The National Company Law Tribunal, Bengluru bench, has rejected the petition of RaboBank, Hong Kong, for the recovery of its dues of ₹109 crore from Café Coffee Day.

This judgment, yet again underscores the point that the judiciary sees the Insolvency & Bankruptcy Code (IBC) as a mechanism to revive a corporate debtor and not as an instrument to recover debts.

In a strongly-worded judgment, the Tribunal observed that “the petitioner (RaboBank) had actively participated in the resolution process of the corporate debtor (CCD) in terms of the Prudential Framework, along with all other lenders before filing the CP, and even thereafter. This conduct of the petitioner puts a question on the bona fides of the instant petition.”

The essence of the judgment is that all the lenders used the RBI circular, dated June 6, 2019, which provides for a ‘Prudential Framework for resolution of Stressed Assets’, under which all the lenders sign an ‘Inter Creditor Agreement (ICA)’, which brings them all on the same platform.

RaboBank actively participated in the Prudential Framework meetings. However, when it decided to sell CCD’s coffee vending business, which could fetch ₹2,400 crore, enough for repayment of debt of all creditors, the bank did not agree to give a ‘no due certificate’ releasing the security offered for its loans. Abhirup Mukherjee of the bank wrote to the lenders saying the bank was not issuing a ‘no objection certificate’ releasing the security and said it “reserves the right of withholding the NoC”. (This was RaboBank’s main defence.)

However, the bank continued to attend the lenders meetings.

One judgment of the Supreme Court, often cited as precedent in cases such as this, is that of Swiss Ribbons & Another Vs Union of India, in which the apex court categorically said that the intention of the IBC legislation is to ensure the continuation and revival of the corporate debtor; the object of the Code is the resolution of the corporate debtor, but not simply recovery of debt. Judge Ajay Kumar Vatsavayi and Technical Member Manoj Kumar Dubey further observed that “the conduct of the petitioner had us believe that it has been trying to utilise this forum as a ‘recovery mechanism”.

The Tribunal also noted that CCD was willing to, and trying to repay the debts of all the creditors—it was willing to sell off its (coffee) vending business. “When other lenders accepted the move the petitioner refused to co-operate.”

“This action of the petitioner clearly establishes that its intention was recovery of its debt but not the resolution of the corporate debtor. Therefore, though a creditor can choose its own forum, but in the peculiar facts of the present case, we are of the view that the petitioner is trying to utilise provisions of the IBC for recovery of debt, which is impermissible,” the Tribunal said.

comment COMMENT NOW