Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) has held that mere rescheduling of payment obligations under a subsequent agreement does not extinguish or novate the borrower’s liability under the original loan agreement. The ruling clarifies that such rescheduling merely changes the timeline for repayment and does not affect the existence of “debt” or “default” under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal was filed by Vikram Bhavanishankar Sharma, a suspended director of Supreme Panvel Indapur Tollways Pvt. Ltd., challenging the order of the National Company Law Tribunal (NCLT), Chandigarh Bench, which admitted a Section 7 IBC application filed by the State Bank of India (SBI).

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Background

The case arose out of a Common Loan Agreement dated 30.08.2011, under which a consortium of banks led by SBI extended a financial facility of ₹900 crore for the development of a four-lane highway between Panvel and Indapur, Maharashtra. The corporate debtor defaulted on repayment, and its loan account was declared a Non-Performing Asset (NPA) on 1 November 2016. Subsequently, the National Highways Authority of India (NHAI) introduced a One-Time Fund Infusion Scheme (OTFIS) to revive stalled projects. Under this scheme, a Tripartite Agreement was executed on 9 November 2016 among NHAI, the corporate debtor, and the lenders, with NHAI providing ₹540 crore to complete the remaining project work. The appellant contended that this Tripartite Agreement novated the earlier Common Loan Agreement, arguing that repayment obligations now stood governed by the new arrangement. Accordingly, SBI had no authority to file a Section 7 IBC application based on the original loan agreement.

Findings of the NCLAT

Rejecting the appellant’s contentions, the Appellate Tribunal held that the Tripartite Agreement did not novate or supersede the Common Loan Agreement. Instead, it merely rescheduled repayment through a “waterfall mechanism” without altering the borrower’s substantive obligations. The Tribunal referred to Clause 6(c) and Clause 6(h) of the Tripartite Agreement, which specified that while the waterfall mechanism for payments under the NHAI facility would override earlier terms until NHAI’s dues were cleared, the corporate debtor’s liability to repay lenders under the existing financing arrangements remained intact.

The Bench noted:“The Agreement dated 09.11.2016 merely reschedules the date of payment without changing the repayment obligations under the Common Loan Agreement. The liability of the corporate debtor to repay the amount remains intact.”  Further, the Tribunal emphasized that subsequent conduct of the corporate debtor, including multiple One-Time Settlement (OTS) proposals submitted to SBI in June 2022 and November 2022, demonstrated acknowledgment of its outstanding debt obligations. It also highlighted that the loan recall notice issued by SBI on 9 November 2022 was in line with the terms of the Common Loan Agreement and that the corporate debtor continued to default even under the revised repayment timelines.

SBI’s Authority to Initiate Insolvency Proceedings

The NCLAT also dismissed the argument that SBI required consent from all consortium members before initiating proceedings under Section 7. Referring to Clause 7.2 of the Loan Agreement and Clause 4.3(a) of the Inter-Creditor Agreement, the Bench held that each creditor had an independent right to enforce its claims and initiate recovery or insolvency proceedings in case of default. It observed: “Each creditor shall have the right, without prejudice to the rights of any other creditor, to enforce its claim against the borrower and to take enforcement action.”

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Upholding the NCLT’s order, the Appellate Tribunal ruled that the corporate debtor’s repayment obligation continued despite the Tripartite Agreement, as it did not extinguish or replace the original loan. Consequently, the Section 7 IBC application filed by SBI was valid and maintainable. The appeal was dismissed, with the NCLAT remarking that the adjudicating authority had rightly admitted the insolvency petition after finding clear evidence of debt and default amounting to ₹610.25 crore.

Appearance

For Appellant: Mr. Ishaan Duggal, Mr. Abhirup Dasgupta and Ms. Jayashree S. Dasgupta, Advocates.

For Respondents: Mr. Assem Chaturvedi and Mr. Siddhant Kumar, Advocates for R-1.

Cause Title: Vikram Bhavanishankar Sharma, Member of the Suspended Board of Directors of Supreme Panvel Indapur Tollways Pvt. Ltd. Versus State Bank of India & Anr.

Case No: Company Appeal (AT) (Insolvency) No. 1811 of 2024 & I.A. No. 6979 & 8862 of 2024

Coram: Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member)