TaxTMI 
TaxTMI 
2023 (1) TMI 302
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..... 89 of 2022, before this 'Tribunal', as an 'Aggrieved Person', on being dissatisfied with the 'impugned order' dated 04.02.2022 in IBA/757/2019, (Filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the I & B (Application to Adjudicating Authority) Rules, 2016, ('National Company Law Tribunal', Division Bench - I, Chennai). 2. The 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai), while passing the 'impugned order' dated 04.02.2022 in IBA/757/2019, among other things, at Paragraphs 13 to 17, had observed the following: 13. "We have heard the submission made by the Learned Counsel for the parties and perused the records, including the documents placed on file. From the averments made in the Application it is seen that the Corporate Debtor has committed default in repayment of its credit facilities which it had availed from the Financial Creditor by way of various credit facilities sanctioned, granted and disbursed by the Applicant. The record from the Information Utility also posits the same fact, as the same shows as "Deemed to be Authenticated". Further, it may be seen that the Financial Creditor....
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....tion the payments made by the Corporate Debtor during pendency of the present Application, Learned Counsel for the Applicant stated during hearing on 24.01.2022 that the present default is nearly Rs.1458 Crores. The same was admitted by the Learned Counsel for the Respondent. Learned Counsel for the Respondent vehemently stated during the hearing on 24.01.2022, that there is no default, when questioned, the basis of the same, our attention was drawn towards the payments made by the Respondents during the intervening period by the Corporate Debtor to the Applicant more particularly during the financial year 2020 to date. During the hearing a question was put by the Bench to the Learned Counsel "whether the account of the Respondent is NPA in the books of the Applicant Bank?". The Learned Counsel for the Respondent refused to answer and directed the same to be answered by Learned Counsel for the Applicant. Learned Counsel for the Applicant replied that the account of the Respondent is NPA with the Applicant and the amount of default at present is Rs.1458 Crores. Learned Counsel for the Respondent could not oppose this answer. 16. Thus, taking into consideration the facts and....
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....ication for stay, direction, condonation of delay, exemption from production of copy of order appealed against or extension of time prayed for in pending matters shall be in prescribed form and the requirements prescribed in that behalf shall be complied with by the applicant, besides filing an affidavit supporting the application." 5. The Learned Counsel for the Appellant submits that the 'Adjudicating Authority', having given 'Liberty', to file a 'Petition', for 're-instatement', it should be treated, to be 'Liberty', to file a fresh 'Application' / 'Petition', as per Section 7 of the I & B Code, 2016, for same cause of action. 6. The Learned Counsel for the Appellant brings it to the notice of this 'Tribunal', that the 'Adjudicating Authority', had failed to take 'notice' of the developments that took place, after the 'Dismissal' of the 'Application' (filed under Section 7 of the Code as 'Withdrawn' on 19.12.2019). As a matter of fact, the 'Lender Consortium', has accepted the 'Additional Sum' of Rs.1765.34 Crores, out of Rs.3100 Crores. Also that, the '1st Respondent / Bank / Financial Creditor', should have filed a fresh 'Application', under Section 7 of the I & B Code, ....
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....der the 'Share Pledge Agreements'. 13. The Learned Counsel for the Appellant submits that because of the fact that the 'Lender Consortium', having full control of the 'Corporate Debtor', and effectively, holding '51% plus 40.38%' (approx. 91.38%) of the 'Paid up Equity Share Capital of the Corporate Debtor', and hence it was not open to them, to press the 'Application', under Section 7 of the Code. As a majority Shareholder, for 'Default', if any, it could have moved an 'Application', under Section 10 of the Code and not under Section 7 of the Code. 14. The Learned Counsel for the Appellant contends that the 'initiation' of 'Corporate Insolvency Resolution Process', by the '1st Respondent / Bank', during the shadow period i.e., from 25.03.2020 to 25.03.2021, when the restrictions imposed by the Section 10A of the Code, were in force, is bad in 'Law'. Added further, taking cognisance of the situation caused by the 'Covid-19 Pandemic', the 'initiation' of 'Corporate Insolvency Resolution Process', was 'suspended for a period of one year', by enacting, 'Section 10A of the I & B Code, 2016'. 15. The Learned Counsel for the Appellant takes a stand that, it is evident from Parag....
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.... 0 0 300 0.5 3 Meenakshi Power (Imp. Coal) 900 0 0 1,000 1.1 4 Coastal Energen (Imp Coal) 1,200 (-) 200 0 2,165* 2,691** 1.9 2.3 21. The Learned Counsel for the Appellant submits that after filing of an 'Application', under Section 7 of the I & B Code, 2016, along with a 'Consortium of Investors' (including the 'Appellant' - 'OTS Consortium'), made an offer of Rs.3000 Crores, as a 'One Time Settlement' on 15.05.2019, inspite of the fact that the sustainable 'Debt', was only Rs.2450 Crores. That apart, on 17.05.2019, the 'Lender Consortium', acknowledged the 'Offer', and called upon 'OTS Consortium', to make a 'payment of Rs.150 Crores', on or before 15.06.2019. Resting upon the request made by the 'Lender Consortium', the 'OTS Consortium', made plurality of payments on 16.05.2019, 06.06.2019 and 14.06.2019 cumulatively, amounting to Rs.150 Crores. Also that, it was clarified to the '1st Respondent / Bank', by the 'OTS Consortium', that the payments were against the 'One Time Settlement'. 22. The Learned Counsel for the Appellant brings it to the notice of this 'Tribunal', that the consideration, payable under the 'One Time ....
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....o be retained by the 'Lender Consortium'. 26. The Learned Counsel for the Appellant submits that the 'OTS Consortium', is ready to 'Settle' the matter in terms of Section 12A of the Code, for Rs.1,000 Crore plus, which is much higher than the 'Reserve Price' of 'Rs.796.25 Crores', at which the 'Lender Consortium', intended to sell the entire 'Debt' of the 'Corporate Debtor', to the 'ARCs' / 'NBFCs' / 'Financial Institutions', etc. Further, if they agree to it, it will exhibit the 'Bonafide', on the part of the 'Lender Consortium', to save the 'Corporate Debtor', from 'Insolvency', being the 'largest Shareholder', of the 'Corporate Debtor'. 27. The Learned Counsel for the Appellant contends that when the request for 'Withdrawal', was made by the '1st Respondent / Bank', on behalf of the 'Lender Consortium', for the 'Application', filed under Section 7 by the '1st Respondent / Bank / Financial Creditor', a 'wrong statement', was made, by way of an Affidavit, by the '1st Respondent / Bank', which was recorded by the 'Adjudicating Authority' ('Tribunal') in the Order dated 19.12.2019 in IBA/757/2019, wherein, it is observed as under: "It is respectfully submitted that th....
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....65 Crores in a separate Account. Appellant's Decisions: 32. The Learned Counsel for the Appellant submits that a 'Party', cannot be permitted to secure an 'Advantage', under an 'Instrument' and at the same time, setup a 'Plea', disputing the 'Validity', of the very same instrument, as per decision in Union of India v. N. Murugesan, reported in (2022) 2 SCC at Page 25, Spl Pgs: 38 to 40, wherein at paragraphs 26, 27, 27.1 to 27.3, wherein it is observed as under: Approbate and Reprobate: 26. "These phrases are borrowed from the Scots law. They would only mean that no party can be allowed to accept and reject the same thing, and thus one cannot blow hot and cold. The principle behind the doctrine of election is inbuilt in the concept of approbate and reprobate. Once again, it is a principle of equity coming under the contours of common law. Therefore, he who knows that if he objects to an instrument, he will not get the benefit he wants cannot be allowed to do so while enjoying the fruits. One cannot take advantage of one part while rejecting the rest. A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has....
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.... the appellants rely are as follows: (Verschures Creameries Ltd. case, KB pp. 611-612) "... A plaintiff is not permitted to 'approbate and reprobate'. The phrase is apparently borrowed from the Scotch law, where it is used to express the principle embodied in our doctrine of election - namely, that no party can accept and reject the same instrument: Ker v. Wauchope [(1819) 1 Bligh PC 1, at pg 21] : Douglas-Menzies v. Umphelby [(1908) AC 224, at p. 232 (PC] . The doctrine of election is not however confined to instruments. A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction". It is clear from the above observations that the maxim that a person cannot 'approbate and reprobate' is only one application of the doctrine of election, and that its operation must be confined to reliefs claimed in respect of the same transaction and to the persons who are parties thereto. The law is thus stated in Halsbury's Laws of England, Vo....
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....ct or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience. 26. It is evident that the doctrine of election is based on the rule of estoppel, the principle that one cannot approbate and reprobate is inherent in it. The doctrine of estoppel by election is one among the species of estoppel in pais (or equitable estoppel), which is a rule of equity. By this law, a person may be precluded, by way of his actions, or conduct, or silence when he has to speak, from asserting a right which he would have otherwise had." 27.3. Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd., (2013) 5 SCC 470: (SCC pp. 480-81, paras 15-16) "I. Approbate and reprobate 15. A party cannot be permitted to "blow hot-blow cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract, or conveyance, or of an order, he is estopped from denying the validity of, or the binding effect ....
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.... or which can be implied from the circumstances. Mulla proceeds to observe: "In England, 'it has been considered a general rule since Clayton case that when a debtor makes a payment he may appropriate it to any debt he pleases, and the creditor must apply it accordingly'. Where several distinct debts are owing by a debtor to his creditor, the debtor has the right when he makes a payment to appropriate the money to any of the debts that he pleases, and the creditor is bound, if he takes the money, to apply it in the manner directed by the debtor. If the debtor does not make any appropriation at the time when he makes the payment, the right of appropriation devolves on the creditor." 12. The rule of appropriation as applied in India was summed up by T.L. Venkatarama Aiyar. J. (as he then was) in the Full Bench decision of the Madras High Court in Garimella Suryanarayana vs. Gada Venkataramana Rao (AIR 1953 Mad. 458). His Lordship stated: (AIR pp. 459 -60, para 5) 5. "The principles governing appropriation of payments made by a debtor are under the general law well settled. When a debtor makes a payment, he has a right to have it appropriated in such....
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..... 5. Specific denial.- (1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability. Provided that the Court may in its discretion require any fact so admitted to be proved otherwise than by such admission. (2) Where the defendant has not filed a pleading, it shall be lawful for the Court to pronounce judgment on the basis of the facts contained in the plaint, except as against a person under a disability, but the Court may, in its discretion, require any such fact to be proved. (3) In exercising its discretion under the proviso to sub-rule (1) or under sub-rule (2), the Court shall have due regard to the fact whether the defendant could have, or has, engaged a pleader. (4) Whenever a judgment is pronounced under this rule, a decree shall be drawn up in accordance with such judgment and such decree shall bear the date on which the judgment was pronounced." 13. Thus, if a plea which was relevant for the purpose of maintaining a suit had not been specificall....
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....answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. Control of a company is not divine right.-When a firm defaults on its debt, control of the company should shift to the creditors. In the absence of swift and decisive mechanisms for achieving this, management teams and shareholders retain control after default. Bankruptcy law must address this. Objectives..." (emphasis in original) 79. In Innoventive Industries Ltd vs. ICICI Bank (supra) this Court noted the objectives set by the Bankruptcy Law Reforms Committee in recommending the IBC: (SCC pp. 426-28, para 16) "16. ...'... The Committee set the following as objectives desired from implementing a new Code to re....
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.... process, through the regulated professional. III. The Code will ensure a time-bound process to better preserve economic value. (8) The law must ensure that time value of money is preserved, and that delaying tactics in these negotiations will not extend the time set for negotiations at the start. IV. The Code will ensure a collective process. (9) The law must ensure that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution. V. The Code will respect the rights of all creditors equally. (10) The law must be impartial to the type of creditor in counting their weight in the vote on the final solution in resolving insolvency. VI. The Code must ensure that, when the negotiations fail to establish viability, the outcome of bankruptcy must be binding. (11) The law must order the liquidation of an enterprise which has been foun....
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....beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." 82. IBC has overriding effect over other laws. Section 238 of the IBC provides that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law, for the time being in force, or any other in....
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....na Iyer J., the interpretative effort "must be illumined by the goal, though guided by the words." 39. The Learned Counsel for the Appellant cites the Judgment of the Hon'ble Supreme Court of India in Swiss Ribbons (P) Limited & Anr. v. Union of India & Ors. (vide Writ Petition (Civil) No. 99 of 2018 dated 25.01.2019, reported in India Kanoon at Pages 18 & 19, wherein at Paragraph 12, it is observed as under: 12. "It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters / those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corpora....
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.... the contract. They can always plead in defence deficiencies on the part of the banks and financial institutions." 41. The Learned Counsel for the Appellant cites the Judgment of the Hon'ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Limited, (vide Civil Appeal No. 4633 of 2021 dated 12.07.2022), reported in (2022) 8 SCC Online SC 841 at Page 352; Spl Pgs.: 373-376, wherein at Paragraphs 65 to 69 and 75 to 78, it is observed as under: 65. "It is well settled that the first and foremost principle of interpretation of a statute is the rule of literal interpretation, as held by this Court in Lalita Kumari v. State of Uttar Pradesh. If Section 7(5)(a) IBC is construed literally the provision must be held to confer a discretion on the Adjudicating Authority (NCLT). 66. In Hiralal Rattanlal v. State of Uttar Pradesh, this Court held:- (SCC P. 224, Para 224) "22. ... In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that we have to see at the very outset is what does that provision say? If the provision is unambiguous and if from that provision, the legisl....
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.... Operational Creditor. 76. The fact that legislature used 'may' in Section 7(5)(a) IBC but a different word, that is, 'shall' in the otherwise almost identical provision of Section 9(5)(a) shows that 'may' and 'shall' in the two provisions are intended to convey a different meaning. It is apparent that legislature intended Section 9(5)(a) IBC to be mandatory and Section 7(5)(a) IBC to be discretionary. An application of an Operational Creditor for initiation of CIRP under Section 9(2) IBC is mandatorily required to be admitted if the application is complete in all respects and in compliance of the requisites of the IBC and the rules and regulations thereunder, there is no payment of the unpaid operational debt, if notices for payment or the invoice has been delivered to the Corporate Debtor by the Operational Creditor and no notice of dispute has been received by the Operational Creditor. The IBC does not countenance dishonesty or deliberate failure to repay the dues of an operational creditor. 77. On the other hand, in the case of an application by a Financial Creditor who might even initiate proceedings in a representative capacity on behalf of all financial cre....
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....serving borrower getting financial assistance. The obligation to act fairly on the part of the administrative authorities was evolved to ensure the rule of law and to prevent failure of justice. This doctrine is complementary to the principles of natural justice which the quasi-judicial authorities are bound to observe. It is true that the distinction between a quasi-judicial and the administrative action has become thin, as pointed out by this Court as far back as 1970 in A.K. Kraipak V. Union of India [1969 (2) SCC 262]. Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi-judicial action. If the High Court cannot sit as an appellate authority over the decisions and orders of quasi-judicial authorities, it follows equally that it cannot do so in the case of administrative authorities. In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them. They have "a right to choose between more than one possible course of action upon which there is room for reasonable people....
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....at in the new tender process Clauses 6(a) and 6(b) have been altogether deleted which is only to favour M/s. Monarch Infrastructure (P) Ltd. and, therefore, we should not encourage such activity in these matters. There have been several decisions rendered by this Court on the question of tender process, the award of contract and evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus: (i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest; (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate: (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons. ....
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....was an 'Admitted Acknowledgement of Debt', and it was pleaded on behalf of the 'Corporate Debtor' that several 'Resolution Plans', were submitted to 'restructure the Debt', but of no avail. 48. Also that a 'technical plea', was taken by the 'Corporate Debtor', that the 'Authorised Representative' of the 'Applicant', was authorised vide 'Board Resolution' in 1999, while the I & B Code, 2016, came into existence in 2016. However, a reliance was placed, among other things, on the decision of the Hon'ble Supreme Court of India in Vidarbha Industries case. The 'Adjudicating Authority' ('Tribunal'), after taking into account that the 'Corporate Debtor', had repaid a sum of Rs.16,915 Crores and it was a healthy viable concern, made an observation that the existence of a 'Debt and Default', were not the 'sole criteria, while 'Adjudicating', an 'Application', under Section 7 and viability and the overall financial health of the 'Corporate Debtor', was also taken into consideration and dismissed the 'Petition'. 1st Respondent / Bank's Submissions: 49. The Learned Senior Counsel for the '1st Respondent / Bank', contends that the 'Appellant', is not a 'Party', to the Proceedings, befo....
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....rocess', was initiated. Admittedly, there is a 'Debt' and 'Default' and the only allegation made on behalf of the 'Appellant' is that, 'OTS', was not 'entertained', by the '1st Respondent / Bank / Financial Creditor'. 53. It is represented on behalf of the '1st Respondent / Bank' that 'OTS', in itself, is an 'Admission', and cannot be a reason for dismissing an 'Application' / 'Petition', filed under Section 7 of the 'I & B Code, 2016, where the 'Debt' and 'Default' is proved, and that the 'Debt', is more than Rupees One Lakh, since the 'Petition', was filed by the '1st Respondent / Bank', prior to the 'increase in threshold Limit'. 54. The Learned Counsel for the 1st Respondent / Bank refers to the decision of the Hon'ble Supreme Court of India in Dena Bank v. C. Shivakumar Reddy (2021) SCC Online SC 543, wherein it was clarified that even an 'OTS', of a live claim would also construe an 'Acknowledgement of Debt', to attract Section 18 of the Limitation Act, 1963. 55. The Learned Counsel for the 1st Respondent / Bank refers to the decision of the Hon'ble Supreme Court of India in E S Krishnamurthy & Ors. v. M/s. Bharathi Hi Tech Builders Pvt. Ltd., (vide Civil Appeal No. ....
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.... an operational creditor means a person to whom an operational debt is owed and an operational Company Appeal (AT) (Insolvency) No. 99 of 2020 13 of 24 debt under Section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor -- it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the Application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part ....
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....ed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the Company Appeal (AT) (Insolvency) No. 99 of 2020 15 of 24 Adjudicating Authority is satisfied that a default has occurred, the Application must be admitted unless it is incomplete." 57. The Learned Counsel for the 1st Respondent / Bank adverts to the Judgment of the Hon'ble Supreme Court in Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. (vide Civil Appeal No. 9405 of 2017 dated 21.09.2017, reported in India Kanoon, wherein at Paragraph 19, it is observed as under: 19. "The financial creditor can file an application before the National Company Law Tribunal along with proof of default and the name of a resolution professional proposed to act as the interim resolution professional in respect of the corporate debtor. The requirement to provide proof of default ensures that financial creditors do not file frivolous applications or applications which prematurely put the corporate debtor into insolvency resolution proceedings for extraneous considerations. The Adjudicating Authority / Tribunal can, within fourteen days from the date of receipt of the application, ascerta....
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....ding the provisions together, it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020." 59. The Learned Counsel for the 1st Respondent / Bank relies on the Judgment of this 'Tribunal', dated 14.08.2018, in Axis Bank Ltd. v. Edu Smart Services Private Limited (vide Comp. App (AT) (INS.) No. 302 of 2017), wherein. it was held as under: "a claim can be (i) a right to payment whether disputed, undisputed, secured or unsecured or (ii) a right to payment arising from a breach of contract irrespective of whether the same is matured, unmatured, disputed or undisputed. Existence of 'default' has nothing to do with admission of insolvenc....
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....ich was regarding filing of affidavit to delete names of personal guarantors from the section 7 application. (attached at p. 149 of Appeal Paperbook). 9. The other contention of the Learned Counsel of the Appellant is that the Appellant had submitted an OTS proposal to the financial creditor (State Bank of India), which was pending decision, and hence the Adjudicating Authority should not have passed admission order on section 7 application. The acceptance of the settlement proposal by the financial creditor is a matter entirely in the ambit of the financial creditor (SBI) and we do not think that the proceedings before the Adjudicating Authority should have been held up and delayed, waiting for a response by the State Bank of India. IBC does not provide for keeping the proceedings in abeyance and the application for admission has to be decided in a stipulated timeframe. If a settlement would have been reached, the Appellant would have had recourse to Section 12A of the IBC. We, therefore, do not find this contention of the Appellant sustainable. 10. The Innoventive Industries judgment (supra) of the Hon'ble Supreme Court does not put any bar on the admission of a....
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....Appellant'. In any event, it is projected on the 1st Respondent / Bank, that there is an 'admission of debt and default'. Hence, the 'Appeal', is bad in 'Law' and on 'Facts'. 66. The Learned Counsel for the 1st Respondent / Bank points out that the '1st Respondent / Bank / Financial Creditor', has 'Second Charge' on the 'Securities', along with the 'Consortium Subordinate Lenders', Viz. Jammu and Kashmir Bank, e-State Bank of Mysore, State Bank of India, e-State Bank of Patiala, UCO Bank for the Subordinate Loan in terms of the Amended and Restated Subordinate Loan Agreement dated 05.07.2016. 67. The Learned Counsel for the 1st Respondent / Bank points out that the 'Bank', has 'charge', in respect of 'Securities', under the 'Working Facility Agreement' dated 18.12.2015 along with other 'Consortium Lenders', Viz. Bank of India, Indian Overseas Bank, Jammu and Kashmir Bank, Punjab National Bank, State Bank of India, e-State Bank of Mysore, e-State Bank of Patiala, Andhra Bank, Canara Bank, Central Bank of India, Corporation Bank, Indian Bank, e-State Bank of Hyderabad, Tamilnadu Mercantile Bank. 68. The Learned Counsel for the 1st Respondent / Bank, adverts to the decision o....
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....h a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove." 69. The Learned Counsel for the 1st Respondent / Bank refers to the decision of the Hon'ble Supreme Court of India, in the matter of State Bank of India v. Arvindra Electronics Pvt. Ltd. (vide Civil Appeal No. 6954 of 2022 dated 04.11.2022), reported in MANU/SC/1429/2022, wherein at Paragraph 6.7, 7,7.1 and 8, it is observed as under 6.7 It is required to be noted that under the OTS Scheme which was originally sanctioned in the year 2017 the borrower was required to pay Rs.10,53,75,069.74 against the outstanding of Rs.13,99,89,273.99. Therefore, under the original sanctioned OTS Scheme the borrower was getting the substantial relief of approximately 3 crores. The Bank agreed and accepted the OTS offer on the terms and conditions mentioned in the letter dated 21.11.2017. In the sanctioned letter dated 21.11.2017 it was ....
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....f the order of the 'Adjudicating Authority' dated 24.09.2020. When a 'Settlement' was arrived at between the parties, it is the pre-module duty of the 'Corporate Debtor' to effect payments proposed by virtue of the 'Settlement' after committing 'default', the 'Appellant' cannot take altogether different stand, especially when the tenor and spirit of 'Share Purchase Agreement' was not adhered to. To put it precisely, when the 'Appellant' had promised to repay the advanced sum paid by the 'Respondent'/'Applicant' to it, then there is not only a violation of the 'Share Purchase Agreement' dated 21.11.2012 but also the non-payment of amounts comes squarely under definition of Section 5(8) of the I&B Code pertaining to 'Financial Debt'. 67. In the present case, the 'Adjudicating Authority' in the 'Impugned Order' dated 30.03.2021 in IBA/13/KOB/2020 had clearly at paragraph 6 had observed as under: 'the Corporate Debtor did not come forward to make the payment as per the consent terms in the settlement which was due as on 30.11.2020 and that they sought ti....
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....; came to the conclusion that the 'Respondent'/'Applicant' had proved the existence of a 'debt' as well as existence of 'default' and had discussed in detail about the same in the order dated 25.08.2020, which speaks for itself. 70. That apart, the 'Adjudicating Authority' in the 'Impugned Order' dated 30.03.2021 had opined that 'the present application has been settled after Admission before making the public announcement as per Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The I&B Code does not bar the 'Tribunal' to admit the matter which was settled after Admission. 71. Be that as it may, considering the entire conspectus of the facts and circumstances of the case, taking into account of the fact that when the 'Respondent'/'Applicant' paid an advance of Rs.1,00,00,000/-on 21.11.2012 and because of the numerous encumbrances found out later, in regard to the properties and assets of the 'Corporate Debtor' which culminated into an 'Addendum' dated 27.11.2012 being entered into between the parties to the 'Agreement', in....
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....ed 18.03.2019 addressed to by the 'Corporate Debtor' to the Bank. The main document in these additional documents is the terms of OTS which is not disputed therefore, we are of the considered view that no prejudice would be caused if the said OTS document is taken on record. The other documents relied upon by the Bank is pursuant to the OTS and also a copy of I.A. 1155/2016 which is a public document and we see no substantial reasons not to take these documents on record as they are relevant to the facts of the case. 12. It is seen from the record that the date of default has been mentioned as 13.09.2013, which stood revived with the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 before the DRT Pune, well within the three year period. Subsequently, another settlement proposal dated 07.03.2018 was accepted by the Bank on 27.03.2018, wherein a timeline was provided for the payment of the balance amount. We are of the considered view that the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 falls within the ambit of 'acknowledgement of debt' as defined under Section 18 of the Limitation Act, 1963, which is further fructified by the admitted OTS....
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....ate Debtor', operates the 'Thermal Power Plant', based on 'Imported Coal', and because of the 'continuous rise' in 'Coal Prices', since the Commencement of the year 2022, due to the Global Factors, the 'Corporate Debtor was unable to procure 'Coal' for supplying power to the 'State Government', under 'Power Purchase Agreement'. Therefore, the Corporate Debtor starting selling the electricity at 'Energy Exchange', in the month of April 2022 at much higher rate than agreed under 'Power Purchase Agreement', and ensured the 'Plant' remains operational. As of date, out of two Units, only Unit II is operational, whereas Unit No.1 is shut down, due to turbine failure, for which, appropriate steps are being carried out to rectify the same. 74. Moreover, in the meanwhile, 'Interim Resolution Professional', also contacted the 'TANGEDCO', and has been making efforts on regular basis, to recover the 'Outstanding Dues', to meet the 'Cash Flow' requirement of the 'Corporate Debtor' and run the 'Plant'. 75. It is represented on the side of the 2nd Respondent / IRP that the 'Ministry of Power', in exercise of power, vested upon them, as per Section 11 of the Electricity Act, 2003, as directe....
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....disputed, undisputed, secured or unsecured; Section 3 (8) of the Code, defines 'corporate debtor' meaning, a corporate person who owes a debt, to any person; Section 3 (10) of the Code, defines 'creditor' meaning, any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; Section 3 (11) of the Code, defines 'debt' meaning, a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; Section 3 (12) of the Code, defines 'default' meaning, non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be. Section 5 (7) of the Code, deals with 'financial creditor' meaning, any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; Section 5 (8) of the Code, provides for 'financial debt' meaning, a debt along with interest, if any, which is disbursed against the consideration for the time....
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....meters of the Section 7 of the I & B Code, 2016. Exercise of Discretion: 86. The aspect of 'Discretion', is to be 'exercised', by a 'Person' / 'Authority', only in a 'Legal' manner, so to say, the same ought to be governed by a 'Rule', as per 'Justice', and not in a 'Whimsical' fashion. If there is a 'failure' or 'miscarriage', while exercising the same, there is no 'embargo', upon the 'Competent Authority' / 'Appropriate Authority' / 'Superior Forum', to 'review' the same. Discussions: 87. Before the 'Adjudicating Authority', ('National Company Law Tribunal', Division Bench - I, Chennai), the '1st Respondent / Bank', had filed IBA/757/2019 on 03.10.2018 (Filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, ('National Company Law Tribunal', Division Bench - I, Chennai), against the 'Corporate Debtor' ('Coastal Energen Private Limited'), mentioning under 'Part IV' ('Particulars of Financial Debt'), wherein, the 'Total Amount', disbursed by the '1st Respondent / Bank / Financial Creditor' as on 10.09.2018, was mentioned as Rs.3131.40 Crores. The amount in d....
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.... an upfront payment of Rs.50 Crores to the '1st Respondent / Bank'. 93. It comes to be known that on 01.10.2019, an enhance 'OTS Offer' of Rs.3100 Crores with an 'Equity' of 15% for the 'Consortium', was submitted by the 'Promoter Group', on 01.10.2019. 94. Besides this, the '1st Respondent / Bank / Financial Creditor', had filed a 'Memo', before the 'Adjudicating Authority', praying for a 'Liberty', to 'revive' the 'Application' / 'Petition' ('if the 'OTS Proposal' failed and the same was 'allowed'). 95. On behalf of the '1st Respondent / Bank', it is pointed out before this 'Tribunal', that after the 'dismissal' of the 'Application', filed under Section 7 by the 'Bank', at the request of the 'Lender Consortium', the IA/827/2020 in IBA/757/2019 for restoration of the main IBA/757/2019, was filed before the 'Adjudicating Authority' ('National Company Law Tribunal', Division Bench - I, Chennai), and the IBA/757/2019 was 'Restored', by the 'Adjudicating Authority', on 28.12.2020 for further consideration, on account of the 'Default', in payment of the 'Sum', under the 'One Time Settlement'. 96. In this connection, this 'Tribunal', on going through the Order dated 05.11.20....
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.... force, is 'bad in Law', this 'Tribunal, relevantly points out that the 'Parliament', had intended to 'impose a prohibition, as regards the projecting of the 'Applications' / 'Petitions', for the start of 'Corporate Insolvency Resolution Process', in respect of a 'Corporate Debtor', for a 'Default', taking place on or after 25.03.2020 and the 'embargo' was for a period of six months, extendable for a year'. As a matter of fact, the words, 'shall ever be filed', is a clear pointer that the 'Statutory Provision', ought not to be 'applicable', in respect of any 'Default', 'prior to 25.03.2020', as opined by this 'Tribunal'. 99. In any event, the 'Appellant' cannot fall back upon the ingredients of Section 10A of the I & B Code, 2016, because of the fact that the 'Date of Default' ('Non Performing Asset'), in the instant case on hand, was on 31.03.2017. In this connection, it is not out of place to this 'Tribunal', to make a pertinent mention that the '1st Respondent / Bank' ('Financial Creditor'), filed under 'Section 7 Application', under the I & B Code, 2016, before the 'Adjudicating Authority', on 03.10.2018. As such, the 'contra plea', taken on behalf of the 'Appellant', is 'un....
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....the 'benefits' of the 'contracts' / 'agreements', by 'securing the necessary facilities' and hence, it is 'estopped' from 'repudiating' / 'denying', the 'liability', or 'validity', or 'binding effect' of 'contract', upon it. Therefore, the 'converse plea', taken on behalf of the 'Appellant', is 'negative', by this 'Tribunal'. 103. One cannot remain in oblivion as to the vital fact that the 'Promoters', had not 'paid' any 'Sum', as per 'OTS', but, they had arranged a Sum of Rs.150 Crore from three different 'Companies' / 'Persons', and the said 'Sum', is kept in a 'No Lien Account', with the '1st Respondent / Bank', and in reality, the said 'Sum', was not 'Appropriated' or 'Disbursed' / 'Distributed', by the 'Lenders'. 104. According to the '1st Respondent /Bank', in the present case, the candid fact is that the 'Promoters', were not in a position to arrange for the 'required funds', inspite of the 'pluralities of opportunities', provided to them, and further, in lieu of the 'OTS Proposal', being not fructified and hence, the '1st Respondent / Bank', was 'perforced' to initiate the 'Corporate Insolvency Resolution Process', against the '2nd Respondent / Corporate Debtor', and ....