/2023 INSC 0418/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7121 OF 2022
M. Suresh Kumar Reddy   …Appellant
versus
Canara Bank & Ors.                   ...Respondents
J  U  D  G  M  E  N  T
ABHAY S. OKA, J .
FACTUAL ASPECTS
1. The   respondent­Bank   filed   an   application   under
Section 7 of the Insolvency and Bankruptcy Code, 2016 (for
short,   ‘the   IB   Code’)   before   the   National   Company   Law
Tribunal, Hyderabad, Telangana.   The said application was
filed   against   a   Corporate   Debtor   M/s   Kranthi   Edifice   Pvt.
Ltd.   The   present   appellant   claims   to   be   a   suspended
Director   of   the   Corporate   Debtor.     National   Company   Law
Civil Appeal No. 7121 OF 2022
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Tribunal   (for   short,   ‘NCLT’),   by   an   Order   dated   27 th
  June
2022,   admitted   the   application   filed   by   the   respondent­
Bank and  declared a moratorium  for  the  purposes referred
in Section 14 of the IB Code.   The appellant claiming to be
an   aggrieved   person   preferred   an   appeal   against   the   said
Order before the National Company Law Appellate Tribunal
(for  short,  ‘NCLAT’).   By  the   impugned  judgment  dated  5th
August 2022, NCLAT has dismissed the appeal. 
2. The first respondent, Canara Bank is the successor of
Syndicate Bank, which made application under Section 7 of
the IB Code to NCLT.   Syndicate Bank was merged into the
first   respondent­Canara   Bank.     A   letter   of   sanction   dated
2 nd
  April   2016   was   issued   by   Syndicate   Bank   by   which
credit facilities were sanctioned to the Corporate Debtor for
one­year   valid   up   to   28 th
  February   2017.   A   Secured
Overdraft   Facility   of   Rs.   12   crores   was   granted   by   the
Syndicate   Bank,   apart   from   sanctioning   the   Bank
Guarantee   limit   of   Rs.   110   crores.   Thus,   the   facilities
granted   by   the   Syndicate   Bank   to   the   Corporate   Debtor
were   fund­based   (Overdraft   Facility)   and   non­fund­based
(Bank Guarantees). 
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3. In the application under Section 7 of the IB Code, the
Syndicate Bank stated that as on 30 th
  November 2019, the
liability of the corporate debtor under the Secured Overdraft
Facility   was   Rs.74,52,87,564.93.     The   liability   of   the
Corporate   Debtor   towards   outstanding   Bank   Guarantees
was Rs.19,16,20,100.
4. On 21 st
  October 2022, this Court while issuing notice,
recorded   a   statement   of   the   learned   senior   counsel
appearing   for   the   appellant   that   a   proposal   for   settlement
under   a   One­Time   Settlement   Scheme   has   been   submitted
to the first respondent­Bank and a sum  of Rs.6 crores has
been deposited with the first respondent­Bank.  Eventually,
the said proposal was turned down by the first respondent­
Bank.     Therefore,   the   present   appeal   was   taken   up   for
hearing. 
SUBMISSIONS
5. The   learned   Senior   Counsel   appearing   for   the
appellant submitted that repeated efforts were made to have
one­time   settlement   of   the   dues   payable   to   the   first
respondent.     But  the   said  request  was   not   acceded  to.    He
Civil Appeal No. 7121 OF 2022
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relied upon a decision of this Court in the case of  Vidarbha
Industries   Power   Limited   v.   Axis   Bank   Limited 1
.     He
submitted   that   even   assuming   that   the   existence   of
financial   debt   and   default   on   the   part   of   the   Corporate
Debtor   was   established,   the   NCLT   was   not   under   an
obligation   to   admit   the   application   under   Section   7.     For
good   reasons,   NCLT   could   have   refused   to   admit   the
application   under   Section   7   of   the   IB   Code.     He   also   fairly
pointed out the Order dated 22 nd
 September 2022 passed by
this   Court   in   a   Review   Petition   seeking   a   review   of   the
decision in the case of  Vidarbha Industries 1
.
6. He   invited   our   attention   to   the   correspondence
between   the   Government   of   Telangana   and   the   Syndicate
Bank.   There   were   contracts   granted   by   the   Telangana
Government   to   the   Corporate   Debtor.     He   invited   our
attention to a letter dated 5 th
  November 2018 addressed by
the   Executive   Engineer   on   behalf   of   the   Government   of
Telangana   requesting   the   Bank   to   extend   the   Bank
Guarantees   furnished   by   the   said   Bank   on   the   request   of
the   Corporate   Debtor.     Similarly,   by   a   letter   dated   7 th
August   2019,   the   Government   of   Telangana   requested   the
Syndicate   Bank   to   extend   29   Bank   Guarantees   mentioned
1   2022 (8) SCC 352
Civil Appeal No. 7121 OF 2022
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in the said letter.  He pointed out that the Corporate Debtor
addressed   a   letter   to   the   Bank   on   9 th
  January   2020   by
which a request was made to extend the Bank Guarantees.
He   also   invited   the   attention   of   the   Court   to   a   letter   dated
8 th
  January   2020   addressed   by   the   Government   of
Telangana   to   the   Bank   requesting   the   Bank   to   extend   the
seven   Bank   Guarantees   mentioned   therein.     He   submitted
that   notwithstanding   the   requests   made   by   the   State
Government,   Syndicate   Bank   did   not   extend   the   Bank
Guarantees.     Thus,   in   a   sense,   the   failure   of   the   Bank   to
extend the Bank Guarantees forced the Corporate Debtor to
commit default. He submitted that the Bank is responsible
for   triggering   the   default.     The   learned   counsel   invited   our
attention to the interim  order  dated 24 th
  April 2020 passed
by the learned Single Judge of the Telangana High Court by
which the first respondent­Bank was restrained from taking
coercive   steps   pursuant   to   letters   of   invocation   of   Bank
Guarantees including handing over of Demand Drafts to the
State Government.  He urged that in the teeth of this order,
NCLT   ought   not   to   have   admitted   the   application   under
Section 7.
7. Learned   counsel   appearing   for   the   first   respondent­
Bank   firstly   pointed   out   that   the   decision   in   the   case   of
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Vidarbha Industries 1
 is in peculiar facts of that case, as is
explained by the same Bench while disposing of the Review
Petition.  He submitted that the decision of this Court in the
case   of   E.S.   Krishnamurthy   and   others   v.   Bharath   Hi­
Tecch  Builders  Private  Limited 2
  still holds the field.   He,
therefore,   submitted   that   once   NCLT   is   satisfied   that   there
is a financial debt and a default has occurred, it is bound to
admit   an   application   under   Section   7.     He   submitted   that
the   request   made   by  the   Corporate   Debtor   for  extension   of
the   Bank   Guarantees   was   specifically   rejected   as
communicated by the first respondent by a letter dated 18 th
January   2021   addressed   to   the   Corporate   Debtor.   He
would,   therefore,   submit   that   there   is   no   error   committed
by NCLT in admitting application under Section 7.
OUR VIEW
8. We   have   given   careful   consideration   to   the
submissions.     This   Court   in   the   case   of   Innoventive
Industries   Limited   v.   ICICI   Bank   and   Another 3
  has
explained the scope of Section 7.  Paragraph nos.28 to 30 of
the said decision read thus:­
2  ( 2022) 3 SCC 161
3  ( 2018) 1 SCC 407
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“28.   When   it   comes   to   a   financial
creditor triggering the process, Section
7   becomes   relevant.   Under   the
Explanation   to   Section   7(1),   a   default
is   in   respect   of   a   financial   debt   owed
to   any   financial   creditor   of   the
corporate   debtor   —   it   need   not   be   a
debt   owed   to   the   applicant   financial
creditor.   Under   Section   7(2),   an
application   is   to   be   made   under   sub­
section   (1)   in   such   form   and   manner
as is prescribed, which takes us to the
Insolvency   and   Bankruptcy
(Application   to   Adjudicating   Authority)
Rules,   2016.   Under   Rule   4,   the
application   is   made   by   a   financial
creditor   in   Form   1   accompanied   by
documents   and   records   required
therein. Form 1 is a detailed form in 5
parts, which requires particulars of the
applicant   in   Part   I,   particulars   of   the
corporate debtor  in  Part II,  particulars
of   the   proposed   interim   resolution
professional   in   Part   III,   particulars   of
the   financial   debt   in   Part   IV   and
documents,   records   and   evidence   of
default in Part V. Under Rule 4(3), the
applicant   is   to   dispatch   a   copy   of   the
application   filed   with   the   adjudicating
authority   by   registered   post   or   speed
post   to   the   registered   office   of   the
corporate   debtor.   The   speed,   within
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which   the   adjudicating   authority   is   to
ascertain   the   existence   of   a   default
from   the   records   of   the   information
utility   or   on   the   basis   of   evidence
furnished   by   the   financial   creditor,   is
important.   This   it   must   do   within   14
days of the receipt of the application. It
is   at   the   stage   of   Section   7(5),   where
the   adjudicating   authority   is   to   be
satisfied   that   a   default   has   occurred,
that the corporate debtor is entitled to
point   out   that   a   default   has   not
occurred   in   the   sense   that   the   “debt”,
which   may   also   include   a   disputed
claim,   is   not   due.   A   debt   may   not   be
due if it is not payable in law or in fact.
The   moment   the   adjudicating
authority   is   satisfied   that   a   default
has   occurred,   the   application   must
be  admitted unless it is incomplete,
in   which   case   it   may   give   notice   to
the   applicant   to   rectify   the   defect
within   7   days   of   receipt   of   a   notice
from   the   adjudicating   authority.
Under sub­section (7), the adjudicating
authority   shall   then   communicate   the
order   passed   to   the   financial   creditor
and   corporate   debtor   within   7   days   of
admission   or   rejection   of   such
application, as the case may be.
29.   The scheme of Section 7 stands in
contrast   with   the   scheme   under
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Section   8   where   an   operational
creditor   is,   on   the   occurrence   of   a
default, to first deliver a demand notice
of   the   unpaid   debt   to   the   operational
debtor   in   the   manner   provided   in
Section 8(1) of the Code. Under Section
8(2), the corporate debtor can, within a
period   of   10   days   of   receipt   of   the
demand   notice   or   copy   of   the   invoice
mentioned   in   sub­section   (1),   bring   to
the   notice   of   the   operational   creditor
the existence of a dispute or the record
of the pendency of a suit or arbitration
proceedings, which is pre­existing—i.e.
before   such   notice   or   invoice   was
received   by   the   corporate   debtor.   The
moment   there   is   existence   of   such   a
dispute,   the   operational   creditor   gets
out of the clutches of the Code.
30.   On   the   other   hand,   as   we   have
seen,   in   the   case   of   a   corporate
debtor   who   commits   a   default   of   a
financial   debt,   the   adjudicating
authority   has   merely   to   see   the
records of the information utility or
other   evidence   produced   by   the
financial   creditor   to   satisfy   itself
that   a   default   has   occurred.   It   is   of
no   matter   that   the   debt   is   disputed
so   long   as   the   debt   is   “due”   i.e.
payable   unless   interdicted   by   some
law   or   has   not   yet   become   due   in
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the sense that  it  is  payable at some
future   date.   It   is   only   when   this   is
proved   to   the   satisfaction   of   the
adjudicating   authority   that   the
adjudicating authority may reject an
application and not otherwise.”
(emphasis added)
9. The view taken in the case of  Innoventive   Industries 3
has   been   followed   by   this   Court   in   the   case   of   E.S.
Krishnamurthy   and   others 2
.     Paragraph   nos.32   to   34   of
the said decision read thus: 
32. In   Innoventive   industries  
[ Innoventive   Industries
Ltd.   v.   I CICI   Bank ,   (2018)   1   SCC   407,
paras   28   and   30   :   (2018)   1   SCC   (Civ)
356],  a two­Judge Bench of this Court
has  explained  the  ambit  of  Section  7
IBC,   and   held   that   the   adjudicating
authority   only   has   to   determine
whether   a  “default”   has  occurred   i.e.
whether   the   “debt”   (which   may   still
be   disputed)   was   due   and   remained
unpaid.   If   the   adjudicating   authority
is of the opinion that a “default” has
occurred,   it   has   to   admit   the
application   unless   it   is   incomplete.
Speaking through Rohinton F. Nariman,
Civil Appeal No. 7121 OF 2022
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J.,   the   Court   has   observed:   (SCC   pp.
438­39, paras 28 & 30)
“ 28 .   When   it   comes   to   a   financial
creditor   triggering   the   process,
Section 7 becomes relevant. Under
the   Explanation   to   Section   7(1),   a
default   is   in   respect   of   a   financial
debt   owed   to   [Ed.   :   The   word
between   two   asterisks   has   been
emphasised   in   original.]   any   [Ed .   :
The   word   between   two   asterisks
has   been   emphasised   in   original.]
financial   creditor   of   the   corporate
debtor   —   it   need   not   be   a   debt
owed   to   the   applicant   financial
creditor.   Under   Section   7(2),   an
application   is   to   be   made   under
sub­section   (1)   in   such   form   and
manner   as   is   prescribed,   which
takes   us   to   the   Insolvency   and
Bankruptcy   (Application   to
Adjudicating   Authority)   Rules,
2016.   Under   Rule   4,   the
application   is   made   by   a   financial
creditor   in   Form   1   accompanied
by   documents   and   records
required   therein.   Form   1   is   a
detailed   form   in   5   parts,   which
requires   particulars   of   the
applicant   in   Part   I,   particulars   of
the   corporate   debtor   in   Part   II,
Civil Appeal No. 7121 OF 2022
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particulars of the proposed interim
resolution   professional   in   Part   III,
particulars of the financial debt in
Part   IV   and   documents,   records
and   evidence   of   default   in   Part   V.
Under   Rule   4(3),   the   applicant   is
to   dispatch   a   copy   of   the
application   filed   with   the
adjudicating   authority   by
registered   post   or   speed   post   to
the   registered   office   of   the
corporate   debtor.   The   speed,
within   which   the   adjudicating
authority   is   to   ascertain   the
existence   of   a   default   from   the
records   of   the   information   utility
or   on   the   basis   of   evidence
furnished by the financial creditor,
is   important.   This   it   must   do
within 14 days of the receipt of the
application.   It   is   at   the   stage   of
Section   7(5),   where   the
adjudicating   authority   is   to   be
satisfied   that   a   default   has
occurred,   that   the   corporate   debtor
is   entitled   to   point   out   that   a
default   has   not   occurred   in   the
sense   that   the   “debt”,   which   may
also   include   a   disputed   claim,   is
not due. A debt may not be due if it
is not payable in law or in fact. The
moment   the   adjudicating   authority
Civil Appeal No. 7121 OF 2022
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is   satisfied   that   a   default   has
occurred,   the   application   must   be
admitted unless it is incomplete, in
which case it may give notice to the
applicant   to   rectify   the   defect
within 7 days of receipt of a notice
from   the   adjudicating   authority .
Under   sub­section   (7),   the
adjudicating   authority   shall   then
communicate   the   order   passed   to
the   financial   creditor   and
corporate   debtor   within   7   days   of
admission   or   rejection   of   such
application, as the case may be.
*           *          *
30.   On   the   other   hand,   as   we
have   seen,   in   the   case   of   a
corporate   debtor   who   commits
a   default   of   a   financial   debt,
the   adjudicating   authority   has
merely to see the records of the
information   utility   or   other
evidence   produced   by   the
financial   creditor   to   satisfy
itself   that   a   default   has
occurred. It is of no matter that
the   debt   is   disputed   so   long   as
the   debt   is   “due”   i.e.   payable
unless   interdicted   by   some   law
Civil Appeal No. 7121 OF 2022
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or   has   not   yet   become   due   in
the   sense   that   it   is   payable   at
some   future   date.   It   is   only
when   this   is   proved   to   the
satisfaction of the adjudicating
authority that the adjudicating
authority   may   reject   an
application and not otherwise . ”
33.   In   the   present   case,   the
adjudicating authority noted that it had
listed   the   petition   for   admission   on
diverse   dates   and   had   adjourned   it,
inter alia, to allow the parties to explore
the   possibility   of   a   settlement.
Evidently,   no   settlement   was   arrived   at
by   all   the   original   petitioners   who   had
instituted   the   proceedings.   The
adjudicating authority noticed that joint
consent   terms   dated   12­2­2020   had
been   filed   before   it.   But   it   is   common
ground   that   these   consent   terms   did
not cover all the original petitioners who
were   before   the   adjudicating   authority.
The   adjudicating   authority   was
apprised   of   the   fact   that   the   claims   of
140   investors   had   been   fully   settled   by
the   respondent.   The   respondent   also
noted   that   of   the   claims   of   the   original
petitioners   who   have   moved   the
adjudicating   authority,   only   13   have
been   settled   while,   according   to   it   “40
are in the process of settlement and 39
Civil Appeal No. 7121 OF 2022
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are   pending   settlements”.   Eventually,
the   adjudicating   authority   did   not
entertain   the   petition   on   the   ground
that   the   procedure   under   IBC   is
summary,   and   it   cannot   manage   or
decide upon each and every claim of the
individual   homebuyers.   The
adjudicating   authority   also   held   that
since   the   process   of   settlement   was
progressing “in all seriousness”, instead
of examining all the individual claims, it
would   dispose   of   the   petition
by   directing   the   respondent   to   settle   all
the   remaining   claims   “seriously”   within
a   definite   time­frame.   The   petition   was
accordingly disposed of by directing the
respondent   to   settle   the   remaining
claims   no   later   than   within   three
months,   and   that   if   any   of   the
remaining   original   petitioners   were
aggrieved   by   the   settlement   process,
they would be at liberty to approach the
adjudicating   authority   again   in
accordance   with   law.   The   adjudicating
authority's decision was also upheld by
the   appellate   authority,   who   supported
its conclusions.
34.   The   adjudicating   authority   has
clearly   acted   outside   the   terms   of   its
jurisdiction under Section 7(5) IBC.  The
adjudicating   authority   is   empowered
only   to   verify   whether   a   default   has
Civil Appeal No. 7121 OF 2022
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occurred   or   if   a   default   has   not
occurred.   Based   upon   its   decision,
the adjudicating authority must then
either admit or reject an application,
respectively.   These   are   the   only   two
courses of action which are open to the
adjudicating   authority   in   accordance
with   Section   7(5).   The   adjudicating
authority   cannot   compel   a   party   to   the
proceedings   before   it   to   settle   a
dispute.”
(emphasis added)
10. Thus,   once   NCLT   is   satisfied   that   the   default   has
occurred,   there   is   hardly   a   discretion   left   with   NCLT   to
refuse   admission   of   the   application   under   Section   7.
Default is defined under sub­section 12 of Section 3 of the
IB Code which reads thus: 
“3.     Definitions:   ­   In   this   Code,
unless the context otherwise requires,­
.. .. .. .. .. .. .. .. 
(12)   “default”   means   non­payment   of
debt   when   whole   or   any   part   or
instalment   of   the   amount   of   debt   has
become   due   and   payable   and   is   not
[paid]   by   the   debtor   or   the   corporate
debtor, as the case may be; ”
Thus,   even   the   non­payment   of   a   part   of   debt   when   it
becomes   due   and   payable   will   amount   to   default   on   the
Civil Appeal No. 7121 OF 2022
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part   of   a   Corporate   Debtor ̣.     In   such   a   case,   an   order   of
admission under Section 7 of the IB Code must follow.   If
the NCLT finds that there is a debt, but it has not become
due   and   payable,   the   application   under   Section   7   can   be
rejected.   Otherwise, there is no ground available to reject
the application. 
11. Reliance is placed on the decision of this Court in the
case   of   Vidarbha   Industries 1
  and   in   particular,   what   is
held therein in paragraph nos. 86 to 89 which reads thus:­
“86.   Even   though   Section   7(5)( a )   IBC
may confer  discretionary  power  on the
adjudicating   authority,   such
discretionary   power   cannot   be
exercised   arbitrarily   or   capriciously.   If
the   facts   and   circumstances   warrant
exercise   of   discretion   in   a   particular
manner,   discretion   would   have   to   be
exercised in that manner.
87.   Ordinarily,   the   adjudicating
authority   (NCLT)   would   have   to
exercise   its   discretion   to   admit   an
application under Section 7 IBC and
initiate   CIRP   on   satisfaction   of   the
existence   of   a   financial   debt   and
default   on  the   part   of   the   corporate
debtor   in   payment   of   the   debt,
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unless there are good reasons not to
admit the petition.
88.   The   adjudicating   authority   (NCLT)
has  to consider  the grounds  made out
by   the   corporate   debtor   against
admission,   on   its   own   merits.   For
example,   when   admission   is   opposed
on the ground of existence of an award
or   a   decree   in   favour   of   the   corporate
debtor,   and   the   awarded/decretal
amount   exceeds   the   amount   of   the
debt, the adjudicating  authority  would
have   to   exercise   its   discretion   under
Section   7(5)( a )   IBC   to   keep   the
admission   of   the   application   of   the
financial   creditor   in   abeyance,   unless
there is  good reason  not  to  do  so. The
adjudicating   authority   may,   for
example,   admit   the   application   of   the
financial creditor, notwithstanding any
award or  decree, if the award/decretal
amount is incapable of realisation. The
example is only illustrative.
89.   In   this   case,   the   adjudicating
authority   (NCLT)   has   simply   brushed
aside the case of the appellant that an
amount   of   Rs   1730   crores   was
realisable   by   the   appellant   in   terms   of
the   order   passed   by   A PTEL   in   favour   of
the   appellant,   with   the   cursory
observation   that   disputes   if   any
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between   the   appellant   and   the
recipient   of   electricity   or   between   the
appellant   and   the   Electricity
Regulatory   Commission   were
inconsequential.”
(emphasis added)
12. A   Review   Petition   was   filed   by   the   Axis   Bank   Limited
seeking   a   review   of   the   decision   of   Vidarbha   Industries 1
on   the   ground   that   the   attention   of   the   Court   was   not
invited   to   the   case   of   E.S.   Krishnamurthy 2
.     While
disposing of Review Petition by Order dated 22 nd
 September
2022, this Court held thus:   
“The   elucidation   in   paragraph   90
and   other   paragraphs   were   made   in
the context of the case at hand. It is
well   settled   that   judgments   and
observations   in   judgments   are   not
to   be   read   as   provisions   of   statute.
Judicial   utterances   and/or
pronouncements   are   in   the   setting
of the facts of a particular case. 
To  interpret  words  and  provisions  of  a
statute,   it   may   become   necessary   for
the   Judges   to   embark   upon   lengthy
discussions.   The   words   of   Judges
interpreting   statutes   are   not   to   be
interpreted as statutes.”
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13. Thus,   it   was   clarified   by   the   order   in   review   that   the
decision   in   the   case   of   Vidarbha   Industries 1
  was   in   the
setting   of   facts   of   the   case   before   this   Court.     Hence,   the
decision   in   the   case   of   Vidarbha   Industries 1  
cannot   be
read and understood as taking a view which is contrary to
the view taken in the cases of  Innoventive   Industries 3  
and
E.S.   Krishnamurthy 2
.   The   view   taken   in   the   case   of
Innoventive   Industries 3  
still holds good.  
14. In this case, we must note that the amount payable by
the   Corporate   Debtor   also   included   the   amount   repayable
under   fund­based   credit   facility   of   secured   overdrafts.   The
facility granted to the Corporate Debtor was not confined to
Bank Guarantees. 
15. Moreover, a demand notice under Section 13(2) of the
Securitisation   and   Reconstruction   of   Financial   Assets   and
Enforcement   of   Security   Interest   Act,   2002   dated   29 th
August   2018   was   issued   by   the   first   respondent.     As   the
Corporate   Debtor   did   not   honour   the   said   notice,   the
original   application   for   recovery   has   been   filed   by   the   first
respondent   before   the   Debt   Recovery   Tribunal   at
Hyderabad.   Moreover, the Corporate Debtor acknowledged
the   debt   on   5 th
  May   2019   to   the   extent   of   Rs.
Civil Appeal No. 7121 OF 2022
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63,36,61,897.26.     Moreover,   the   Balance   Sheet   as   of
31.03.2019   of   the   Corporate   Debtor   reflects   the   said
liability of the Corporate Debtor.
16. It   is   true   that   as   far   as   Bank   Guarantees   are
concerned,   the   Executive   Engineer   of   the   Government   of
Telangana   addressed   letters   to   the   Bank   requesting   the
Bank   to   revalidate   the   Bank   Guarantees.   On   8 th
  January
2020, the Government addressed a letter to Syndicate Bank
to   extend   the   seven   Bank   Guarantees   mentioned   therein.
The   letter   mentions   that   if   the   action   of   revalidation   or
extension   of   the   Bank   Guarantees   is   not   taken,   the   Bank
Guarantees be realized and the amount be paid by Demand
Drafts   to   the   State   Government.   Thus,   Bank   Guarantees
were invoked by the State Government. In view of the said
letter,   on   9 th
  January   2020,   the   Corporate   Debtor
addressed   a   letter   to   the   Syndicate   Bank   mentioning   that
the   issue   relating   to   the   pre­closure   of   the   two   contracts
granted   by   the   State   Government   was   under   the   active
consideration of the State Government. The letter mentions
that   if   the   Bank   Guarantees   were   not   extended,   the   same
are likely to be encashed by the Government.   Therefore, a
request was  made by  the  Corporate  Debtor  to  the  Bank  to
revalidate   the   Bank   Guarantees.     However,   the   first
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respondent by a letter dated 18 th
 January 2021, specifically
informed   the   Corporate   Debtor   that   the   competent
authority has not considered the proposal of the Corporate
Debtor   for   extending   Bank   Guarantees   and   Secured
Overdraft   Facilities.     By   the   same   letter,   the   first
respondent   called   upon   the   Corporate   Debtor   to   clear   the
outstanding immediately.   Thus, there is no doubt that the
Corporate   Debtor   committed   a   default   within   the   meaning
of  Section  3(12)  of  the  IB  Code due  to   non­payment  of  the
amounts due to the Bank. 
17. There are a large number of Guarantees issued by the
Bank.  The interim order of the Telangana High Court does
not   relate   to   all   Bank   Guarantees.     Moreover,   there   is   no
finding   recorded   in   the   interim   order   that   the   Corporate
Debtor is not liable to pay the dues.  The interim order only
prevents coercive action against the Corporate Debtor.  
18. Even assuming that NCLT has the power to reject the
application   under   Section   7   if   there   were   good   reasons   to
do so, in the facts of the case, the conduct of the appellant
is   such   that   no   such   good   reason   existed   on   the   basis   of
which NCLT could have denied admission of the application
under Section 7.
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19. Hence,   we   find   that   there   is   no   merit   in   the   appeal,
and   the   same   is,   accordingly,   dismissed.   There   will   be   no
order as to costs.
……..….……………J.
     (Abhay S. Oka)
……...………………J.
      (Rajesh Bindal)
New Delhi;
May 11, 2023.   
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