2020 (1) TMI 1327 - Tri - Insolvency and Bankruptcy

Tribunal admits application under Insolvency Code, initiates Corporate Resolution Process

Syndicate Bank Versus Bhadreshwar Vidyut Private Limited

The Tribunal admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- On a perusal of CRILCFGMO which is a Return of defaulted borrowers placed as Annexure 1 in page No. 146 and 147 this Authority is satisfied that on 20.07.2018 Syndicate Bank, the Financial Creditor has reported to have moved the borrower into the 'Moved to Default Status' on 16.07.2018 along with 10 various other lending Banks. Also, the Financial Creditor has issued a recall notice on 05.12.2018 to the Corporate Debtor instructing them to clear the dues, failing which recovery action will be initiated including filing before NCLT. A contention is seen to have been made by the Authorized Representative who appeared on behalf of the Corporate Debtor that a Resolution Plan is already under consideration by all other Financial Creditors and only the Applicant/Financial Creditor who is having a negligible 1.64% voting power in the total claim has come forward for the CIRP process. In the instant case, the Financial Creditor has complied with all the requirements with respect to initiating the CIRP process against the Corporate Debtor Company and produced all the applicable documents in support of initiating the CIRP process in the prescribed manner. Accordingly, this Adjudicating Authority is satisfied that default has occurred and the application under sub-section 2 of Section 7 of I&B Code, 2016 is complete in all respects notwithstanding the fact that the Financial Creditor has acted against the interest of other lending institutions in violation of the Joint Lending Arrangements and stipulations contained in various agreement such as Joint Deed of Hypothecation, Master Inter Credit Agreement [MICA], necessary inter se agreements, Trust and Retention Agreement, etc. This Tribunal is required to adjudicate the matter within contours prescribed under Section 7 of the Insolvency and Bankruptcy Code without having regard to any other policy matter or guideline issued by the competent authority with respect to the Joint Lending Arrangement amongst the Bank or similar other documents. This Authority is duty bound to admit this application initiated under Section 7 by a Financial Creditor if a default has occurred and the application is complete in all respect and there is no disciplinary proceeding is pending against the proposed Resolution Professional - taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that this Application as filed by the Applicant -Financial Creditor is required to be admitted under Section 7(5) of the I&B Code, 2016. The Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. Issues Involved:1. Admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.2. Financial Creditor's claim and evidence of default.3. Corporate Debtor's defense and counter-arguments.4. Compliance with Joint Lending Arrangements and related agreements.5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.Detailed Analysis:1. Admissibility of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016:The application was filed by the Financial Creditor (Syndicate Bank) under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (M/s. Bhadreshwar Vidyut Private Limited). The Tribunal examined the application and found it complete in all respects, satisfying the requirements under sub-section 2 of Section 7 of the I&B Code, 2016.2. Financial Creditor's claim and evidence of default:The Financial Creditor claimed an outstanding amount of Rs. 32,22,50,660.16 as of 29.07.2019. The Corporate Debtor had approached a consortium of banks for financial assistance, and the Financial Creditor had sanctioned a fund-based limit of Rs. 31 Crores and a non-fund-based limit of Rs. 105 Crores. The Corporate Debtor failed to adhere to the terms and conditions of the sanction, resulting in the account being classified as Non-Performing Asset (NPA) on 30.06.2018. The Financial Creditor issued a recall notice on 05.12.2018, calling upon the Corporate Debtor to clear the outstanding amount. The Tribunal was satisfied with the evidence provided by the Financial Creditor, including the CRILC Report and Statement of Accounts, proving the default.3. Corporate Debtor's defense and counter-arguments:The Corporate Debtor argued that the application was premature and not maintainable, as the Financial Creditor held only 1.64% of the total debt value. The Corporate Debtor highlighted the project's total cost and the financial assistance received from other lenders. They faced delays and difficulties in obtaining clearances and permissions, affecting their operations. The Corporate Debtor contended that the Financial Creditor unilaterally reduced the working capital limits, causing further financial difficulties. They also argued that the Financial Creditor's action was contrary to the Joint Lending Arrangement and RBI guidelines, as the majority of lenders were considering a resolution plan.4. Compliance with Joint Lending Arrangements and related agreements:The Tribunal examined the various agreements, including the Working Capital Consortium Agreement, Master Inter-Creditor Agreement (MICA), and Trust and Retention Agreement (TRA). The Corporate Debtor argued that the Financial Creditor violated these agreements by unilaterally reducing the working capital limits and initiating the CIRP process. However, the Tribunal noted that the Financial Creditor had complied with the requirements for initiating the CIRP process, and the default was established.5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium:The Tribunal appointed Jayashree S Iyer as the Interim Resolution Professional (IRP) and declared a moratorium under Section 14(1) of the I&B Code, 2016. The moratorium would include the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of any assets, and recovery of any property by an owner or lessor. The moratorium would remain in effect until the completion of the CIRP or until the Tribunal approves a resolution plan or passes an order for liquidation.Conclusion:The Tribunal admitted the application under Section 7 of the I&B Code, 2016, initiating the CIRP against the Corporate Debtor. The Tribunal found that the default had occurred, and the application was complete in all respects. The IRP was appointed, and a moratorium was declared, ensuring the protection of the Corporate Debtor's assets and interests during the CIRP process.