TaxTMI 
TaxTMI 
2022 (5) TMI 14
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....orporated on 16th July, 1986 having its office at "Urjanidhi, 1, Barakhamba Lane, Connaught Place, New Delhi-110001 bearing CIN L65910DL1986GO1024862. 3. The corporate debtor, is a company incorporated on 11th May, 1993 under the Companies Act, 1956 having its registered office at Abhyanchal Parisar, Post Mandleshwar, Dist. Khargone, West Nimar), Madhya Pradesh-451221 bearing CIN U40101MP1993PLC007667 as per master data. 4. It is the case of the applicant that in the year 1993, the Government of Madhya Pradesh entrusted the construction and implementation of 10*40 MW hydroelectric power project at Mandaleshwar, Madhya Pradesh, to one M/s. Entegra Limited earlier known as S.K.G Power Ventures Limited) (for brevity 'Entegra') on "Build Own Operate and Maintain" basis, which in turn floated a Special Purpose Vehicle named M/s. Shree Maheshwar Hydel Power Company Limited (for brevity corporate debtor/SMHPCL) as to implement the said project. 5. It is submitted on 11th November, 1994, Power Purchase Agreement was signed between the corporate debtor and Madhya Pradesh State Electricity Board for purchase of 100% power from the project. In the year 1997, at the request of....
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....at in order to address the Corporate Debtor's persistent default and to explore the possibility of reviving the Project, a task force was constituted in September 2004, by the Ministry of Power and Finance with State Government of Madhya Pradesh wherein the applicant was also a part of the said task force. Simultaneously, the corporate debtor appointed Infrastructure Leasing and Financial Services Limited as financial advisors to work-out a Financial Realignment Plan for the project. The FRP was approved by each of the lenders on various dates vide their respective realignment letters. The corporate debtor approached applicant to take over as the Lead Institution from IFCI Limited and also to revalidate its financial assistance for the Project and after further discussion with the Corporate Debtor, the applicant revalidated its support of Term Loan of Rs. 325,00,00,000/-. 9. It is further stated by applicant that, in terms of the sanction letter dated 2nd March, 2005 for revalidation of loan, it was agreed between the parties that the applicant, in consultation with other consortium lenders, will approve the appointments of Chairman, Managing Director and Director (Finance) ....
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....ding to the tune of Rs. 3,75,00,00,000/- in the nature of subordinate loan, to facilitate the "financial closure" and to ensure proper implementation of the Project. 13. It is further stated that a Common Loan Agreement was also executed on 29th September, 2006 between the applicant, Rural Electrification Corporation Limited, Housing & Urban Development Corporation Limited and the Corporate debtor for a loan aggregating to Rs. 834,00,00,000/-. 14. It is further submitted that on 29th September, 2006, the Financial Closure was achieved with the execution of the Common Loan Agreement (for brevity CLA) and Subordinate Loan Agreement (for brevity SLA) and as per the agreed terms of the Subordinate Loan Agreement, the applicant had the right to convert at its option a part or full of subordinate loan into fully paid up equity shares of the corporate debtor at par. It is pertinent to mention that without the sanction of the Subordinate Loan Agreement by the applicant, the Project would have been adversely impacted as submitted in the proceeding paras and all works at the Project site would have come to a standstill. 15. It is further submitted that in accordance with the require....
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....ersion dated 27th May, 2016, the Board of the Corporate Debtor was requested to convert part subordinate loan amounting to Rs. 66,10,00,000/- into equity, in terms of the relevant clause of the Subordinate Loan Agreement. That the corporate debtor in its meeting held on 1st June, 2016 converted the subordinate loan of Rs. 66,10,00,000/- into equity of Rs. 10/- each which were issued to applicant. 19. It is further submitted that following the non-compliance by the Corporate Debtor and the Promoters, the applicant on behalf of consortium of lenders, issued a loan recall notice dated 5th January 2016 to the corporate debtor for payment of all outstanding dues. However, no repayment of the outstanding amounts was received by the lenders. 20. It is submitted that by virtue of the transfer of 6,57,46,779 number of equity shares of Rs. 10/- and conversion of subordinate loan of Rs. 66,10,00,000/- into 6,61,00,000 equity shares of Rs. 10/- each, the applicant became a shareholder of the corporate debtor w.e.f from 1st June, 2016 holding 13,18,46,779 equity shares of Rs. 10/- constituting 23.32% of the entire shareholding of the corporate debtor. It is also pertinent to mention that ....
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....oan Recall Notice was served on corporate debtor by the applicant on 17.01.2018, duly received by Corporate debtor and not disputed. 24. It is further submitted that the amount of financial debt, owed by the corporate debtor to the applicant which is in default as on 15.01.2018, is to the tune of Rs. 2789,42,00,000/- including outstanding interests amounts payable plus other charges. 25. The case of the applicant is that the debt is acknowledged in the Balance Sheet for the F.Y. 2013-14 signed by Sh. Mukul Kasliwal (Promoter) as one of Directors on 17.11.2014, thereafter the debt was further acknowledged in the Balance Sheet of the corporate debtor for F.Y. 2016-17 signed on 28.08.2017. Therefore fresh period of limitation starts from 28.08.2017 and expires on 28.08.2020. Section 7 of the application filed on 16.02.2018 qua the said debt is thus within limitation. Further, there is acknowledgment of liability also in the meeting of the Board of Directors of the Corporate Debtor held on 29.09.2015 duly attended by Sh. Mukul Kasliwal, one of the promoters. 26. The applicant's claim is based upon following documents: * Loan agreement dated 04.12.1998 * C....
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....he respondent company, controlled by the applicant will not defend its own interest or the interest of its shareholders, as the management of the respondent is under control of the applicant. The following facts and circumstances make this clear. e. On 18.01.2018, the respondent company was served with the recall notice dated 17.01.2018, whereby the applicant called upon the respondent to make payment of total outstanding amount of Rs. 2139.20 crore within 15 days from the receipt of the notice. However, the management of the respondent suppressed the said notice from Board of Respondent and shared the said notice with the Board of the Respondent only on 29.91.2018, i.e. 11 days after the receipt of the said notice. f. Considering the sensitivity of the issue, though the respondent should have immediately scheduled a Board Meeting on a urgent basis to discuss the said Recall Notice dated 17.01.2018. however, for reasons best known to the respondent, the respondent unilaterally decided that the Recall Notice would be placed before Board of Respondent for consideration in an meeting scheduled to take place on 07.02.2018, i.e. much after the expiry of the 15 days per....
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....ith comments in a revised reply. j. Further it is stated that the respondent reply dated 21.03.2018 to the recall notice dated 17.01.2018 was sent after the Hon'ble NCLAT's Judgment dated 12.03.2018 without placing the same before the board of Directors, or seeking their concurrence. k. Further, it is also mentioned that the Recall notice dated 17.01.2018 by the applicant was served upon the respondent on 18.01.2018 and the respondent circulated a draft reply of the said notice to the Board of Respondent only on 19.02.2018 at 7.14 pm. Meanwhile, on around 16.02.2018, the applicant filed the application under Section 7 of the Code before this Tribunal and same was served upon the respondent on or about 19.02.2018. l. It is submitted that the management of the respondent deliberately delayed sending its reply to the Recall Notice and first draft of the same was in fact circulated to the Board of the Respondent for comments only after receipt of the petition. Further, the respondent's reply dated 21.03.2018 to the Recall Notice dated 17.01.2018 was only sent after a period of more than 2 months, without approval from the Board of the respondent a....
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.... are - (1) Loan Agreement dated 4.12.1998; (2) Amendatory and Restated Agreement dtd. 16.09.2005; (3) Common Loan Agreement dtd. 29.09.2006; (4) Subordinate Loan Agreement dtd. 29.09. 2006; (5) Master Restructuring and Loan Agreement dated 22.06.2010 and (6) Additional Loan Agreement dated 27.04.2017. a.5 It has been argued that all the loan agreements have been entered into by applicant while in complete control of the Corporate Debtor. It is alleged that Hon'ble NCLAT has already held that the entire basis of the past loan agreements executed by the Lenders is illegal since the terms of Loans Agreements were approved by the Board of Directors much after the Loan Agreements had been executed by applicant in violation to Proviso of Section 63(3) of Companies Act and the Respondent Company was completely under the control of applicant at the relevant time. a.6 The entire basis of the Additional Loan Agreement Dated 27.04.2017 is that the said Loan Agreement is being entered into on the strength of the invocation of pledge and conversion of sub-debt into equity and supposedly in exercise of Scenario II of the High Level Committee Report. The Additional Loan Agre....
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....f the Limitation Act, 1963 started ticking from 31.03.2012 i.e. from date of declaration as NPA and 31.03.2015. Since all the aforementioned documents are post September 2015, they do not amount to an acknowledgement for the purposes of Section 18 of the Limitation Act. 31. In response to the objections against the present application IA No. 53/2018 Original applicant/PFCL submitted that: b.1 It is stated by the Financial Creditor that the GoMP has also filed written submission on 27.02.2020 in the present proceeding, favouring resolution under IBC. Furthermore, the MCA has filed an affidavit dated 20.11.2018 stating that no resolution could be reached between the promoters and lenders and it has no comments on IBC application. Thus, resolution being sought via present proceeding is wholly in consonance with the Hon'ble NCLAT directions in Para 51 of the Order dated 12.03.2018. The Hon'ble NCLAT has observed that "The Project has been delayed endlessly." Notably, more than three more years have elapsed from the date of the said Order. Thus, the only way forward is resolution of Corporate Debtor under the framework of IBC. b.2 It is further submitted tha....
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....re the present Application is not maintainable. It is submitted that the Order dated 18.12.2020 passed in Section 241-242 proceeding has no bearing on the present proceeding under IBC. In fact in Para 29 of the Order, the NCLT has said that ".......as far as aspect of examination of illegality of recall notice is concerned, the same can be examined even in the course of proceedings filed under Section 7 of the IBC Code, 2016 as an application filed hereunder can be admitted only when there is a debt which is due and payable both in law and in fact and a default has occurred in payment thereof." Pertinently, in the said Order, this Hon'ble Tribunal further clarified that such examination has to be as per the dictum of the Hon'ble Supreme Court in M/S. Innoventive Industries Ltd. V. ICICI Bank & Anr., (2018) 1 SCC 407. 32. IA-54 of 2018 is filed by one strategic foreign investor Power Infrastructure India being company incorporated under laws of Republic of Mauritius for intervening in the main Insolvency application. The applicant has pleaded to intervene in the present application filed by one of the financial creditors under Section 7 of the IB Code against the Corporat....
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....led under section 65 of Code, the main case of the Entegra Limited is that the company was declared NPA on 31.03.2012, while being under the control of the applicant itself. It is relied that since this fact has already been held previously by Courts/Tribunals, the movement of amounts disbursed under the Loan Agreements since 2005 into the Trust and Retention Accounts (hereinafter be referred as 'TRA') were being controlled and regulated by the applicant only. It is further stated that the fact of complete control of applicant over the management and the accounts into which the Loan amounts were being disbursed is further established by Letter dated 08.11.2005 issued by the applicant. It has been pointed out that the Letter of applicant dated 02.03.2005 records the control of applicant/creditors as a pre-condition for revalidating the earlier loan assuring that funds will be used primarily for the project. d.1 It is also stated that despite being under no obligation to do so and despite the restrictive amended Articles of Associations (AoA) which inhibited infusion of fresh equity, the Promoters/Intervenor herein to enable the continuance of project, kept infusing ....
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....7.04.2017 was admittedly on 22.06.2010 and Company was declared an NPA on 31.03.2012. thereafter, much beyond the period of 3 years, while in the position of majority equity-shareholders of the respondent company and while having management control of corporate debtor, applicant and other Lenders executed another Additional Loan Agreement dated 27.04.2017 with corporate debtor, revalidating the Loans which already stood time-barred. This Additional Loan Recall Notice further contains onerous conditions giving the Lenders complete control over the disbursement of monies under the said Loan Agreement. 34. Heard all the parties being Financial creditor, corporate debtor, two proposed interveners being promoters and the strategic foreign investor, as well as the applicant/promoters in IA-60 of 2020 under Section 65 of the Code. Perused records and written submissions filed by the respective parties. 35. The main objections raised by the proposed interveners and loan recall notice dated 17.01.2018 is baseless, illegal and hence, there is no default committed by the respondent corporate debtor. There is also an issue raised of limitation in respect of financial debt which according....
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....of the 'I & B Code' merely on the ground that the Directors and Promoters have engaged in Scheme having striking similarity with the infamous chit funds or Ponzi Schemes. The Promoters/Directors may face serious criminal implication for breach of the orders of SEBI, but that cannot be ground to reject the application under Section 7 against the 'Corporate Debtor', or to initiate any proceeding under Section 65 against the Appellants, who have no connection with the Directors or Promoters of the 'Corporate Debtor'. Para No. 17 : For the reasons aforesaid, we set aside the impugned judgment dated 5th July, 2018 and remit the case to the Adjudicating Authority to admit the application after notice to the 'Corporate Debtor' so as to enable the 'Corporate Debtor' to settle the claim. No intervention application can be entertained by the Adjudicating Authority before admission of the application". Thus in view of above IA No. 53 of 2018 and IA No. 54 of 2018 filed by proposed interveners are rejected and disposed of. 37. Further, to note that the interveners/respondent corporate debtor never disputed that the loan amounts were disbur....
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.... in view of all of Corporate debtor becoming NPA in 2012 and application filed in 2018. The Corporate debtor pointed out the conduct of applicant because of which default had occurred, which cannot be determined in the proceeding under Section 7 of the Code. 40. On the point of limitation admittedly the declaration of NPA was made in the year 2012 however, it is seen that the debt is acknowledged in the Balance Sheet for the F.Y. 2013-14 signed by Sh. Mukul Kasliwal (Promoter) as one of Directors on 17.11.2014, thereafter the debt was further acknowledged in the Balance Sheet of the corporate debtor for F.Y. 2016-17 signed on 28.08.2017. Therefore fresh period of limitation starts from 28.08.2017 and expires on 28.08.2020. Section 7 of the application filed on 16.02.2018 therefore, the default is thus within limitation. Now it is settled by the Hon'ble Supreme Court that even after NPA status, if the default continues and the debt is admitted in Balance Sheet, fresh lease of limitation gets triggered and a consequence the application can be admitted as held in Asset Reconstruction Company (India Limited) Vs. Bishal Jaiswal & Anr. 41. Further, there is acknowledgment of li....
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....taken lightly as it has led to financial disaster. 44. Since last number of years it is seen that all parties are knee-deep involved in blame game and mudslinging, probably to save their own skin. In present scenario there is no other remedy or solution which may bring some streamline/discipline in the affairs of the Corporate Debtor than the CIRP. Unless all the parties before us and other affected parties are removed from control of the Corporate debtor, the multiple cross litigations, appeals preferred by stakeholders, debtor, workmen-employee, will not come to an end and there cannot be any beginning of bringing Corporate Debtor out of quagmire. It is further seen that all parties have blatantly flouted order of Hon'ble NCLAT dated 12.03.2018 in Co. Appeal (AT) No. 237 of 2017 filed by present applicant. The order dated 12.03.2018 para 51 and 52 relevant directions given to parties are reproduced herein:- "Para 51 The project appear to have made some progress but remain incomplete. The completion of the Project is necessary in the national interest. It will benefit the farmers in the State of Madhya Pradesh. The Project has been delayed endlessly. The volumin....
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....n 9 for their dues as arrears as they are not terminated from services till date, pending for more than two years. It seems and gives impression leading to conclusion that there is a deliberate attempt to frustrate resolution of corporate debtor and the project has become mirage. Govt. of MP has given counter guarantee so why the proceedings should not be initiated for recovery against this guarantor merely because it being Government? Where in law it is mentioned that government is exempt from any liability/responsibility undertaken by it? The task force is appointed in 2004 by Ministry of Power and Finance by GOMP to supervise the functioning and progress of project inspite of which there is no improvement but deterioration in the situation from bad to worse year after year. The lenders and promoters of the Corporate debtor have totally failed to protect the prevalent project as for seen, only on technical issues like who was in control of project/corporate debtor and who is responsible for the disastrous situation reached today. The prime purpose of the project floating for betterment of rural farmers of Madhya Pradesh as well as development in infrastructure by installing hydro....