State Bank of India v. Evans Fraser & Co. Ltd.

INSOLVENCY AND BANKRUPTCY CODE, 2016

--Initiation of corporate insolvency resolution process by financial creditor --Petition against non-repayment of loan Objection of maintainability of petition against co-obligator --Co-obligator jointly and severally liable to repay debt as per Rupee Term Loan agreement--Where Rupee Term Loan agreement entered between bank and specified companies of VID group including corporate debtor obliged that they were jointly and severally liable to repay debt taken by all or any one of them as if each one of them was principal borrower to loan agreement, therefore, on default of repayment of the debt, petition under section 7 was admitted against co-obligor.--Bank filed petition under section 7 against corporate debtor on the ground that the corporate debtor had committed default in making payment under Rupee Term Loan Agreements (RTL). The corporate debtor raised objection that actual disbursement under the RTL was only to specified companies of VID Group and not to Co-obligators and obligation of Co-obligators was not covered under any clause of section 5(8). Therefore, the petition was not maintainable against it. Held: The RTL Agreement entered between the bank and specified companies of VID Group including the corporate debtor, obliging that they were jointly and severally liable to repay this debt by all or by any one of them as if each one of them was principal borrower to the loan Agreement entered between the bank and these Group companies including the corporate debtor. Specified companies of VID Group committed default in payment of dues and petition under IBC had already been admitted against them. Therefore, there being an obligation in respect of the claim against the corporate debtor for repayment of the debt, but the same not being discharged. The bank had proved the existence of debt as well as existence of default committed by the corporate debtor. Thus, the petition was admitted.