2021 (3) TMI 626 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI

Constitutional validity of Sections 35- AA and 35-AB of the ‘Banking Regulations Act, 1949’ - Liability in the case of Contract of Guarantee - who is responsible, principal or the borrower - Financial Debt - initiation of CIRP - HELD THAT:- Reserve Bank of India has powers’ to issue certain directions to certain banks and Banking companies so as to see that there is proper recovery of public money or for any other such purpose. As a matter of fact, Section 3(11) definition of Insolvency & Bankruptcy Code, deals with ‘debt’ meaning a ‘liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt’ - Any sum which is due and payable by the borrower/Corporate Debtor to the Bank is a ‘Financial Debt’ within the meaning of Section 5(8) of the Code. The ‘CIRP’ is to be initiated when a default is made in regard to the payment of ‘Debt’ by the ‘Corporate Debtor’. In Law, a ‘Creditor’ is not to be restrained from filing such application in accordance with ‘Law’. The trigger for initiating ‘Insolvency Process’ is the occurrence of ‘default’ by the ‘Debtor’.

In the case on hand resting upon the Gazette Notification of the Ministry of Finance dated 05.05.2017 whereby the Central Government had authorized the Reserve Bank of India to issue such directions to any banking company or banking companies which may be considered necessary to initiate insolvency resolution process in respect of default under the provisions of the Insolvency and Bankruptcy Code, 2016, the Reserve Bank of India had issued a letter dated 28.08.2017 (Annexure A- 7, Page 156 of Volume I of the Paper Book), whereby the Respondent/Company’s name was shown at Sl No 20 in the List of Accounts of the Appellant /State Bank of India. Indeed, based on the recommendations of “internal advisory committee (IAC)” constituted pursuant to the Banking Regulation (Amendment) Ordinance, 2017 12 accounts were identified for immediate reference for resolution under the I&B Code etc.

Thus, by no stretch of imagination it can be said that there was no issuance of authorization by the Central Government to the Reserve Bank of India for issuance of such direction(s) to any banking company to initiate insolvency resolution process in respect of default under the I&B Code and added further, the Reserve Bank of India through letter dated 28.08.2017 issued a specific list of accounts wherein the Respondent’s name admitted.

This Tribunal bearing in mind that it has allowed Comp. App. (AT) (Ins) No. 294/2020, the Comp. App(AT)(Ins) No. 295/ 2020 has become an ‘Otiose’ one, because of the fact as a concomitant effect, the 2nd order dated 10.01.2020 passed by the ‘Adjudicating Authority’ becomes a nugatory one in the eye of Law and accordingly stands disposed of - Application disposed off.