Disbursement Of Non Fund-Based Facilities Cannot Be Refused By Lenders When Resolution Plan Contains Clause For Disbursement: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan, Barun Mitra and Arun Baroka has held that Non Fund Based facilities cannot be refused to be disbursed when the approved Resolution Plan contains a clause for their disbursement. On the other hand, the respondents submitted that the submission of the Appellants that they do not have any obligation to issue/ release/ disburse the NFB limits under the approved Resolution Plan is incorrect. It was also submitted that when the Resolution Plan has been considered and approved by the CoC after considering the feasibility and viability of the company and it was decided to roll-over the NFB limits, there is no occasion to turn round and oppose issuance of NFB facilities. Present is a case where Resolution Plan has already been approved by the CoC where decision was consciously taken to roll-over NFB facilities by the existing lenders. The tribunal observed that “We are not persuaded to accept the submission of the Counsel for the Appellant that the lenders are entitled to review the viability and financial capacity of the company itself before release of any NFB facilities.Stopping the company to not able to work any contract due to non-release of bank guarantee is akin to stopping the company from carrying out normal function which shall lead non-compliance of the repayment obligation of the company which can never be object of approval of the Resolution Plan.” Finally, the tribunal observed that NFB Agreement clearly stipulated “Recital D of the NFB Agreement: The execution of this Agreement and other financial documents by the borrower has been authorised to give effect to the terms of the approved Resolution Plan.