Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain and Naresh Salecha (Technical Member) has held that termination of a Concession Agreement (CA) by the Government of Maharashtra (GoM) does not absolve a corporate debtor of its repayment obligations when the termination is unrelated to the debtor’s default in servicing its loans.

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Background

The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) by a suspended director of Supreme Manor Wada Bhiwandi Infrastructure Pvt. Ltd. challenging the order of the NCLT, Mumbai, which had admitted Union Bank of India’s Section 7 application and initiated CIRP proceedings against the corporate debtor.

The corporate debtor, a special purpose vehicle promoted by Supreme Infrastructure India Ltd., was granted a concession by the GoM in 2010 to develop and operate a highway project on a BOT basis. To finance the project, the corporate debtor availed multiple credit facilities, including a rupee term loan of Rs. 322.5 crore and an additional facility of Rs. 83.66 crore, secured through various agreements. In 2015, a restructuring package was approved, raising the aggregate principal amount to over Rs. 414 crore.

The corporate debtor defaulted on repayments, and its account was classified as NPA in November 2016. A revival letter signed by the debtor on 22.01.2018 acknowledged the outstanding debt. The financial creditor issued a recall notice in 2018 demanding repayment of Rs. 160.80 crore.

Appellant’s Case

The appellant argued that following the termination of the concession agreement by the GoM on 11.10.2019, liability to pay the lenders shifted to the government under the substitution agreement. It was submitted that Article 16 of the CA required GoM to make termination payments directly to lenders, regardless of whether the termination was due to concessionaire default or government default.

It was further contended that the GoM had offered Rs. 174 crore during arbitration proceedings, which was sufficient to discharge the debt owed to Union Bank of India. The appellant placed reliance on the Supreme Court’s ruling in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. to argue that pending arbitral claims against GoM should be taken into account in insolvency proceedings.

Respondent’s Stand

Union Bank of India countered that the debt was duly admitted in the revival letter and balance sheets, and default had existed since November 2016. The bank argued that the alleged GoM offer was unsubstantiated and, even if presumed true, grossly insufficient as the total debt exceeded Rs. 824 crore, with over Rs. 249 crore owed to Union Bank alone.

It was further submitted that the pending arbitration had no bearing on the debtor’s default and that the Vidarbha decision was inapplicable as no award existed in this case. The NCLT, it was argued, had correctly followed Supreme Court precedents in Innoventive Industries Ltd. v. ICICI Bank and E.S. Krishnamurthy v. Bharath Hi-Tech Builders Pvt. Ltd. in admitting the application.

Tribunal’s Findings

The NCLAT observed that the facilities availed by the corporate debtor were undisputed and that the debtor had acknowledged its liability in writing. The account was declared NPA in 2016, and debt due was reflected in financial statements. On these facts, debt and default stood conclusively established.

Rejecting the appellant’s contention, the bench held that liability could not be shifted to GoM merely because the concession agreement was terminated. “The liability was enjoined upon the corporate debtor to make payment to the financial creditor,” the Tribunal noted.

As to the Vidarbha judgment, the Tribunal distinguished the case, observing that in Vidarbha an enforceable award existed entitling the debtor to substantial sums, whereas in the present case arbitral proceedings were pending and the alleged offer by GoM was neither proven nor adequate. Even assuming an offer of Rs. 174 crore, it was insufficient to discharge debts of over Rs. 824 crore.

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Finding no merit in the appeal, the NCLAT upheld the NCLT’s order admitting Union Bank’s Section 7 petition and dismissed the appeal. It reiterated that once debt and default are established, admission of the application is mandatory under the IBC.

Appearance 

For Appellant: Mr. Abhirup Das Gupta and Jayashree S. Das Gupta, Advocates.

For Respondents: Mr. Dhrupad Vaghani & Ajiz MK, Advocates for R2. Mr. Sunil Fernandes, Sr. Advocate with Ms. Shankari Mishra, Mr. Arun Kumar Shukla and Mr.  Naman Shukla, Advocates for R1. 

Cause Title: Vikram Bhawanishankar Sharma Member of the Suspended Board of Directors of Supreme Manor Wada Bhiwandi Infrastructure Pvt. Ltd. Versus Union Bank of India & Anr.

Case No: Comp App. (AT) (Ins) No. 794 of 2023 & I.A. No. 2685 of 2023 & 1531 of 2025

Coram: Justice Rakesh Kumar Jain, Mr. Naresh Salecha (Technical Member)