Court admits petition under Section 7 of Insolvency & Bankruptcy Code against Corporate Debtor

The court admitted the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, filed by the Financial Creditor against the Corporate Debtor for defaulting on financial obligations totaling Rs. 217,42,97,170.42. Despite the Corporate Debtor's legal defenses, the court found the application timely, established the debt and default, and initiated the Corporate Insolvency Resolution Process (CIRP). An Interim Resolution Professional (IRP) was appointed, a moratorium declared, and the matter scheduled for a progress report on March 4, 2020.

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Issues Involved:
1. Filing of the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Financial obligations and defaults by the Corporate Debtor.
3. Restructuring of Credit Facilities and subsequent defaults.
4. Legal defenses raised by the Corporate Debtor.
5. Admission of debt and default by the Corporate Debtor.
6. Application of the law of limitation.
7. Admission of the application and initiation of Corporate Insolvency Resolution Process (CIRP).
8. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Detailed Analysis:

1. Filing of the Petition:
The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 by the Financial Creditor, M/s. State Bank of India, through its authorized officer. The petition sought the initiation of Corporate Insolvency Resolution Process (CIRP) against M/s. Mackeil Ispat & Forging Limited (Corporate Debtor).

2. Financial Obligations and Defaults:
The Corporate Debtor was sanctioned a Term Loan Consortium Facility of Rs. 83.00 crores, which was later increased to Rs. 94.83 crores. Additionally, working capital facilities amounting to Rs. 41.38 crores were extended. Due to failure in discharging financial obligations, the accounts were declared non-performing assets (NPA) as of March 31, 2013. The total debt payable by the Corporate Debtor was Rs. 217,42,97,170.42 as of January 19, 2018.

3. Restructuring of Credit Facilities:
The Credit Facilities were restructured under a Master Restructuring Agreement dated March 21, 2012. Despite restructuring, the Corporate Debtor failed to make timely payments, leading to the recall of facilities and declaration of the amounts due and payable.

4. Legal Defenses by the Corporate Debtor:
The Corporate Debtor argued that the Financial Creditor suppressed material facts and that the application was barred by the law of limitation and principles of waiver, estoppel, and acquiescence. They claimed that the loan was disbursed in driblets, affecting the project's viability, and disputed the NPA status of their accounts. They also highlighted ongoing negotiations for One Time Settlement (OTS) and alleged that the Financial Creditor did not disburse a sanctioned Rs. 30.00 crores loan.

5. Admission of Debt and Default:
The Financial Creditor cited the Corporate Debtor's admission of debt through a settlement approach for Rs. 60 crores, as noted by the Debt Recovery Tribunal (DRT). The Corporate Debtor's acknowledgment of debt in writing was deemed a clear admission, and the default was established.

6. Application of Law of Limitation:
The Financial Creditor argued that the application was within the limitation period, considering the stay of recovery proceedings by the High Court of Calcutta from September 19, 2014, to November 2, 2016. The period of stay was excluded from the limitation period, making the application timely.

7. Admission of the Application and Initiation of CIRP:
The Tribunal found the application complete and established the financial debt and default. The Corporate Debtor's arguments were unconvincing, and the application for initiating CIRP was admitted.

8. Appointment of IRP and Declaration of Moratorium:
Mr. Siba Kumar Mohapatra was appointed as the Interim Resolution Professional (IRP). A moratorium was declared under Section 14 of the Insolvency & Bankruptcy Code, 2016, prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor. The IRP was directed to convene a meeting of the Committee of Creditors and submit a resolution plan within 105 days.

Orders:
- The application under Section 7 was admitted.
- Moratorium was declared.
- IRP was appointed.
- The Registry was directed to communicate the order.
- The matter was listed for a progress report on March 4, 2020.

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