The main legal point established in the judgment is that once NCLT is satisfied that a default has occurred, there is hardly any discretion left with NCLT to refuse admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

JUDGMENT :

ABHAY S. OKA, J.

FACTUAL ASPECTS

1. The respondent-Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the IB Code’) before the National Company Law Tribunal, Hyderabad, Telangana. The said application was filed against a Corporate Debtor M/s Kranthi Edifice Pvt. Ltd. The present appellant claims to be a suspended Director of the Corporate Debtor. National Company Law Tribunal (for short, ‘NCLT’), by an Order dated 27th June 2022, admitted the application filed by the respondent-Bank and declared a moratorium for the purposes referred in Section 14 of the IB Code. The appellant claiming to be an aggrieved person preferred an appeal against the said Order before the National Company Law Appellate Tribunal (for short, ‘NCLAT’). By the impugned judgment dated 5th August 2022, NCLAT has dismissed the appeal.

2. The first respondent, Canara Bank is the successor of Syndicate Bank, which made application under Section 7 of the IB Code to NCLT. Syndicate Bank was merged into the first respondent-Canara Bank. A letter of sanction dated 2nd April 2016 was issued by Syndicate Bank by which credit facilities were sanctioned to the Corporate Debtor for one-year valid up to 28th February 2017. A Secured Overdraft Facility of Rs. 12 crores was granted by the Syndicate Bank, apart from sanctioning the Bank Guarantee limit of Rs. 110 crores. Thus, the facilities granted by the Syndicate Bank to the Corporate Debtor were fund-based (Overdraft Facility) and non-fund-based (Bank Guarantees).

3. In the application under Section 7 of the IB Code, the Syndicate Bank stated that as on 30th November 2019, the liability of the corporate debtor under the Secured Overdraft Facility was Rs.74,52,87,564.93. The liability of the Corporate Debtor towards outstanding Bank Guarantees was Rs.19,16,20,100.

4. On 21st October 2022, this Court while issuing notice, recorded a statement of the learned senior counsel appearing for the appellant that a proposal for settlement under a One-Time Settlement Scheme has been submitted to the first respondent-Bank and a sum of Rs.6 crores has been deposited with the first respondent-Bank. Eventually, the said proposal was turned down by the first respondent-Bank. Therefore, the present appeal was taken up for hearing.

SUBMISSIONS

5. The learned Senior Counsel appearing for the appellant submitted that repeated efforts were made to have onetime settlement of the dues payable to the first respondent. But the said request was not acceded to. He relied upon a decision of this Court in the case of Vidarbha Industries Power Limited v. Axis Bank Limited, 2022 (8) SCC 352. He submitted that even assuming that the existence of financial debt and default on the part of the Corporate Debtor was established, the NCLT was not under an obligation to admit the application under Section 7. For good reasons, NCLT could have refused to admit the application under Section 7 of the IB Code. He also fairly pointed out the Order dated 22nd September 2022 passed by this Court in a Review Petition seeking a review of the decision in the case of Vidarbha Industries.

6. He invited our attention to the correspondence between the Government of Telangana and the Syndicate Bank. There were contracts granted by the Telangana Government to the Corporate Debtor. He invited our attention to a letter dated 5th November 2018 addressed by the Executive Engineer on behalf of the Government of Telangana requesting the Bank to extend the Bank Guarantees furnished by the said Bank on the request of the Corporate Debtor. Similarly, by a letter dated 7th August 2019, the Government of Telangana requested the Syndicate Bank to extend 29 Bank Guarantees mentioned in the said letter. He pointed out that the Corporate Debtor addressed a letter to the Bank on 9th January 2020 by which a request was made to extend the Bank Guarantees. He also invited the attention of the Court to a letter dated 8th January 2020 addressed