application', under Section 7 of the I & B Code, 2016, is to be `disposed of', within the purview of `Section 7 of the Code'. In an application under Section 7, the `Petitioner', must be able to establish the `Existence' of a `Debt', which is due from a `Debtor'.

84. Although a `Debt', is disputed, if the amount is more than the `threshold limit', as per Section 4 of the I & B Code, 2016, then the `Petition', under Section 7, per se, is `maintainable'. No wonder, `Section 7 Application/ Petition', is to be considered by an `Adjudicating Authority', on its own merits, taking into consideration the record, even though, the `Debt', is `disputed', and if the amount is more than the `threshold limit', then, the `Application', is `maintainable'.

Company Appeal (AT) (Insolvency) No. 1980 of 2024 34 of38

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.

129. It must be borne in mind that the `Inter Creditor Agreement', is meant to take care of the interest of all the `Lenders', among themselves, coupled with the Corporate Debtor, dehors the fact that the `Corporate Debtor'/`GVK Power (Goindwal Sahib) Ltd.', was not a privy and party to any of the `Clauses' of the said `Agreement'."

64. Hon'ble Supreme Court of India in 'The Bijnor Urban Cooperative

Bank Limited, Bijnor & others vs. Meenal Agarwal & others, CIVIL

APPEAL NO. 7411 OF 2021, decided on 15.12.2021, while considering

the issue as to whether benefit under the OTS Scheme can be prayed as a

matter of right? held as under: -

"9. Even otherwise, as observed hereinabove, no borrower can, as a matter of right, pray for grant of benefit of One Time Settlement Scheme. In a given case, it may happen that a person would borrow a huge 16 amount, for

Company Appeal (AT) (Insolvency) No. 1980 of 2024 35 of38 example Rs. 100 crores. After availing the loan, he may deliberately not pay any amount towards installments, though able to make the payment. He would wait for the OTS Scheme and then pray for grant of benefit under the OTS Scheme under which, always a lesser amount than the amount due and payable under the loan account will have to be paid. This, despite there being all possibility for recovery of the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.

10. If a prayer is entertained on the part of the defaulting unit/person to compel or direct the financial corporation/bank to enter into a one-time settlement on the terms proposed by it/him, then every defaulting unit/person which/who is capable of paying its/his dues as per the terms of the agreement entered into by it/him would like to 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."

Company Appeal (AT) (Insolvency) No. 1980 of 2024 36 of38 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 Code and the same is to be

considered by the Adjudicating Authority, on its own merits, taking into

consideration the facts of the particular case and the Law established, in

this regard. However, there is no much discretion available to the

Adjudicating authority, if all the requirement as mentioned under section 7

of the IBC are satisfied by a Creditor Applicant. It is also to be remembered

that any reason or inability of Corporate Debtor, to pay the Debt, is also not

required to be looked into at this stage by the Adjudicating Authority. The

reliance of the appellant on the law laid down by the Hon'ble Delhi High

Court in Ambience Pvt. Ltd. (Supra) is also of no help to the appellant due to

the difference of factual matrix. In that case the approval/sanction of OTS

was absolute, while in the instant case the approval has been given only by

the Respondent No. 1, that too, subject to the approval of all members of the

consortium and admittedly other members of the consortium have never

approved the OTS proposal of the appellant.

65. So far as the submission of Ld. Counsel for the appellant, that the

Respondent No. 1, alone cannot file any application under Section 7 of the

IBC, is concerned, we do not find much force therein also. Section 7 of the

Company Appeal (AT) (Insolvency) No. 1980 of 2024 37 of38 IBC itself provides that a financial creditor either by itself or jointly with

other financial creditors may move such application, therefore there appears

no bar as to why a single creditor in isolation may not move any such

application. However, a joint application by many financial creditors under

Section 7 of the IBC is required to be filed with the consent of those who

have joined therein as petitioners. In the case in hand the application has

been filed by Financial Creditor Respondent No.1, Canara Bank alone, on its

own, without approval or consent of other members of the consortium and

in our considered opinion there was absolutely no need to take the consent

or permission from other creditors (Members of Consortium) to file any such

application. Therefore, keeping in view all the facts of circumstances of the

case and the legal position enumerated herein before we do not find any

illegality in the impugned order passed by the Adjudicating Authority.

Resultantly the appeal is lacking force and is dismissed. The impugned

order passed by the adjudicating authority is hereby affirmed.

66. Keeping in view the peculiar facts and circumstances of this case

there is no order for costs. The pending IA's are also closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical)

New Delhi.

03.09.2025.

sr

Company Appeal (AT) (Insolvency) No. 1980 of 2024 38 of38