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2022 (11) TMI 756 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Financial creditors - locus standi of IDBI Bank for filing application under section 7 of IBC - IDBI Bank alone could have filed the petition for the insolvency resolution or not - non-disbursement by Standard Chartered Bank of the additional amount after restructuring of debt - material change in the restructuring package and consequently the guarantee stands discharged or not? Whether Respondent IDBI Bank can independently declare an event of default and whether it is entitled to file application under section 7 against the corporate debtor after the event of default has occurred? - HELD THAT:- On looking at the Security Trustee Agreement, wherein the Lead Bank Bank of Baroda representing the consortium of banks has entered an agreement with Doshion and the Security Trustee IL&FS Trust Company. This Security Trustee Agreement was executed on 26.11.2013 after the consortium banks had decided to provide loans to the borrower Doshion. In the ‘Definition and Interpretation’ section of the Security Trustee Agreement, an ‘Event of Default’ has been stated as having the meaning ascribed to in the financing documents - The action of declaring an Event of Default is also an action wherein this procedure was to be followed. Thus, it is clear that the ‘Event of Default’ cannot be declared by an individual bank under the individual financing documents of the participating banks in the Bank of Baroda consortium and recourse must be taken to the Security Trustee Agreement and the Inter-se Agreement. Clause 7.2 of the Inter-se Agreement sets out a clear procedure by which an Event of Default can be declared by any an individual lender belonging to the Bank of Baroda consortium and this procedure is quite akin to the procedure set out in clause (4) of the Security Trustee Agreement regarding declaration of an ‘Event of Default’. Action taken by IDBI Bank regarding declaration of ‘Event of Default’ and thereafter recall of the loan - HELD THAT:- Prior to the issue of this letter to FIPL, a letter dated 20.9.2016 was sent by IDBI Bank to the borrower Doshion (attached at pp.95-113 of the reply filed by the IDBI Bank) stating that since an Event of Default had taken place since the borrower Doshion has failed to service the principal and interest amount payable to IDBI Bank on the due dates, the original loan including restructured loan were being recalled - The recall notice to Doshion and thereafter, a letter to FIPL dated 4.11.2016 were sent by IDBI Bank without any reference or intimation to the Lead Bank i.e. Bank of Baroda or the Security Trustee. The ‘Event of Default’ declared by the Respondent IDBI Bank has not been declared in accordance with the Inter-se Agreement entered into between participating banks of the Bank of Baroda consortium and the Security Trustee Agreement, and therefore cannot be called a valid ‘Event of Default’. Thus, the Respondent IDBI Bank was not entitled to act independently in declaring an ‘Event of Default’ in respect of its individual loan and recalling the loan advanced by it to the borrower Doshion and seeking repayment of the said loan from the guarantor FIPL - the locus standi of the Respondent IDBI Bank in taking unilateral action for declaring an ‘Event of Default’ in the repayment of the loan advanced by it is not established as the IDBI Bank being a participating bank of the Bank of Baroda consortium was bound to act under the clauses/provisions of the Inter-se Agreement and the Security Trustee Agreement. In view of the stipulations and provisions in the Inter-se Agreement of which the Respondent IDBI Bank was a signing party, and the provisions of the Security Trustee Agreement entered into between the Bank of Baroda (as a Lead Bank of the consortium) and the guarantor FIPL and IL&FS Trustee Company Limited, the IDBI Bank could not have acted unilaterally in either declaring an ‘Event of Default’ regarding repayment its loan facilities granted to the borrower Doshion and later seeking repayment of the loan from the guarantor Fivebro International Private Limited. - the Adjudicating Authority has committed gross error in not examining the provisions in the Inter-se Agreement, Security Trustee Agreement and the Deed of Guarantee, by which the four participating banks of the Bank of Baroda consortium have bound themselves while considering their effect in the adjudication of the section 7 application filed against the guarantor FIPL and thereafter admitting it. The corporate debtor Fivebro International Private Limited is freed from the rigours of CIRP and moratorium and other related provisions of IBC - Application disposed off.
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