Tribunal upholds OBC's petition under IBC, validates Recovery Certificate, and initiates CIRP

The Tribunal found the petition by Oriental Bank of Commerce (OBC) under Section 7 of the IBC, 2016 maintainable as OBC, being a financial creditor, can file independently. The discrepancy in the outstanding amount claimed by OBC was provisionally upheld, subject to verification. The validity of the Recovery Certificate issued by the Debt Recovery Tribunal (DRT) was affirmed, justifying initiation of Corporate Insolvency Resolution Process (CIRP). OBC's status as a Financial Creditor was confirmed, and the petition was deemed not time-barred. State Bank of India (SBI) was allowed to file claims separately. CIRP was initiated, with an appointed Interim Resolution Professional (IRP) and a moratorium declared.

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Issues Involved:

1. Maintainability of the petition filed by Oriental Bank of Commerce (OBC) under Section 7 of the IBC, 2016.
2. Discrepancy in the outstanding amount claimed by the Financial Creditor.
3. Status and validity of the Recovery Certificate issued by the Debt Recovery Tribunal (DRT).
4. Status of the Financial Creditor as per the definition under the IBC Code.
5. Applicability of the Law of Limitation to the claims made by the Financial Creditor.
6. Involvement and claims of other consortium banks, particularly State Bank of India (SBI).

Detailed Analysis:

1. Maintainability of the Petition:

The Tribunal examined the maintainability of the petition filed solely by Oriental Bank of Commerce (OBC) under Section 7 of the IBC, 2016. It was argued that only the lead bank (SBI) could take enforcement actions. However, the Tribunal clarified that Section 7 permits a financial creditor to file an application either singly or jointly. Since OBC is a financial creditor and the Corporate Debtor committed default, the petition is maintainable. The Tribunal concluded that the petition by OBC is valid and can proceed independently of other consortium banks.

2. Discrepancy in the Outstanding Amount:

The Corporate Debtor contended discrepancies in the outstanding amount claimed by OBC. The Tribunal noted that the Corporate Debtor initially availed a loan of Rs. 380 Crores from the consortium banks, including Rs. 38 Crores from OBC. The Debt Recovery Tribunal (DRT) issued a recovery certificate for Rs. 340.55 Crores, allowing all consortium banks to recover their respective dues jointly and severally. Thus, the outstanding amount claimed by OBC is provisionally correct, subject to further verification by the Interim Resolution Professional (IRP).

3. Status and Validity of the Recovery Certificate:

The Corporate Debtor argued that the recovery certificate issued by the DRT does not exist due to ongoing disputes and modifications. However, the Tribunal found that the recovery certificate issued on 23rd March 2016 by the DRT is valid and enforceable. The Corporate Debtor’s failure to pay the outstanding amount as per the recovery certificate justifies the initiation of the Corporate Insolvency Resolution Process (CIRP).

4. Status of the Financial Creditor:

The Tribunal examined the definition of a Financial Creditor under Section 5(7) and Financial Debt under Section 5(8) of the IBC Code. It was established that OBC, having extended a loan to the Corporate Debtor, qualifies as a Financial Creditor. The outstanding amount owed to OBC constitutes a financial debt. Therefore, OBC’s status as a Financial Creditor is affirmed, and the contention of the Corporate Debtor is rejected.

5. Applicability of the Law of Limitation:

The Tribunal addressed the applicability of the Law of Limitation. It was noted that the DRT’s decree and the subsequent recovery certificate are within the limitation period. The petition filed on 12th December 2018 is within the permissible time frame. The Tribunal confirmed that the provisions of the Limitation Act, 1963, apply to the IBC Code, and the petition is not time-barred.

6. Involvement and Claims of Other Consortium Banks:

State Bank of India (SBI) filed an application to join as a petitioner/financial creditor. The Tribunal clarified that while the petition by OBC is maintainable independently, SBI can file its claims before the IRP during the CIRP process. The Tribunal granted liberty to SBI to file its claim before the IRP, who is directed to consider it in accordance with the law.

Conclusion:

The Tribunal admitted the petition filed by OBC, initiating the CIRP against the Corporate Debtor. Shri Valayudham Jayavel was appointed as the Interim Resolution Professional (IRP). A moratorium was declared, prohibiting suits, transferring assets, and recovery actions against the Corporate Debtor. The IRP was directed to file reports periodically and adhere to the time schedule under the IBC Code. The application by SBI was disposed of with liberty to file claims before the IRP. The case is posted for the IRP’s report on 30th April 2019.

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