Case Law Details
Tottempudi Salalith Vs State Bank of India & Ors. (Supreme Court of India)
Supreme Court held that the recovery certificate itself would give rise to a fresh cause of action entitling a financial creditor to initiate Corporate Insolvency Resolution Process (CIRP).
Facts- The appellant is the managing director of the Respondent No.2, Totem Infrastructures Limited (corporate debtor) against whom proceedings have been initiated on account of default in repaying financial facilities extended to them by several banks in the form of loans and bank guarantees. The total claim on account of default as made before the National Company Law Tribunal (NCLT) was for a sum of Rs.613,27,01,598.23/.
Several banks had extended these facilities, being (i) Union Bank of India, (ii) IDBI, (iii) Oriental Bank of Commerce, (iv) Bank of Baroda, (v) Karnataka Bank, (vi) Syndicate Bank and (vii) Punjab National Bank as also the State Bank of India, who is the first respondent in this appeal. The State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of Patiala, had also extended such facilities, but they had merged with the State Bank of India on 01.04.2017. Hence, the State Bank of India is now prosecuting the composite claims of these banks. In the proceeding before the NCLT, out of which this appeal arises, it was the State Bank of India who had filed the application as financial creditor u/s. 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).
Conclusion- It has been held by this Court in Kotak Mahindra I that the recovery certificate itself would give rise to a fresh cause of action entitling a financial creditor to initiate Corporate Insolvency Resolution Process (CIRP). By this judgment, the right of the financial creditor to invoke the mechanism under the IBC after issue of recovery certificate stood acknowledged as a valid legal course. This Court, in that case also dealt with the question of instituting a CIRP on the strength of recovery certificate. Needless to add, such recovery certificate arose out of a proceeding from the DRT. The enforcement mechanism for a recovery certificate is an independent course, which a financial creditor may opt for realisation of its dues crystalised under the 1993 Act, instead of chasing the mechanism under the 1993 Act.
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