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2024 (4) TMI 968
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....l, Mumbai Bench-IV rejecting Section 7 Application filed by the Appellant. The Appellant aggrieved by the rejection of Section 7 Application has come up in this Appeal. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) The Appellant extended various financial facilities to the Respondent - Cable Corporation of India Limited. Default was committed by the Corporate Debtor in servicing the financial debt. Account of the Corporate Debtor became irregular on 06.06.2019 and was classified as Non-Performing Asset ("NPA") on 04.09.2019. (ii) Section 7 Application was filed by the Appellant on 12.03.2021 claiming default of an amount of Rs.58,44,90,194/- as on 01.03.2021. Notices were issued by the Adjudicating Authority in response to which reply was filed by the Corporate Debtor. (iii) During the pendency of Section 7 Application, a settlement was arrived at between the parties. The State Bank of India ("SBI") vide letter dated 27.09.2021 accepted the offer of settlement of dues on payment of Rs.47.47 crores along with de-risking of live Performance Bank Guarantees ("PBG") aggregating to Rs.30.40 crores. Twenty five percent of the compromise amount....
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....s. The Corporate Debtor also shared fixed deposit receipt for an amount of Rs.8.65 crores with SBI. On 16.06.2023 the SBI sent a letter to Corporate Debtor rejecting Corporate Debtor's offer. The SBI informed the Corporate Debtor that if it intends to amicably resolve the matter, it may submit a fresh compromise proposal for both fund-based cash credit and non-fund based BG amount. The Corporate Debtor once again offered 100% cash deposit by letter dated 27.06.2023, which was rejected by the SBI. (vii) The Adjudicating Authority heard the parties and by order dated 18.07.2023, dismissed Section 7 Application filed by the SBI. The Adjudicating Authority held that Corporate Debtor having paid entire settlement amount of Rs.47.47 crores, no debt was due and the Bank Guarantee cannot qualify as a 'debt'. It was further noticed by the Adjudicating Authority that Corporate Debtor has offered de-risking of BGs by deposit of 100% cash margin in the form of fixed deposit, subject to release of securities by the Financial Creditor. The Adjudicating Authority found bonafide efforts on behalf of the Corporate Debtor in de-risking by deposit of 100% cash margin and by recording the aforesaid ....
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....having been paid, no debt is left for which Section 7 Application could be admitted. It is submitted that insofar as de-risking of the BGs is concerned, as per the SBI on the date when order was passed by the Adjudicating Authority total live BGs as on date was for Rs.8.63 crores. The Corporate Debtor has forwarded the CBG from ICICI Bank, which was not accepted by SBI on the ground that it is not in required format. The attempt of Financial Creditor was to somehow refuse to accept the efforts made by the Corporate Debtor. It is submitted that the Adjudicating Authority has rightly taken the view that Bank Guarantees having not been invoked, there was no debt for which Section 7 Application could have been proceeded with. The Adjudicating Authority has rightly noted the bonafide efforts made by the Corporate Debtor in de-risking the live BG, which could not be fructified due to obstructive attitude adopted by the Appellant. The Appellant has been using the IBC proceedings for recovery, even when entire settlement amount of Rs.47.47 crores has been paid. Even the Bank also accepted the fresh compromise by letter dated 13.12.2023 in response to which the Corporate Debtor made all eff....
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....payment of Rs.47.47 crores and de-risking of live BGs of Rs.30.40 crores. The Sanction Letter further provided that, if the compromise amount or the de-risking of the BGs is not received within the stipulated period, the Bank reserve the right to cancel the compromise. 10. Insofar as payment of Rs.47.47 crores, which was the settlement amount, there is no dispute between the parties that the said amount stood paid by 01.06.2022, i.e., within the time extended by Adjudicating Authority. In the order passed by the Adjudicating Authority on 01.06.2022, the Adjudicating Authority has noticed the submission of Financial Creditor. The order dated 01.06.2022 is as follows: "1. Mr. Gaurav Joshi, Ld. Sr. Counsel for the Financial Creditor present. Mr. Ashish S. Kamat a/w Mr. Rashmin Khandekar, Ld. Counsel for the Corporate Debtor present. 2. This matter was listed in vacation Bench on 26.05.2022 wherein the Bench ordered the payment of the balance amount of Rs.7.47 crore latest by 31.05.2022 and for replacement of Bank Guarantees, a time up to 30.06.2022 has been allowed. 3. Counsel for the Financial Creditor confirms that the payment of Rs.7.47 crore has been made by the Corporate....
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....-compliance to settlement terms in the form of failure to de-risk the outstanding PBGs, which stood at INR15.63 crores as on 30.6.2022, was not attributable to the default on the part of the Corporate Debtor. Instead, the said failure occurred because of obstinate attitude of the Financial Creditor. It was also submitted that there has been no prejudice caused to the Financial Creditor due to the delay, if any, and on the contrary, the bank guarantee exposure of Financial Creditor has reduced substantially and non-release of securities, indirectly, de-risked such exposure. This is because, since the execution of the Sanction Letter, the value of the Bank Guarantees that needed to be de-risked have reduced from INR 30.40 Crore to INR 8.63 Crore, on account of expiry/withdrawal of some of PBGs. Our attention was also drawn to one instance, where one of the Guarantee was invoked and the Corporate Debtor deposited the amount becoming payable on such invocation with the Financial Creditor within the permissible period, in accordance with the conditions of clause VII of the sanction letter. 6.3.2. The Financial Creditor drew our attention to Order dated 31.03.2022 & 26.05.2022 to cont....
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.... 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". 6.4.6. In the case of Anita Jindal Vs. M/s Jindal Buildtech Pvt. Ltd. through The IRP (2022) ibclaw.in 564 NCLAT 14, it was held that "The Preamble of IBC is carefully worded to describe the spirit and objective of the Code to be 'Reorganisation' and 'Insolvency Resolution', specifically omitting the word 'Recovery'. The Parliament has made a conscious effort to ensure that there is a significant difference between 'Resolution' and 'Recovery'. The Hon'ble Supreme Court has time and again observed that the fundamental intent of IBC is 'maximising the value of assets' in the process of 'Resolution'. In 'Mobilox Innovations Private Limited' Vs. 'Kirusa Software Private Limited', (2018) 1 SCC 353, the Hon'ble Apex Court has examined in detail the United Nations Legislative Guide on Insolvency, in which the IBC finds its roots. Any Application to commence CIRP can be denied when the Creditor....
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....te Debtor was ready to offer 100% cash margin or CBG, rejection of the said is not acceptable. Furthermore, the SBI itself on 13.12.2023, granted further one months' time from the date of receipt of the letter for submitting 100% cash margin or CBGs. The Corporate Debtor has prayed for extension of 30 days' time during which the Corporate Debtor has taken steps to submit CBGs, but the SBI refused to accept the said CBGs. 14. After having heard learned Counsel for the parties, it is clear that settlement amount having been paid, the Adjudicating Authority did not commit any error in rejecting Section 7 Application, which was only based on Corporate Debtor not being able to de-risk the live BGs within the time allowed. The present is not a case that BGs were invoked and the Corporate Debtor was asked to deposit the amount for invoked BGs. The BG were given by the Bank with regard to various contracts, which were undertaken by the Corporate Debtor and Corporate Debtor was always ready to deposit the amount by 100% cash margin or by giving CBGs. The learned Senior Counsel for the Corporate Debtor has further submitted that after filing of the Appeal the Corporate Debtor has deposited ....