Financial Creditor's Petition Admitted Against Corporate Debtor for Default in Repayment Obligations

The Adjudicating Authority admitted the petition filed by the Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor due to default in repayment obligations. The Authority found that there was a duly established financial debt, a default in payment by the Corporate Debtor, and the documents showed the default. The application was admitted, and a moratorium was declared. An Interim Resolution Professional (IRP) was appointed, and the case was listed for a progress report filing on 20.08.2020.

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Issues Involved
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Financial assistance and loan agreements between the parties.
3. Default in repayment obligations by the Corporate Debtor.
4. Delays and issues in the project implementation.
5. Demand letters and recall of the loan by the Financial Creditor.
6. Objections raised by the Corporate Debtor regarding maintainability of the petition.
7. Applicability of RBI circular dated 7th June 2019.
8. Allegations of suppression of material facts and direct payments received by the Financial Creditor.
9. Requirement of documents from information utility showing default.

Detailed Analysis

1. Initiation of Corporate Insolvency Resolution Process (CIRP)
The petition was filed by the Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor due to its inability to repay its financial debt.

2. Financial Assistance and Loan Agreements
The Corporate Debtor approached the Financial Creditor for financial assistance to part finance its project, which was agreed upon, and a Rupee Term Loan Assistance was sanctioned. The loan was to be repaid in 48 equal quarterly installments along with interest.

3. Default in Repayment Obligations
The Corporate Debtor defaulted on its repayment obligations, leading to the issuance of demand letters by the Financial Creditor and the subsequent recall of the loan. The outstanding amount as of March 31, 2019, was INR 2416.96 crores.

4. Delays and Issues in Project Implementation
The project faced significant delays due to various reasons, including the failure of GIC to adhere to its obligations under the corporate guarantee. The Corporate Debtor attributed the delays to factors beyond its control, including issues with UPPTCL.

5. Demand Letters and Recall of Loan
Demand letters were issued by the Financial Creditor on multiple occasions, and the loan was recalled on October 10, 2018, demanding the outstanding amount inclusive of interest and delay charges. Bank guarantees were invoked, realizing an amount of INR 580.37 crores.

6. Objections Raised by the Corporate Debtor
The Corporate Debtor raised several objections, including:
- The petition's maintainability due to ongoing proceedings before the Uttar Pradesh Electricity Regulatory Commission.
- Alleged arbitrary and illegal approach by the Financial Creditor.
- Failure to consider RBI directions applicable to NBFCs.
- Concealment of material facts and direct payments received by the Financial Creditor.

7. Applicability of RBI Circular Dated 7th June 2019
The Corporate Debtor argued that the RBI circular dated 7th June 2019 was applicable. However, it was contended that the circular could not have a retrospective effect and did not override the provisions of the Code. The Adjudicating Authority agreed with this contention.

8. Allegations of Suppression of Material Facts and Direct Payments
The Corporate Debtor alleged that the Financial Creditor received direct payments from UPPTCL without informing the Corporate Debtor. The Financial Creditor admitted receiving payments and adjusted them against the debt owed by the Corporate Debtor. The Adjudicating Authority found these objections unworthy of consideration.

9. Requirement of Documents from Information Utility Showing Default
The Corporate Debtor objected to the lack of documents from the information utility showing default. The Financial Creditor argued that the default could be established based on other evidence, which was accepted by the Adjudicating Authority.

Conclusion
The Adjudicating Authority, after considering the application and documents, found that:
- There was a duly established financial debt.
- There was a default in payment by the Corporate Debtor.
- The documents attached with the application showed the default in payment of debt.

The petition was found complete and within the limitation period. The application was admitted, and a moratorium in terms of Section 14 of the Insolvency & Bankruptcy Code, 2016, was declared. The proposed Interim Resolution Professional (IRP) was appointed, and the registry was directed to communicate the order to the parties involved. The case was listed for the filing of the progress report on 20.08.2020.

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