In India, the corporate debtor manages and expands power generation assets. The Corporate Debtor invested Rs. 1996.54 crores in the construction of a 2 x 150 MW Thermal Power Plant in Bhadreshwar Kutch, Gujarat. The Corporate Debtor had obtained a term loan totaling Rs. 1497.40 Crores for the construction of the Power Plant. This loan included Rs. 998.26 Crores from REC Limited, Rs. 252.74 Crores from Punjab National Bank, and Rs. 246.40 Crores from State Bank of India. The Corporate Debtor's Promoters had contributed Rs. 499.14 Crores in the form of equity to the Power Plant.
In the instant case titled Indian Overseas Bank v. Arvind Kumar, the issue raised for clarification before the NCLAT was:
Whether non release makes the Corporate Debtor liable or not?
With regard to this issue, after reviewing the entire case, NCLAT found that the Corporate Debtor, who had fulfilled his obligation under the contract, was not liable for default because no money had been released from the corporate debtor's total collection. There is another problem. Respondent No. 1 may have experienced discrimination in the inter-se dispute between financial creditors regarding the release of funds from the TRA Account, but this would not hold the corporate debtor liable for default.
In accordance with the terms of the agreement, the Corporate Debtor fulfilled his obligation under the contract by depositing the entirety of its collection in the Trust Retention Account (TRA). As a result, the Corporate Debtor cannot be said to be in default. Release of the money owed to Respondent No. 1 in accordance with the "Punjab National Bank Consortium Inter-se Agreement" read in conjunction with the "Trust Retention Account (TRA) Agreement" is a private contract between the parties, for which the Corporate Debtor is not liable.
The NCLAT categorically stated that,
"While referring to Section 7 of the IBC and also which has been interpreted by the Hon'ble Supreme Court in Innoventive Case (Supra) where it has been categorically held that default on the part of the Corporate Debtor sine qua non of an application under Section 7. 'Default' is defined in section 3 (12) as non-payment of debt when whole or any part of instalment of the Company Appeal (AT) (Insolvency) No. 270 of 2020 amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor as the case may be".