Non-Payment of Amount Due to Bank is Default under S. 3(12) of IBC: SC Dismisses Appeal [Read Judgement]
Amount Due to Bank – Amount – Non-Payment – Bank – Amount Due to Bank is Default – IBC – SC Dismisses Appeal – SC – Appeal – Supreme Court – taxscan
Amount Due to Bank – Amount – Non-Payment – Bank – Amount Due to Bank is Default – IBC – SC Dismisses Appeal – SC – Appeal – Supreme Court – taxscan
The Supreme Court viewed the non-payment of the amount due to the bank as a default under Section 3(12) of the Insolvency and Bankruptcy Code, 2016 (IBC)and dismissed the appeal.
The respondent Bank applied Section 7 of the Insolvency and Bankruptcy Code, 2016 ( IBC) before the National Company Law Tribunal, Hyderabad, Telangana. The appellant, M. Suresh Kumar Reddy claimed to be a suspended Director of the Corporate Debtor.
National Company Law Tribunal (‘NCLT’), by an Order, admitted the application filed by the respondent bank and declared a moratorium for the purposes referred to in Section 14 of the IB Code. The appellant preferred an appeal against the said Order before the National Company Law Appellate Tribunal (NCLAT) which got dismissed.
The first respondent, Canara Bank is the successor of Syndicate Bank, which made an application under Section 7 of the IB Code to NCLT. Syndicate Bank was merged into the first respondentCanara Bank. A letter of sanction was issued by Syndicate Bank by which credit facilities were sanctioned to the Corporate Debtor for oneyear 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 fundbased (Overdraft Facility) and nonfundbased (Bank Guarantees).
A proposal for settlement under a OneTime Settlement Scheme has been submitted to the first respondentBank and a sum of Rs.6 crores has been deposited with the first respondentBank. Eventually, the said proposal was turned down by the first respondent bank.
A tw0 judge bench comprising Justice Abhay S. Oka and Justice Rajesh Bindal observed that the first respondent by a letter dated 18th January 2021, informed the Corporate Debtor that the competent authority has not considered the proposal of the Corporate Debtor for extending Bank Guarantees and Secured Overdraft Facilities.
It was observed that “the Corporate Debtor committed a default within the meaning of Section 3(12) of the IB Code due to non-payment of the amounts due to the Bank.”
To Read the full text of the Order CLICK HERE
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