Creditors on their account or jointly with other creditors are competent to initiate insolvency resolution process

In terms of explanation appended to section 7(1) an application by ‘Financial Creditor’ either on its own behalf or jointly with other financial creditor would be competent for initiating Corporate Insolvency Resolution Process against a ‘Corporate Debtor’ before Tribunal when a default has occurred

Where in pursuance of common loan agreement consortium banks along with financial creditor sanctioned a term loan to corporate debtor but corporate debtor defaulted term loan and ‘Financial Creditor’, Bank of Baroda filed application under section 7 to trigger Corporate Insolvency Resolution Process against corporate debtor. However, ‘corporate debtor’ opposed application stating that applicant was part of consortium of banks and it could not individually enforce any right or obligation of common loan agreement. It was held that lead bank like petitioner was competent to file this application under section 7 on its own behalf and also on behalf of other banks who were members of consortium and since default had occurred, petition was to be admitted.

October 16th, 2017