2021 (1) TMI 1155 - Tri - Insolvency and Bankruptcy

Tribunal Denies Stay, Orders Insolvency Process: Debt & Default Confirmed, Timely Resolution Emphasized

Vidarbha Industries Power Limited Versus Axis Bank Limited

The Tribunal rejected the Corporate Debtor's application for a stay of further proceedings of the Company Petition, emphasizing the need for timely ... Seeking stay of the further proceeding of the Company Petition - termination of Power Purchase Agreement (PPA) - HELD THAT:- The Application is intended to deflect the attention of the Tribunal from the blatant default in repayment of its debts. The Code is an independent legislation that provides effective resolution of debts. The Tribunal has exclusive jurisdiction in such matters. The objective of the CIRP under the Code is to ensure maximization of the value of the Corporate Debtor - the plea that the admission of the Company Petition would be prejudicial to the Corporate Debtor cannot a ground to stay the further proceeding of the Company Petition. The present Application is intended to delay the disposal of the Company Petition, which from the averments made in the Application deserves to be admitted. The Application therefore does not merit consideration and is liable to be rejected. The observation would indicate that no other extraneous matter should come in the way of expeditiously deciding a Petition either under Section 7 or under Section 9 of the Code. The inability of the Corporate Debtor in servicing the debts or the reason for committing a default is alien to the scheme of the Code. The averments made in the instant Application would indicate that various factors apparently hindered the Corporate Debtor from carrying on its business. There were disputes between the Corporate Debtor and the recipient of energy as well as the change in supply chain management of the recipient of the energy may also have contributed to the lack of confidence between the entities - The decision in the matters pending before the Hon'ble Apex Court and other authorities would hardly have any bearing and impact on the issues involved in the present Company Petition under Section 7 of the Code. This Authority is required only to see whether there has been a debt and the Corporate Debtor defaulted in making the repayments. These two aspects when satisfied would trigger Corporate Insolvency - there has been a considerable delay in disposal of the Company Petition. The Application be and the same is rejected on contest. Issues Involved:1. Application for stay of further proceedings of the Company Petition.2. Existence of debt and default by Corporate Debtor.3. Relevance of disputes between Corporate Debtor and other entities.4. Jurisdiction and objective of the Insolvency and Bankruptcy Code (IBC).Issue-wise Detailed Analysis:1. Application for Stay of Further Proceedings of the Company Petition:The Corporate Debtor filed an application seeking a stay of the further proceedings of the Company Petition, pending the final hearing and disposal of several related cases, including Civil Appeal No. 372 of 2017 by the Supreme Court, Case No. 199 of 2017 by MERC, Case No. 44 of 2020 by MERC, and Appeal No. 446 of 2019 by APTEL. The Corporate Debtor argued that the admission of the Company Petition would prejudice its interests and those of its other lenders and stakeholders. The Tribunal, however, rejected the application, stating that the issues raised by the Corporate Debtor before various other forums have no bearing on the issues relevant to the Company Petition under Section 7 of the Code.2. Existence of Debt and Default by Corporate Debtor:The Respondent, the Lead Bank of the Consortium of Banks, argued that the Corporate Debtor has been in default in respect of various facilities since 31st March 2019, prompting the Financial Creditor to approach the Tribunal through the Company Petition under Section 7 of the Code. The Tribunal emphasized that its role is to assess the existence of debt and default, which, when satisfied, would trigger Corporate Insolvency. The Tribunal found that there has been a debt and the Corporate Debtor defaulted in making the repayments, thus warranting the initiation of the Corporate Insolvency Resolution Process (CIRP).3. Relevance of Disputes Between Corporate Debtor and Other Entities:The Corporate Debtor highlighted various disputes with other entities, including issues with the Maharashtra Electricity Regulatory Commission (MERC), Reliance Infrastructure Limited (RIL), Adani Electricity Mumbai Limited (AEML), and Coal India Limited (CIL). The Tribunal noted that these disputes are extraneous to the matters involved in the Company Petition under Section 7 of the Code. The Tribunal stated that the decision in the matters pending before the Supreme Court and other authorities would not affect the proceedings before it.4. Jurisdiction and Objective of the Insolvency and Bankruptcy Code (IBC):The Tribunal highlighted that the Code is a special legislation aimed at ensuring the timely resolution of a corporate debtor's insolvency in a time-bound manner. The Tribunal referred to the Supreme Court's observation in Swiss Ribbons v. Union of India, emphasizing the need for timely resolution to prevent the depletion of the corporate debtor's assets and to support the development of credit markets. The Tribunal reiterated that its jurisdiction is to ensure the maximization of the value of the Corporate Debtor and that extraneous matters should not hinder the expeditious disposal of the Company Petition.Conclusion:The Tribunal rejected the Corporate Debtor's application for a stay of the further proceedings of the Company Petition, emphasizing the need for a timely resolution under the Insolvency and Bankruptcy Code. The Tribunal found that the existence of debt and default by the Corporate Debtor warranted the initiation of the Corporate Insolvency Resolution Process. The Tribunal also noted that disputes with other entities and pending matters before other authorities were irrelevant to the proceedings under Section 7 of the Code. The Tribunal ordered the expeditious disposal of the Company Petition.