The National Company Law Appellate Tribunal ( NCLAT ) New Delhi has held that a member may individually file for bankruptcy under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) even while the majority of consortium lenders are thinking about restructuring debt with the Corporate Debtor.
Apresh Garg , the appellant is a Suspended Director of the Corporate Debtor has been filed challenging order dated 30.01.2024 passed by the National Company Law Appellate Tribunal, New Delhi Bench (Court – II) admitting Section 7 Application filed by Indian Bank (Respondent No.1).The Corporate Debtor (“CD”) – M/s Agson Global Private Limited obtained various financial facilities through a Joint Consortium of Lenders. The Joint Consortium Agreement was executed on 25.10.2017.
In the Import and Processing and Distributions Division, the Indian Bank has approved a working capital term loan of Rs. 29.40 crores (Rs. 15.40 crores based on funds and Rs. 14 crores based on non-funds). The IOB served as the principal Bank under the Consortium. To guarantee loan repayment, the CD has executed a number of security agreements. More loans were approved as well.
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Under section 7 of the Code, Indian Bank filed an application to recover ₹51.07 crore from Twenty First Century Castings Pvt. Ltd. Citing a consortium resolution dated 23.01.2024 in which 90% of lenders consented to move the loan account to NARCL for restructuring, the corporate debtor objected.
The Adjudicating Authority, however, decided that it was forced to accept the Section 7 application and designate Shailesh Verma as the Resolution Professional because the loan account had not yet been transferred and the default was still uncontested.
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The appellant argued that there was no reason for the Indian Bank to file a Section 7 application when 90% of the lenders were thinking about restructuring the CD’s debt and the bank only owned a small part of 2.47% in the Consortium of Lenders.
In contrast, the Respondent argued that the Indian Bank was a Consortium member and had the entire authority to file a claim under Section 7 for the Appellant’s default.
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Furthermore, it was argued that the CD’s credit rating precluded the acceptance of the appellant’s restructuring proposal. Due to its RP-5 credit rating, the CD was not eligible for restructuring in accordance with the RBI Circular’s rules.
The bench of Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member) noted that JLM was well aware that each member is free to pursue recovery strategies in accordance with their individual bank’s recovery policy. According to their bank’s policy, all lenders are therefore free to take the actions necessary to realize their loan.
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Furthermore, the Tribunal held that the message dated March 15, 2025, clearly outlines the reasons for rejecting the settlement proposal. These reasons include the absence of tied-up cash, the proposal’s reliance on funds from an anonymous investor, and a long-pending insurance claim. The promoters had suggested paying Rs. 5 crores up front. After examination, NARCL has given the proposal enough thought, and there are no errors in the communication that call for additional guidance.
The Tribunal came to the conclusion that the appellant’s settlement plan had not been accepted by NARCL, which is the assignee of the total debt from all consortium members, including Indian Bank. Under the IBC, the Corporate Debtor’s resolution must proceed in light of the circumstances. The Adjudicating Authority’s order allowing the Section 7 application was found to be error-free. The appeal was therefore denied.
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