M. SURESH KUMAR REDDYversusCANARA BANK & ORS.

                         [2023] 5 S.C.R. 387                               387


                   M. SURESH KUMAR REDDY                                   A
                                   v.
                     CANARA BANK & ORS.
                   (Civil Appeal No. 7121 of 2022)
                            MAY 11, 2023                                   B
        [ABHAY S. OKA AND RAJESH BINDAL, JJ.]
       Insolvency and Bankruptcy Code, 2016 – ss.3(12), 7, 14 –
Scope of s.7 – ‘Default’ u/s.3(12) – Application filed by the
respondent-Bank u/s.7 against corporate debtor, admitted by NCLT
                                                                           C
– Moratorium was declared for the purposes referred in s.14 –
Challenged by appellant, a suspended Director of the Corporate
Debtor – Appeal dismissed by NCLAT – Held: Once NCLT is satisfied
that the default has occurred, there is hardly a discretion left with it
to refuse admission of the application u/s.7 – Even the non--payment
of a part of debt when it becomes due and payable will amount to           D
default on the part of a Corporate Debtorò – In such a case, an
order of admission u/s.7 must follow – In the present case, the amount
payable by the Corporate Debtor also included the amount
repayable under fund-based credit facility of secured overdrafts –
The facility granted to the Corporate Debtor was not confined to
                                                                           E
Bank Guarantees – Corporate Debtor committed a default within
the meaning of s.3(12) due to non-payment of the amounts due to
the Bank – Thus, even assuming that NCLT has the power to reject
the application u/s.7 if there are good reasons to do so, in the instant
case, the conduct of the appellant was such that no such good reason
existed on the basis of which NCLT could have denied admission of          F
the application u/s.7 – Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 –
s.13(2).
      Dismissing the appeal, the Court
      HELD: 1. Once NCLT is satisfied that the default has                 G
occurred, there is hardly a discretion left with NCLT to refuse
admission of the application under Section 7. Thus, even the non-
payment of a part of debt when it becomes due and payable will
amount to default on the part of a Corporate Debtorò. In such a
case, an order of admission under Section 7 of the IB Code must            H
                                  387
388            SUPREME COURT REPORTS                      [2023] 5 S.C.R.


A     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.
      [Para 10][397-C, E-F]
            E.S. Krishnamurthy and others v. Bharath Hi Tecch
B           Builders Private Limited (2022) 3 SCC 161; Innoventive
            Industries Limited v. ICICI Bank and Another (2018) 1
            SCC 407 : [2017] 8 SCR 33 – relied on.
            2. The decision in the case of Vidarbha Industries cannot
      be read and understood as taking a view which is contrary to the
C     view taken in the cases of Innoventive Industries and E.S.
      Krishnamurthy The view taken in the case of Innoventive
      Industries still holds good. [Para 13][399-A-C]
            Vidarbha Industries Power Limited v. Axis Bank Limited
            2022 (8) SCC 352 – referred to.
D            3. In this case, the amount payable by the Corporate Debtor
      also included the amount repayable under fund-based credit facility
      of secured overdrafts. The facility granted to the Corporate
      Debtor was not confined to Bank Guarantees. Moreover, a
      demand notice under Section 13(2) of the Securitisation and
E     Reconstruction of Financial Assets and Enforcement of Security
      Interest Act, 2002 dated 29th 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
F     debt on 5th May 2019 to the extent of Rs. 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. It is
      true that as far as Bank Guarantees are concerned, the Executive
      Engineer of the Government of Telangana addressed letters to
G     the Bank requesting the Bank to revalidate the Bank Guarantees.
      On 8th 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

H
   M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                         389


Guarantees be realized and the amount be paid by Demand Drafts         A
to the State Government. Thus, Bank Guarantees were invoked
by the State Government. In view of the said letter, on 9th January
2020, the Corporate Debtor addressed a letter to the Syndicate
Bank mentioning that the issue relating to the pre-closure of the
two contracts granted by the State Government was under the
                                                                       B
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 respondent by a letter dated
18th January 2021, specifically informed the Corporate Debtor          C
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
                                                                       D
Corporate Debtor committed a default within the meaning of
Section 3(12) of the IB Code due to non-payment of the amounts
due to the Bank. 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        E
is not liable to pay the dues. The interim order only prevents
coercive action against the Corporate Debtor. 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
                                                                       F
on the basis of which NCLT could have denied admission of the
application under Section 7. [Paras 14-18][399-D-H; 400-A-D]
                      Case Law Reference
[2017] 8 SCR 33                 relied on                Para 8
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7121              G
of 2022.
      From the Judgment and Order dated 05.08.2022 of the National
Company Law Appellate Tribunal at Chennai in Company Appeal (AT)
(CH) (Insolvency) No. 315 of 2022.
                                                                       H
390            SUPREME COURT REPORTS                          [2023] 5 S.C.R.


A            Krishnan Venugopal, Sr. Adv., R. Anand Padmanabhan, Govind
      Jethalia, Shashi Bhushan Kumar, Advs. for the Appellant.
            Rajesh Kumar Gautam, Anant Gautam, Kartik Jindal, Sumit
      Sharma, Ms. Anani Achumi, Ms. Madhumita Bagchi, Dinesh Sharma,
      Kiran Kumar Patra, Advs. for the Respondents.
B           The Judgment of the Court was delivered by
            ABHAY S. OKA, J.
            FACTUAL ASPECTS
             1. The respondent-Bank filed an application under Section 7 of
C     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 Tribunal (for short, ‘NCLT’),
D     by an Order dated 27th 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
E     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 respondent-Canara Bank. A
      letter of sanction dated 2nd April 2016 was issued by Syndicate Bank by
F     which credit facilities were sanctioned to the Corporate Debtor for one-
      year valid up to 28th 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 fund-based
      (Overdraft Facility) and non-fund-based (Bank Guarantees).
G
            3. In the application under Section 7 of the IB Code, the Syndicate
      Bank stated that as on 30th 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.
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      M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                             391
                   [ABHAY S. OKA, J.]

       4. On 21st October 2022, this Court while issuing notice, recorded     A
a statement of the learned senior counsel appearing for the appellant
that a proposal for settlement under a One-Time Settlement Scheme
has been submitted to the first respondent-Bank and a sum of Rs.6
crores has been deposited with the first respondent-Bank. Eventually,
the said proposal was turned down by the first respondent-Bank.
                                                                              B
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 one-time settlement
of the dues payable to the first respondent. But the said request was not     C
acceded to. He relied upon a decision of this Court in the case of Vidarbha
Industries Power Limited v. Axis Bank Limited1. 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           D
the IB Code. He also fairly pointed out the Order dated 22nd September
2022 passed by this Court in a Review Petition seeking a review of the
decision in the case of Vidarbha Industries1.
        6. He invited our attention to the correspondence between the
Government of Telangana and the Syndicate Bank. There were contracts          E
granted by the Telangana Government to the Corporate Debtor. He
invited our attention to a letter dated 5th 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      F
dated 7th August 2019, the Government of Telangana requested the
Syndicate Bank to extend 29 Bank Guarantees mentioned in the said
letter. He pointed out that the Corporate Debtor addressed a letter to the
Bank on 9th 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 8th January 2020 addressed by the Government of Telangana to            G
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

1
    2022 (8) SCC 352                                                          H
392                SUPREME COURT REPORTS                           [2023] 5 S.C.R.


A     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 24th April 2020 passed by
      the learned Single Judge of the Telangana High Court by which the first
      respondent-Bank was restrained from taking coercive steps pursuant to
B
      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
C     pointed out that the decision in the case of Vidarbha Industries1 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 Limited2 still holds the field. He, therefore,
D     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 18th January
      2021 addressed to the Corporate Debtor. He would, therefore, submit
E     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
F     Court in the case of Innoventive Industries Limited v. ICICI Bank
      and Another3 has explained the scope of Section 7. Paragraph nos.28
      to 30 of the said decision read thus:-
               “28. When it comes to a financial creditor triggering the process,
               Section 7 becomes relevant. Under the Explanation to Section
G              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
      2
          (2022) 3 SCC 161
      3
H         (2018) 1 SCC 407
M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                                 393
             [ABHAY S. OKA, J.]

  prescribed, which takes us to the Insolvency and Bankruptcy               A
  (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,
                                                                            B
  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        C
  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
                                                                            D
  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               E
  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 sub-section (7), the
  adjudicating authority shall then communicate the order passed to
  the financial creditor and corporate debtor within 7 days of
                                                                            F
  admission or rejection of such application, as the case may be.
  29. The scheme of Section 7 stands in contrast with the scheme
  under 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          G
  period of 10 days of receipt of the demand notice or copy of the
  invoice mentioned in sub-section (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 pre-
  existing—i.e. before such notice or invoice was received by the           H
394           SUPREME COURT REPORTS                           [2023] 5 S.C.R.


A          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
B          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 the sense that it is payable at
           some future date. It is only when this is proved to the
C          satisfaction of the adjudicating authority that the
           adjudicating authority may reject an application and not
           otherwise.”
                                                             (emphasis added)

D           9. The view taken in the case of Innoventive Industries3 has
      been followed by this Court in the case of E.S. Krishnamurthy and
      others2. Paragraph nos.32 to 34 of the said decision read thus:
           32. In Innoventive industries [Innoventive Industries
           Ltd. v. ICICI Bank, (2018) 1 SCC 407, paras 28 and 30 : (2018) 1
E          SCC (Civ) 356], a two-Judge 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
F          occurred, it has to admit the application unless it is
           incomplete. Speaking through Rohinton F. Nariman, J., the Court
           has observed: (SCC pp. 438-39, paras 28 & 30)
              “28. When it comes to a financial creditor triggering the process,
              Section 7 becomes relevant. Under the Explanation to Section
G             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 sub-
H
M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                               395
             [ABHAY S. OKA, J.]

    section (1) in such form and manner as is prescribed, which           A
    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
                                                                          B
    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       C
    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
                                                                          D
    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         E
    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.
                                                                          F
    Under sub-section (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.
                                  ***
                                                                          G
    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.
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396      SUPREME COURT REPORTS                              [2023] 5 S.C.R.


A        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 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
B
         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
C     original petitioners who had instituted the proceedings. The
      adjudicating authority noticed that joint consent terms dated 12-2-
      2020 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
D     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 are pending settlements”.
      Eventually, the adjudicating authority did not entertain the petition
E     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
F     dispose of the petition by directing the respondent to settle all the
      remaining claims “seriously” within a definite time-frame. 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
G     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
H
   M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                               397
                [ABHAY S. OKA, J.]

      authority is empowered only to verify whether a default has            A
      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
                                                                             B
      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 sub-section 12 of      C
Section 3 of the IB Code which reads thus:
      “3. Definitions: - In this Code, unless the context otherwise
      requires,-
      .. .. .. .. .. .. .. ..
                                                                             D
      (12) “default” means non-payment 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 non-payment of a part of debt when it becomes
                                                                             E
due and payable will amount to default on the 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.
                                                                             F
      11. Reliance is placed on the decision of this Court in the case of
Vidarbha Industries1 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      G
      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
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398            SUPREME COURT REPORTS                          [2023] 5 S.C.R.


A           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, unless there are
            good reasons not to admit the petition.
            88. The adjudicating authority (NCLT) has to consider the grounds
B           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
C           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.
D           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 APTEL in favour of the appellant, with the cursory observation
            that disputes if any between the appellant and the recipient of
E           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 Industries1 on the ground that the
F     attention of the Court was not invited to the case of E.S. Krishnamurthy2.
      While disposing of Review Petition by Order dated 22nd 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
G           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
H           necessary for the Judges to embark upon lengthy discussions.
   M. SURESH KUMAR REDDY v. CANARA BANK & ORS.                                 399
                [ABHAY S. OKA, J.]

      The words of Judges interpreting statutes are not to be interpreted      A
      as statutes.”
       13. Thus, it was clarified by the order in review that the decision
in the case of Vidarbha Industries1 was in the setting of facts of the
case before this Court. Hence, the decision in the case of Vidarbha
Industries1 cannot be read and understood as taking a view which is            B
contrary to the view taken in the cases of Innoventive Industries3 and
E.S. Krishnamurthy2. The view taken in the case of Innoventive
Industries3 still holds good.
       14. In this case, we must note that the amount payable by the
Corporate Debtor also included the amount repayable under fund-based           C
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 29th August 2018 was issued by the        D
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. 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.   E

        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
8th January 2020, the Government addressed a letter to Syndicate Bank
to extend the seven Bank Guarantees mentioned therein. The letter              F
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 9th January 2020, the Corporate Debtor addressed a letter to        G
the Syndicate Bank mentioning that the issue relating to the pre-closure
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
                                                                               H
400             SUPREME COURT REPORTS                           [2023] 5 S.C.R.


A     Corporate Debtor to the Bank to revalidate the Bank Guarantees.
      However, the first respondent by a letter dated 18th 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
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      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 non-payment 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
C     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
D     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.
            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.
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      Divya Pandey                                                Appeal dismissed.
      (Assisted by : Varun Dhond and Roopanshi Virang, LCRAs)




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