Corporate Debtor Default Leads to Insolvency Process

The Tribunal found the Corporate Debtor in default of repayment and invalidated their defense based on an OTS proposal rejected by the Financial Creditor. The Tribunal ordered the commencement of the Corporate Insolvency Resolution Process (CIRP), appointed an Interim Resolution Professional (IRP), and declared a moratorium until completion of the CIRP or approval of a resolution plan.

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Issues Involved:
1. Default in repayment by the Corporate Debtor.
2. Validity of the One-Time Settlement (OTS) proposal by the Corporate Debtor.
3. Applicability of the Supreme Court judgment in Dharani Sugars and Chemicals Ltd. vs. RBI.
4. Jurisdiction of the High Court in insolvency proceedings.
5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Default in repayment by the Corporate Debtor:
The Applicant, State Bank of India (Financial Creditor), invoked the provisions of Section 7 of the Insolvency and Bankruptcy Code (IBC) against M/s. Bhatia Coke & Energy Limited (Corporate Debtor) for defaulting on a repayment of Rs. 125,89,60,431.52 as of 31.12.2018. The date of default was noted as 11.08.2017. The Corporate Debtor had availed various credit facilities from the Financial Creditor and erstwhile State Bank of Mysore since September 2009. The loans were secured by land, building, plant, machinery, and personal guarantees.

2. Validity of the One-Time Settlement (OTS) proposal by the Corporate Debtor:
The Corporate Debtor proposed an OTS offering an upfront payment of 10% of the principal outstanding and the balance in five equal quarterly installments. However, the Financial Creditor did not accept the OTS proposal. The Tribunal noted that the Financial Creditor's rejection of the OTS proposal invalidated the Corporate Debtor's defense.

3. Applicability of the Supreme Court judgment in Dharani Sugars and Chemicals Ltd. vs. RBI:
The Corporate Debtor argued that the proceedings initiated under the RBI Circular dated 12.02.2018 should be quashed as per the Supreme Court judgment in Dharani Sugars and Chemicals Ltd. vs. RBI. However, the Tribunal clarified that the Supreme Court's order specifically applied to companies against whom insolvency proceedings were initiated based on the RBI Circular, which was not the case here.

4. Jurisdiction of the High Court in insolvency proceedings:
The Corporate Debtor filed a Writ Petition and a Miscellaneous Petition in the High Court of Madras, arguing that the restructuring package was still in effect and the Financial Creditor filed the application with undue haste. The Financial Creditor contended that the High Court did not have jurisdiction over applications filed under Section 7 of the IBC. The Tribunal noted that there was no stay order from the High Court, and the Financial Creditor was within its rights to demand repayment as per the loan agreement.

5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium:
The Tribunal admitted the petition and ordered the commencement of the Corporate Insolvency Resolution Process (CIRP). Mr. Motappa Thimmaraya Swamy was appointed as the IRP. A moratorium was declared, prohibiting the institution or continuation of suits, transferring of assets, foreclosure actions, and recovery of property by owners or lessors. The supply of essential goods or services to the Corporate Debtor was not to be terminated during the moratorium period. The moratorium would be in effect until the completion of the CIRP or until a resolution plan was approved or liquidation ordered.

Conclusion:
The Tribunal found that the Corporate Debtor defaulted on the repayment of the outstanding debt. The defense of the OTS proposal was not tenable as it was rejected by the Financial Creditor. The Tribunal ordered the commencement of the CIRP, appointed an IRP, and declared a moratorium. The Registry was directed to communicate the order to all relevant parties immediately.

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