Union Bank of India vs Ansal API Infrastructure Ltd. & Ors.

Per: Justice Rakesh Kumar Jain: (Oral)

13.05.2025: This appeal is directed against the order dated 19.12.2022, passed by the National Company Law Tribunal, New Delhi (in short ‘the Tribunal’) by which an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) by the present Appellant (Union Bank Of India) has been dismissed on the ground that though the debt and default has been proved but the Appellant has failed to show the direct disbursal of the loan by the Appellant to the Corporate Debtor.

Shorn of unnecessary details, the brief facts of this case are that the Corporate Debtor approached PMDO Lenders (Pooled Municipal Debt Obligation) for loan and the PMDO sanctioned a term loan to the CD aggregating to Rs. 393.40 Cr. by a sanction letter dated 23.06.2011.

Besides the sanction letter, the agreements with their amendments were executed between the parties on 05.07.2011, namely, Common Loan agreement dated 05.07.2011 which was executed between the CD and the PMDO Lenders (Consortium of Banks) and IL&FS Urban Infrastructure Managers Ltd. was appointed as the Asset Manager for the said term loan. A Security Trustee Agreement dated 05.07.2011 was executed between the CD, the PMDO Lenders, the Asset Manager and Vistara ITCL in which Vistara ITCL was appointed as Security Trustee to the said term loan. A Trust and Retention Account Agreement was executed on 05.07.2011 between the CD, the PMDO Lenders, the Asset Manager, the Security Trustee and the designated Bank/Escrow Agent (Oriental Bank of Commerce Now PNB) in terms of which Vistara ITCL was appointed as the TRA Agent to the said term loan facility.

Subsequently, at the request of the CD in the year 2017, the repayment obligations were rescheduled by the PMDO Lenders under the flexible structuring scheme and the Asset Manager, vide sanction letter dated 17.03.2017, communicated the terms of sanction for restructuring of the term loan to the CD.

It so happened that the CD failed to follow the contractual obligations and the loan account of CD was classified as Non-Performing Asset (NPA) on 29.05.2017 as per the prudential norms of the Reserve Bank of India.

Thereupon, a demand notice under Section 13(2) of SARFAESI Act, 2002 was issued to the CD by the PMDO Lenders on 01.03.2018 and also the present petition was filed on 31.10.2018.

The CD, during the proceedings, submitted various OTS proposals dated 18.11.2019, 09.12.2019, 29.12.2020 and 02.04.2022 but all were rejected.

The Tribunal while rejecting the application of the Appellant has though referred to all the agreements entered into between the parties in para 7.3 and also holding that debt is due on the part of the CD but since the Tribunal was of the view that the Appellant has failed to prove direct disbursal of the loan to the CD, therefore, it does not fall within the definition of financial creditor as provided under Section 5(7) o the Code.

Ld. Counsel for the Appellant has argued that the Tribunal has committed an error in passing the impugned order when it had though referred to all the agreements which were pointed out in the pleading as well as during the course of hearing but was of the view that since there was no direct disbursal of loan by the Appellant to the CD, therefore, the application under Section 7 was not maintainable.

It is submitted that the Tribunal should have referred to the terms and conditions of the agreements and not only to the agreements as it is because the intention between the parties can be gathered only on the basis of the contents of the agreements and not from the nomenclature. In this regard, he has referred to various provisions of the agreements in court.

Counsel for the Respondent has though argued vehemently to defend the impugned order but at the end of the day he could not justify the impugned order on the ground that the discussion by the Tribunal on various aspects of the agreements entered into between the parties form time to time are conspicuous by its absence in the impugned order.

We have heard Counsel for the parties and after perusal of the entire records, are of the considered opinion that this appeal deserves to be allowed simply for the reason that the Tribunal has failed to consider to various provisions of all the agreements which were referred to by Counsel for the Appellant during the course of hearing to arrive at a conclusion that as to whether the Appellant was not the Financial Creditor, therefore, we find it a fit case to set aside the impugned order and remand the matter back to the Tribunal to decide again after referring to the contents of all the agreements and other documents which have been brought on record by both the parties and then pass a speaking order to hold as to whether the application filed by the appellant under Section 7 is to be admitted or not.

In such circumstances, the present appeal is allowed and the impugned order is set aside. CP No. IB – 1641(PB)/2018 is hereby restored to its original number. The matter is remanded back to the Tribunal to decide the application of the Appellant filed under Section 7 in accordance with law.

We make it clear to counsel for the parties as well as the Tribunal that we have not touched any part of the merit of the case while passing this order.

The parties are directed to appear before the Tribunal on 28^th May, 2025.