The Bombay High Court refused to grant urgent relief to the Wadia Group, which sought to restrain the Bank of Baroda from invoking a corporate guarantee given by one of its group companies at the instance of Go First Airlines to the tune of Rs 500 crore.
Nowrosjee Wadia & Sons Ltd (NWS) had approached the court to “temporarily injunct and restrain” the Bank of Baroda from making the demand.
The Wadia Group has also sought an injunction against the lender from proceeding in accordance with law pursuant to such invocation, mainly on the grounds that the corporate guarantee had lapsed as the condition of tie-up of Rs 2,835 crore was attained by the borrower in January 2020.
“Considering the stated stand of the bank that it can act in furtherance of such demands only by instituting legal proceedings in accordance with the law, this court is of the opinion that there is no case made out for urgent ad-interim reliefs by the applicant (NWS),” Justice Manish Pitale said in his order on March 28.
The court will hear the matter further on May 7.
Before the court’s order, senior counsel Navroz Seervai, appearing for the Wadia Group, argued that the bank may invoke provisions of the Insolvency and Bankruptcy Code and this may lead to a situation where the claim of the respondent bank as defined under the code, even being treated as a disputed or undisputed amount, may lead to orders being passed against the applicant.
Countering this, the bank, through its counsels Karl Tamboly and Nishit Dhruva, managing partner of law firm MDP & Partners, argued that the relief as sought was not maintainable as it would have a cascading effect and would eventually oust the jurisdiction of the appropriate forum (National Company Law Tribunal) to deal with the issue of invocation of the corporate guarantee.
“The matter is subjudice and hence we would not be able to comment on this subject” said a Wadia Group spokesperson when contacted.
Nishit Dhruva, representing Bank of Baroda in the case, refused to comment since the matter is sub judice.
The lender also argued that restraining it from taking recourse to any other proceedings, to which the defendant is entitled in law, is wholly unjustifiable and contrary to the public policy.
The Wadia Group-owned budget carrier Go First Airlines is undergoing a corporate insolvency resolution process. The carrier has admitted liabilities of Rs 7,040 crore, including Rs 3,753 crore towards its secured financial creditors such as the Central Bank of India (Rs 1,934 crore), Bank of Baroda (Rs 1,744 crore) and IDBI Bank (Rs 74.46 crore).
According to the disclosure made by resolution professional Shailendra Ajmera, backed by EY, the bank loans are guaranteed by Wadia Reality Pvt Ltd.
The resolution professional has also admitted Rs 504 crore unsecured creditors’ claims from a related party of Wadia Group company. The claim from related parties Associated Biscuits International Ltd are on account of the Rs 416 crore guarantee it provided to the borrower, while that from Bombay Burmah Trading Corporation (Rs 90 crore) was due to inter corporate deposits it gave to the borrower. Leila lands Ltd, a related party, had made a claim of Rs 1,375 crore as a guarantor, but the resolution professional has not admitted it yet.
