M. SURESH KUMAR REDDY v. CANARA BANK & Ors.

Judgment

[2023] 5 S.C.R. 387 387 M. SURESH KUMAR REDDY v. CANARA BANK & ORS. (Civil Appeal No. 7121 of 2022) MAY 11, 2023 [ABHAY S. OKA AND RAJESH BINDAL, JJ.] Insolvency and Bankruptcy Code, 2016 – ss.3(12), 7, 14 – Scope of s.7 – ‘Default’ u/s.3(12) – Application filed by the respondent-Bank u/s.7 against corporate debtor, admitted by NCLT – Moratorium was declared for the purposes referred in s.14 – Challenged by appellant, a suspended Director of the Corporate Debtor – Appeal dismissed by NCLAT – Held: Once NCLT is satisfied that the default has occurred, there is hardly a discretion left with it to refuse admission of the application u/s.7 – Even the non--payment of a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtorò – In such a case, an order of admission u/s.7 must follow – In the present case, the amount payable by the Corporate Debtor also included the amount repayable under fund-based credit facility of secured overdrafts – The facility granted to the Corporate Debtor was not confined to Bank Guarantees – Corporate Debtor committed a default within the meaning of s.3(12) due to non-payment of the amounts due to the Bank – Thus, even assuming that NCLT has the power to reject the application u/s.7 if there are good reasons to do so, in the instant case, the conduct of the appellant was such that no such good reason existed on the basis of which NCLT could have denied admission of the application u/s.7 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – s.13(2).

Dismissing the appeal, the Court HELD: 1. Once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. Thus, even the non- payment of a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtorò. In such a case, an order of admission under Section 7 of the IB Code must 387 A B C D E F G H 388 SUPREME COURT REPORTS [2023] 5 S.C.R. follow. If the NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application. [Para 10][397-C, E-F]