2018 (11) TMI 1351 - Tri - Insolvency and Bankruptcy

Tribunal Admits Petition, Declares Moratorium under Section 7 of IBC

The Tribunal admitted the petition under Section 7 of IBC, declaring a moratorium and appointing an Interim Resolution Professional. The order was ... Corporate Insolvency Resolution Process (CIRP) - Petition lies before Civil Court and not before NCLT - default for repayment of borrowed loan - Held that:- As to the objection raised by the Corporate Debtor that this Petition lies before Civil Court and not before NCLT, our answer is that the RTL Agreement entered between the Banks and the specified companies of Videocon Group including this Corporate Debtor, obliging that they are jointly and severally liable to repay this debt by all or by any one of them as if each one of them is principal borrower to the loan Agreement entered between the Petitioner and these Group companies including the corporate Debtor. In view of the terms of the Agreement, it does not matter as to whether VIL or VTL has been pressed upon to repay the same to the Financial Creditor. The fact of the matter is that there is enough material before this Bench to prove that VIL as well as VTL defaulted in making repayment to the Financial Creditor. On the top of it, for NCLT already having admitted company petition against VIL in respect to the same debt, I don’t think any further evidence is required to prove VIL defaulted in making repayment to this Petitioner. Another specious argument the Corporate Debtor Counsel raised is that the consideration has not been received by this Corporate Debtor therefore, for having this Petitioner proceeded against VIL, this Petition will not lie against this Corporate Debtor, against which, the answer is as to the definition of “debt” under IBC, it has been envisaged that debt means a liability or obligation in respect of a claim which is due from any person. Here for there being an obligation in respect of this claim against this Corporate Debtor as well, and the same not being discharged till date, it squarely falls within the definition of “debt” as mentioned under the IBC. For it need not be said separately that the Corporate Debtor has not denied the fact of lending this loan to this specified companies of Videocon Group, we are of the view that we need not take pains to say that it is a financial debt. For the Petitioner having proved the existence of debt as well as existence of default, this Petition is hereby admitted against this Corporate Debtor. The Corporate Debtor having named the Interim Resolution Professional with his consent, there being no disciplinary proceedings against the same, this Bench hereby admits this petition filed under Section 7 of IBC, 2016, declaring moratorium Issues Involved:1. Default in repayment under the Rupee Term Loan Agreements (RTL).2. Joint and several liability of the Corporate Debtor with other Videocon group companies.3. Merger of various State Banks into State Bank of India (SBI).4. Classification of the debt as 'Financial Debt' under IBC.5. Prior admission of CIRP against Videocon Industries Limited (VIL).6. Applicability of Section 14(c) of IBC.7. Maintainability of the Petition under IBC versus Civil law jurisdiction.Detailed Analysis:1. Default in Repayment under the Rupee Term Loan Agreements (RTL):The petition was filed by State Bank of India (SBI) against the Corporate Debtor for defaulting on payments amounting to Rs. 456.90 crores as of 31st December 2017 under the Rupee Term Loan Agreements (RTL). The loans were initially granted by various state banks which later merged into SBI.2. Joint and Several Liability of the Corporate Debtor with Other Videocon Group Companies:The Corporate Debtor was jointly and severally liable as an Obligor/Co-obligor with 12 other Videocon group companies to repay the loan. The RTL agreement specified that each obligor, including the Corporate Debtor, was liable for the obligations and liabilities of all other obligors.3. Merger of Various State Banks into State Bank of India (SBI):The loans were originally disbursed by State Bank of Hyderabad, State Bank of Mysore, State Bank of Travancore, State Bank of Bikaner and Jaipur, and State Bank of Punjab. These banks merged into SBI effective 1st April 2017, and thus the loans are now considered to have been granted by SBI.4. Classification of the Debt as 'Financial Debt' under IBC:The Corporate Debtor argued that the RTL was disbursed only to VIL, not to the other Obligor/Co-obligor companies, and thus did not qualify as 'Financial Debt' under IBC. However, the Tribunal found that the Corporate Debtor was part of the RTL agreement and had assumed the primary obligation to repay the debt, thus falling within the definition of 'debt' under IBC.5. Prior Admission of CIRP against Videocon Industries Limited (VIL):The Corporate Debtor contended that a CIRP had already been initiated against VIL for the same debt, and thus a separate CIRP against the Corporate Debtor was not maintainable. The Tribunal noted that the liability of the obligors was joint and several, and the initiation of CIRP against VIL did not preclude similar action against the Corporate Debtor.6. Applicability of Section 14(c) of IBC:The Corporate Debtor argued that Section 14(c) of IBC, which prohibits initiation of separate CIRP for the same secured assets, should apply. The Tribunal, however, found that the RTL agreement imposed joint and several liability on all obligors, allowing separate petitions against each for the same debt.7. Maintainability of the Petition under IBC versus Civil Law Jurisdiction:The Corporate Debtor argued that the remedy lay in Civil law and not under IBC as there was no direct disbursement to the Corporate Debtor. The Tribunal rejected this argument, stating that the RTL agreement and the obligations therein fell squarely within the definition of 'debt' under IBC, making the petition maintainable.Conclusion:The Tribunal found sufficient evidence of debt and default, and thus admitted the petition under Section 7 of IBC. The Tribunal declared a moratorium prohibiting the institution or continuation of suits, transferring or disposing of assets, and other actions against the Corporate Debtor. An Interim Resolution Professional was appointed to carry out the functions as per IBC, and a public announcement of the corporate insolvency resolution process was mandated.Order:The petition was admitted, and the Registry was directed to communicate the order to the Financial Creditor, the Corporate Debtor, and the Interim Resolution Professional.