Tribunal Denies CIRP Application, Cites Piramal Judgment

The Tribunal rejected the application for the initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under Section 7 of the Insolvency & Bankruptcy Code. Relying on the Piramal Judgment, which prohibits filing claims in two separate CIRPs for the same debt, the Tribunal dismissed the petition since CIRP against the Principal Borrower was already admitted. The claim against the Corporate Debtor for the same debt was not entertained, and the petition was dismissed without costs. The Tribunal ordered communication of the decision to both the Financial Creditor and the Corporate Debtor.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Default in repayment by the Principal Borrower.
3. Invocation of Corporate Guarantee by the Financial Creditor.
4. Allegations of premature demand and fund disbursement issues by the Corporate Debtor.
5. Invocation of arbitration clause by the Corporate Debtor.
6. Pending proceedings and claims in other courts and tribunals.
7. Application of the Piramal Judgment by the NCLAT.

Issue-wise Detailed Analysis:

1. Initiation of CIRP under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The petition was filed under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to its inability to repay its financial debt. The Financial Creditors, Nisus Finance & Investment Managers LLP, and Beacon Trusteeship Limited, acted as Facility Agents and Debenture Trustee, respectively, under a Debenture Trust Deed (DTD) dated 13.06.2017.

2. Default in Repayment by the Principal Borrower:
The Principal Borrower, Earthcon Infracon Pvt. Ltd. (EIPL), defaulted on the first installment of Rs. 13,12,50,000/- due on 31.03.2019. The Financial Creditor issued a default notice and subsequently invoked the Corporate Guarantee provided by the Corporate Debtor but did not receive the payment.

3. Invocation of Corporate Guarantee by the Financial Creditor:
The Financial Creditor invoked the Corporate Guarantee issued by the Corporate Debtor to secure the repayment of amounts raised under the DTD. Despite the invocation, the Corporate Debtor failed to fulfill its obligations, leading to the initiation of the present petition.

4. Allegations of Premature Demand and Fund Disbursement Issues by the Corporate Debtor:
The Corporate Debtor contended that the Financial Creditor acted prematurely and in contravention of agreed terms by demanding repayment before the expiry of the agreed tenure of 30 months. The Corporate Debtor also alleged that the Financial Creditor deliberately delayed fund disbursements, causing detriment to the Borrower and the Corporate Debtor.

5. Invocation of Arbitration Clause by the Corporate Debtor:
The Corporate Debtor invoked the arbitration clause under the DTD and sent a notice to the Financial Creditor on 24.06.2019. The Financial Creditor did not respond to the arbitration notice.

6. Pending Proceedings and Claims in Other Courts and Tribunals:
The Corporate Debtor highlighted that the Principal Borrower, EIPL, was already undergoing CIRP as per an order dated 23.08.2019, and the Financial Creditor had filed claims before the Committee of Creditors (CoC). The Corporate Debtor argued that initiating CIRP against it for the same debt would violate the law laid down in the Piramal Judgment.

7. Application of the Piramal Judgment by the NCLAT:
The Corporate Debtor relied on the NCLAT judgment in Vishnu Kumar Agarwal Vs. M/S. Piramal Enterprises Ltd., which held that for the same set of debt, a financial creditor cannot file claims in two separate CIRPs. The Financial Creditor argued that there was no bar under the Insolvency & Bankruptcy Code for proceeding against both the Principal Borrower and the Corporate Guarantor.

Conclusion:
The Tribunal concluded that the present application was bound to be rejected based on the Piramal Judgment. Since an application against the Principal Borrower had already been admitted, the claim against the Corporate Debtor arising from the same set of debt could not be admitted. The Tribunal ordered the dismissal of the petition without any cost and directed that a copy of the order be communicated to both the Financial Creditor and the Corporate Debtor.

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