The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by State Bank of India, a financial creditor, against an order allowing the disbursement of Non-Fund Based (NFB) facilities to a corporate debtor. The dispute arose from a resolution plan approved in 2017, which included a provision for NFB facilities. The NFB was not disbursed due to procedural delays, and the corporate debtor applied for disbursement. The Adjudicating Authority allowed the application, but the financial creditors appealed, saying the order was contrary to the resolution plan and NFB agreement. The NCLAT bench of three members held that clauses of the NFB Agreement must be read to give effect to the resolution plan, not to make it otiose and unworkable. The court noted that the resolution plan was approved with the understanding that NFB facilities would be rolled over based on the project’s appraisal. The court rejected the financial creditors’ argument that they had the right to evaluate the borrower’s financial performance before disbursing NFB limits. The case highlights the importance of giving effect to the terms of a resolution plan and the NFB agreement.
‘Non-fund-based facilities cannot be refused by lenders solely due to the non-availability of a disbursement clause, as decided by NCLAT, dismissing State Bank of India’s appeal.
by newsworm | Dec 18, 2024 | Banking, State Bank of India | 0 comments