Corporation Bank's Insolvency Move Against Patna Highway Projects Ltd. Halted by NCLAT

The National Company Law Appellate Tribunal addressed the issue of Corporation Bank initiating insolvency proceedings against Patna Highway Projects Ltd. in violation of the inter-creditor agreement. The Tribunal directed the Interim Resolution Professional not to constitute a Committee of Creditors, ensuring the company's continuity as a going concern. The Professional was authorized to work with the suspended Board of Directors, manage day-to-day operations, and release necessary payments from the Corporate Debtor's bank accounts. The case was scheduled for admission after serving notice to the Respondents, emphasizing adherence to the inter-creditor agreement and proper insolvency procedures.

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Issues:
Violation of inter-creditor agreement by Corporation Bank in initiating insolvency petition against Patna Highway Projects Ltd.

Analysis:
The appeal before the National Company Law Appellate Tribunal raised the issue of Corporation Bank filing an insolvency petition against Patna Highway Projects Ltd. in contravention of the binding inter-creditor agreement and decisions made in lenders' meetings. The Appellant argued that the initiation of Corporate Insolvency Resolution Process by Corporation Bank was improper and against the lenders' decision not to proceed without the consent of other lenders. It was contended that the impugned order conflicted with a previous decision of the Appellate Tribunal in 'Gaja Trustee Company Pvt. Ltd. & Ors. Vs. Haldia Coke and Chemicals Pvt. Ltd.', which had been upheld by the Apex Court.

The Interim Resolution Professional had issued a public announcement, but the Committee of Creditors had not yet been constituted. The Tribunal ordered that notice be issued to the Respondents by Speed Post, with requisites and process fee to be filed by a specified date. If the Appellant provided the email address of the Respondents, notice was also to be sent through email. The case was scheduled for admission after notice on a specified date.

During the interim period, the Tribunal directed that the Interim Resolution Professional should not constitute any Committee of Creditors if not already done. However, the Professional was instructed to ensure the company remained a going concern and to seek assistance from the suspended Board of Directors. Authorized personnel were permitted to carry out their duties, including signing bank cheques with the Professional's authorization and counter-signature. The Bank was instructed to release payments upon such authorization. The Interim Resolution Professional was required to present this order to the Banks where the Corporate Debtor's accounts were held. The Bank Accounts of the Corporate Debtor were allowed to be used for the company's day-to-day operations, such as paying current bills, salaries, wages, and electricity bills.

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