NCLAT Upholds Indian Bank’s Right to Initiate Insolvency Proceedings Despite Majority Lenders’ Assignment to NARCL
- REEDLAW
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The NCLAT upheld the Indian Bank’s right to initiate insolvency proceedings under Section 7 of the IBC, despite the fact that a majority of the consortium lenders had opted to assign the debt to NARCL.
On 15.05.2025, the National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Member Mr. Barun Mitra, dismissed an appeal and connected interlocutory applications, holding that a financial creditor—despite holding a minority share in a lending consortium—is fully entitled to independently initiate proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC) in the event of a clear and undisputed default. The Tribunal clarified that such initiation is not precluded merely because the majority of lenders have, in principle, decided to assign the debt to an asset reconstruction company or are engaged in settlement discussions.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench (Court-II), dismissed an appeal filed by a suspended director of M/s Agson Global Private Limited challenging the order dated 30.01.2024 passed by the Adjudicating Authority admitting a Section 7 application under the Insolvency and Bankruptcy Code, 2016. The application had been filed by Indian Bank, a member of a joint consortium of lenders, to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor for a default amount of ₹51.07 crore as on 10.08.2023. The Indian Bank held a 2.47% share in the consortium and had issued statutory recall and demand notices before proceeding with insolvency action.
The appellant contended that 90% of the consortium lenders had agreed to transfer the account to the National Asset Reconstruction Company Limited (NARCL) for resolution and had taken an in-principle decision to that effect on 29.01.2024, a day before the impugned admission order. It was further submitted that the CD had made multiple settlement proposals, including a ₹530 crore revised offer dated 05.04.2025, which was allegedly not properly considered by NARCL, the assignee of the debt. The appellant emphasised that the intent of Indian Bank was to recover its dues and not to facilitate a genuine resolution under the IBC.
NCLAT held that despite the in-principle agreement among lenders to assign the debt to NARCL, individual lenders were entitled to take independent action under their respective policies. It was noted that the Section 7 application had been filed well before the Joint Lenders Meeting (JLM) on 29.01.2024 and that the Indian Bank had disclosed its intent to proceed with insolvency even in that meeting. The Appellate Tribunal also found that the debt and default were admitted facts and that the subsequent settlement proposals, including those relying on uncertain funding sources like pending insurance claims and unidentified investors, lacked credibility.
The Tribunal concluded that the settlement proposals submitted by the appellant had been adequately considered and reasonably rejected by NARCL. As such, it found no infirmity in the order passed by the Adjudicating Authority admitting the Section 7 application. The appeal was accordingly dismissed, and interim orders stood vacated.
Dr. Abhishek Manu Singhvi, Sr. Advocate, Mr. Abhijeet Sinha, Sr. Advocate with Mr. Sumit K. Batra, Mr. Avishkar Singhvi, Mr. Manish Khurana and Ms. Priyanka Jindal and Mr. Yash Johri, Advocates, represented the Appellant.
Mr. Gopal Jain, Sr. Advocate with Mr. Rajesh Kumar Gautam and Mr. Deepanjal Choudhary, Advocates, appeared for the Indian Bank/ NARCL.
Mr. Sumesh Dhawan, Ms. Vatsala Kak and Ms. Ankita Bajpai, Advocates, appeared for IRP.
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