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2025 Supreme(Online)(NCLAT) 250
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Arun Baroka (Member (Technical)) ,
raj radhe finance limited – Appellant
Versus
pegasus assets reconstruction private limited – Respondent
423/ND/2025 COMPANY APPEAL(AT)(INS)
Once funds are disbursed to the SRA in a CIRP, the lender loses ownership and cannot intervene in the process.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections relevant to Corporate Insolvency Resolution Process (CIRP) - Appeal against NCLT order allowing reissuance of Demand Draft - Appellant, a Non-Banking Financial Company (NBFC), sanctioned loan to SRA for payment under Resolution Plan - Appellant claimed locus in CIRP process - NCLT held that disbursed amount became SRA's, thus Appellant had no standing. (Paras 2.1, 4, 10)
(B) Locus Standi - The court emphasized that once funds are disbursed to the SRA, the lender loses ownership of those funds, and cannot intervene in the CIRP process. (Paras 7, 10)
Facts of the case:
The appeal arises from an NCLT order directing HDFC Bank to reissue a Demand Draft of Rs. 2.18 Crores, initially issued to SRA for the CIRP of K & K Foundry Private Limited, after the draft expired. The Appellant contended it had locus due to the loan agreement. (Paras 2.1, 4)
Findings of Court:
The court found that the Appellant had no locus to intervene in the CIRP as the funds were disbursed to the SRA, and the NCLT's decision to allow reissuance of the Demand Draft was appropriate. (Paras 10, 11)
Issues: The main issues were whether the Appellant had locus to intervene in the CIRP and the validity of the NCLT's direction to reissue the Demand Draft. (Paras 4, 10)
Ratio Decidendi: The court ruled that once the loan amount was disbursed to the SRA, it became the SRA's property, and the Appellant could not claim ownership or intervene in the CIRP process. (Paras 10, 11)
Result: Appeal dismissed.
ORDER
(Hybrid Mode)
11.03.2025:
Heard Shri Gaurav Mitra, learned counsel for the Appellant and Shri Dinkar Singh, learned counsel appearing for the Respondent. This appeal has been filed against order dated 31.01.2025 passed by NCLT, Court- V, Mumbai Bench in I.A. No. 590/2025 which IA was filed by member of the CoC. The application has been allowed and direction has been issued to the HDFC Bank to reissue the demand draft to the extent of the amount available with them i.e., Rs. 2.18 Cr.
2. Brief facts of the case necessary to be noticed to decide the appeal are:
2.1 In the CIRP of the Corporate Debtor - ‘K & K Foundry Private Limited’, resolution plan was submitted by Respondent No.2 herein –
Cont’d…/‘Samir Kale’. Resolution Plan was approved by the Adjudicating Authority.
2.2 The SRA approached the Appellant, who is a NBFC for financing to enable him to make payment as per the Resolution Plan. The Appellant sanctioned financial assistance of Rs.5 Crore to the SRA, out of which disbursement was made for an amount of Rs.2.94 Crores, which on the instance of the SRA was disbursed by way of a Demand Draft in favour of one ‘Pegasus Group Twenty-Eight Trust 4’. Subsequently, the Demand Draft was reissued in the name of the Corporate Debtor on the request of the SRA on 27.08.2024, which Demand Draft was to be expired on 27.11.2024.
2.3 There has been certain correspondence between the Appellant and the SRA with regard to Demand Draft and the Appellant by letter dated 07.12.2024 has recalled the loan. Subsequently, the Adjudicating Authority passed an order on 10.12.2024, which was extension of time for SRA for meeting the requirement of approval of Resolution Plan.
2.4 After order dated 10.12.2024, an I.A. No.590 of 2025 was filed by one member of the CoC seeking a direction to the HDFC Bank to revalidate the Demand Draft. I.A. No.590 of 2025 came to be heard by the Adjudicating Authority. Appellant appeared before the Adjudicating Authority through counsel and sought to raise objections to the prayers made in the application. The Adjudicating Authority noticed the objections and observed that the Appellant has no locus to intervene in the application and allowing the application directed the HDFC Bank to reissue the Demand Draft. Aggrieved by which order this appeal has been filed by the Appellant.
3. We have heard Shri Gaurav Mitra, learned counsel for the Appellant and Shri Dinkar Singh, learned counsel appearing for the Respondent.
4. Shri Mitra, learned counsel for the Appellant submits that when the Demand Draft which issued to the SRA came to be expired on 27.11.2024 and there was no request by the SRA for extension of the Demand Draft, the amount was not available to the SRA and the Adjudicating Authority erred in issuing direction for reissuing Demand Draft. It is submitted that the HDFC Bank has issued the Demand Draft from the amount received from the Appellant, hence, the Appellant was necessary party to be heard in the application and the Adjudicating Authority erred in not allowing the Appellant to intervene in the matter.
5. Shri Dinkar Singh, learned counsel for the Respondent refuting the submission of learned for the Appellant has referred to Para 7.8 and 7.9 of the appeal and submitted that it is the Appellant’s case that out of the sanctioned amount of Rs.5 Crore, they have disbursed an amount of Rs.2.94 Crores to the SRA. When the amount was disbursed, the amount did not remain of the Appellant and it became amount of the SRA, who made a Demand Draft through the HDFC Bank for giving the same in the CIRP process. It is submitted that the Appellant has absolutely no locus to intervene in the CIRP process and Appellant is free to take remedy against the SRA for recovery of his amount.
6. We have considered the submissions of learned counsel for the parties and perused the record.
7. The Adjudicating Authority while allowing the application made following observations:
“The Applicant submits that subsequently the Respondent bank
