TaxTMI 
TaxTMI 
2023 (3) TMI 24
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....uthority (National Company Law Tribunal, Ahmedabad Bench Court 1) in CP (IB) No. 141/7/NCLT/AHM/2019 with IA 513 of 2019 whereby petition under Section 7 of the IBC filed by Respondent No. 1 (herein) - Axis Bank Limited/Financial Creditor against the M/s Avantha Power and Infrastructure Limited/Corporate Debtor was admitted by the Adjudicating Authority and further I.A. No. 513 of 2019 filed by the Corporate Debtor as regard to malicious initiation of CIRP against the Corporate Debtor in filing of application under Section 7 of the IBC, was also dismissed. 2. The facts giving rise to the instant Appeal are as follows: i) The financial facilities availed by Kobra West Power Company Limited ("Principal Borrower-Kobra") proposed to set up a 2x600 MW Thermal Power Plant ("the Project") in the Ste of Chhattisgarh. To part finance the Project, the Principal Borrower had availed the following financial facilities from consortium of lenders led by the Respondent No. 1 (who was also acting as a security trustee): * Rupee loan facility aggregating to Rs. 2150,00,00,000 by entering into a Common Rupee Loan Facility Agreement dated 24.06.2009 ("Rupee Loan Facility I"); ....
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....t allegedly outstanding. v) After issuing the aforesaid Invocation Notice, the Respondent No. 1 filed its written submissions on 12.06.2018 stating that it has no objection to the admission of CP 190 of 2018. vi) The Corporate Debtor-APIL issued its reply to the Invocation Notice on 04.07.2018 and rejoinder of Respondent stating inter alia as follows: * That the sum of INR 480.54 crores demanded from Corporate Debtor-APIL in Schedule 3 of the Recall Notice forms part of the amount sought to be restructured by principal Borrower in CP 190 of 2018. * That there exists no independent and separate default qua Corporate Debtor-APIL in view of the fact that in terms of CP 190 of 2018 the default under both the facilities (for which the Corporate Debtor stood as a guarantor) is already being sought to be restructured. * Future of all stakeholders of Principal Borrower depends on outcome of CP 190 of 2018, the admission of which was not opposed by Respondent No. 1. Thus, the Invocation Notice is premature, contrary to law and not maintainable. vii) The Adjudicating Authority by its judgment and order dated 26.07.2018 admitted CP 190 of ....
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....olution plan against the total admitted Secured Financial Creditors' claims of INR 3,346.83 crores. Admittedly, INR 3,346.83 crores includes the original defaulted amount under the Incremental Debt Facility and Rupee Term Loan II Facility. x) Further case is that the Adjudicating Authority had incorrectly recorded at para 1 of the Impugned Order that Corporate Debtor-APIL had been delaying the proceedings. The fact that the CP 141 of 2019 itself is not maintainable in law and in fact, the impugned order is otherwise bad in law since the same has been passed without hearing the Corporate Debtor-APIL and without considering the submissions made by the Corporate Debtor-APIL in its Reply and written submissions. The Corporate Debtor-APIL was admittedly deprived of an effective hearing before the Adjudicating Authority. 3. The Ld. Counsel for the Appellant during the course of argument and in his memo of appeal along with written submissions submitted that the sole premise of the impugned order that CP 141 of 2019 was filed by Respondent No. 1 for the balance amount is factually incorrect. Paragraph 7 of the impugned order whereby the Adjudicating Authority in incorrect and ....
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....1 SCC Online SC 395" at para 122, has therefore, stated as follows: "122. It is therefore, clear that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor's liability. As to the nature and extent of the liability, much would depend on the terms of the guarantee itself. However, this court has indicated, time and again, that an involuntary act of the principal debtor leading to loss of security, would not absolve a guarantor of its liability." Further, under the terms of the Guarantee Agreement, the Corporate Debtor is discharged upon achievement of Final Settlement Date. Clause 2.7 of the Guarantee Agreements read as follows: "Without derogation of the foregoing, in the event of default on the part of the Borrower in payment and/or performance of any of the Secured Obligations or any part thereof, or in the event of any default/breach of any of the terms, conditions and covenants contained in the respective Facility Agreement and/or other Finance Documents till the Final Settlement Date, the Guarantor shall, upon a written demand made by the Security Trustee for the benefit of the In....
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.... "26. ... Such Resolution Plan may be approved by the financial creditor in the meeting of the committee of creditors. Would such an approval mean that, the financial creditor entered into a composition with the corporate debtor, thereby impairing the rights of the financial creditor to recover the balance amount from the guarantor of the corporate debtor? In my view, the answer is in the negative." Further, in this regard, it is submitted that the term 'Balance Guaranteed Financial Creditor Debt' is defined at paragraph 1.2 (d) (i) of the Resolution Plan as follows: "(d) Admitted Financial creditor Debt reduced by Upfront Admitted Financial Creditor Debt Repayment, Restructured Debt, Restructured Subordinate Debt and additional financial debt accrued in the books of the Corporate Debtor as on the Effective Date (other than the Necessary Bank Guarantees) (collectively the "Balance Financial Creditor Debt") shall be dealt with as follows: (i) debt that is secured by personal guarantee, corporate guarantee or any contractual comforts issued by any third party and constituting part of the Balance Financial Creditor Debt ("Balance Guaranteed Financial Credi....
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....ity Provider in respect of Necessary Bank Guarantees, are not settled, extinguished, disputed or released in any manner whatsoever either on account of the Resolution Plan being approved." In view of the foregoing, the extent of liability of the Corporate Debtor, if any, is expressly limited to the 'Balance Guaranteed Financial Creditor Debt' which remains under the Incremental Debt and Rupee Term Loan II facility pursuant to receipt of sums by the lenders under the Resolution Plan. However, since Respondent No. 1 has not yet disclosed such "balance amount", the CP 141 of 2019 ought to have been dismissed. The above submission of Corporate Debtor has also been ignored by the Adjudicating. In this regard, the Corporate Debtor has relied on the decision of the Hon'ble Supreme Court in "Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407", wherein it was held as follows: "30. ... the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless inter....
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....e Debtor stands fully discharged pursuant to the Resolution Plan of the Principal Borrower. However, for the following reasons, the said contention is contrary not only to the approved Resolution Plan but also to the Deeds of Guarantees entered into by the Corporate Debtor: * Clause 11.1 of the Deeds of Guarantees executed by the Corporate Debtor, provides that the same are continuing guarantees and "shall not be wholly or partially satisfied or exhausted by any payments made to or settled with the Security Trustee by the Borrower". Further, Clause 8.1. and 8.2. of the said Guarantees, which relate to the 'Rights of the Security Trustee', provide that " ..... the Security Trustee shall be at liberty to require the performance by the Guarantor of its obligations hereunder to the same extent in all respects as if the Guarantor had at all times been solely liable to perform the said obligations subject to the terms and conditions of this Deed." and in order to give effect to the Guarantees, the Security Trustee may act as though the Guarantor is the Principal Debtor to the Security Trustee. Further, the liability of the Guarantor in the form of the Corporate Guarantee, as per....
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....uishment or restructuring of any financial liability of the Corporate Debtor will not result in the extinguishment of any claims that the Resolution Applicant and/or the Financial Creditors may have against the Avantha group and/or its affiliates and/or any Third party Security Provider under any contractual arrangements and/or as a result of any credit enhancements issued by Avantha group and/or its affiliates or such Third party Security Provider." In this regard, the Resolution Plan explicitly defines 'Avantha Group' as being the Corporate Debtor herein or any of its affiliates. * Under the Resolution Plan, the Balance Guaranteed Financial Creditor Debt, i.e., an amount of Rs.840.71 crore {Admitted Financial Creditor Debt of Rs.5032.18 crore reduced by Upfront Admitted Financial Creditor Debt Repayment of Rs.100 crore, Restructured Debt of Rs. 1000 crore, Restructured Subordinated Debt of Rs.1685.35 crore and additional financial debt of Rs.1406.12 accrued in the books of the Corporate Debtor as on the IBC admission date), remains outstanding in the books of the Principal Borrower as on date. The said Balance Guaranteed Financial Creditor Debt of Rs. 840.71 crore, a sum....
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.... no interference. 11. Further submitted that Determination of the existence of default; a) The Appellant has also contended that the impugned order is to be set aside since the Adjudicating Authority has failed to determine the existence of default. It is in this regard submitted that under the Code, upon being satisfied that the default of the Corporate Debtor is above the minimum threshold of Rs. 1 crore, the Adjudicating Authority has to admit the Company Petition and initiate the CIRP. It is thereafter the duty of the IRP to invite claims of all Creditors, to verify and collate the same. In fact, the same has been upheld by this Tribunal in "Subhash Agarwal v. M/s. AU Small Finance Bank Ltd. & Ors., Company Appeal (AT) (Ins.) No. 271 of 2020" wherein, whilst upholding the order of the Adjudicating Authority it was held that the question that is required to be considered by the Adjudicating Authority is if the financial debt was due and the default was above the minimum threshold, and that any grievance that the Corporate Debtor may have on the calculation with regard the amount outstanding, can be looked into by the Resolution Professional in the CIRP. b) T....