The National Company Law Appellate Tribunal (NCLAT) on August 19, 2019, has dismissed an appeal filed by L&T Infrastructure Finance Company Ltd. while holding that a Financial Creditor cannot challenge the order of admission of Insolvency petition filed by another financial creditor merely on the ground that it has a superior claim over the claim of the other Financial Creditors.
In this case, an agreement was executed between National Highway Authority of India (NHAI) and the Gwalior Bypass Project Ltd, (Corporate Debtor). As per the terms of the agreement, Gwalior Bypass was barred from creating any encumbrance, lien or from creating any rights or benefits except with prior consent in writing from NHAI.
It was the appellant’s case that Gwalior Bypass had approached L&T Infrastructure Finance Company Ltd. for refinancing an erstwhile loan advanced by IDFC. Certain credit facilities by way of non-convertible debentures were sanctioned by the appellant based on no objection letters issued by NHAI in favour of Gwalior Bypass. In the meantime, the ICICI Bank sanctioned certain loan facilities amounting to Rs.91.5 crore to the Corporate Debtor.
L&T Infrastructure claimed that the move by ICICI Bank to move to NCLT and initiating insolvency proceedings against Gwalior Bypass blatantly disregarded its secured lender status vis-à-vis Gwalior Bypass and by resorting to provisions under the I&B Code, it had acted in collusion with the Corporate Debtor.
Referring to Supreme Court judgment in the case of Innoventive Industries Limited v. ICICI Bank & Anr., the NCLAT held that L&T not being a Member/Shareholder of the Corporate Debtor Gwalior Bypass, has no right to intervene to oppose admission of the application under Section 7 preferred by the ICICI Bank against the Corporate Debtor.
The Bench concluded that “After admission of the application under Section 7, if the Appellant claims that it is one of the ‘Financial Creditor’, it can file claim before the ‘Resolution Professional’, but it cannot challenge the order of admission in absence of any challenge by the ‘Corporate Debtor’, on the ground that it has first charge on the asset of the ‘Corporate Debtor’ or has superior claim over the claim of the other ‘Financial Creditors’.”
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