2017 (9) TMI 1781 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - outstanding loan liability - Held that - Objections raised by the Corporate Debtor Companies carry no force that the Applicant Bank cannot move an application under the I & B Code before this Court, while the JLF is considering or has seized of the issue of resolution plan for the Corporate Debtor or the Applicant Bank filed the present petition contrary to the guidelines issued by the RBI. Because in our humble opinion such objection/contention may sound high but remedy lie elsewhere not necessarily before this Court under the I & B Code We find that the objections as raised by the Corporate Debtor Companies are no longer relevant for rejecting the present petition under the I & B Code. Moreover, it is a matter of record that the Corporate Debtor Companies M/s. Rotomac Global Private Limited itself through its letter dated 14.03.2016 has admitted its loan liability to the extent of ₹ 3,100 Crores. Such being the factual position the Company is not able to repay its debts then its management cannot be expected to have a divine right to keep continue with the managing the affair of the company. Therefore, by considering the abovestated facts & circumstances of the present applications and by following the Judicial Trends, as settled we find that the present applications deserve for admission, hence, are admitted under Section 7 of I & B Code, 2016 with such consequential directions

Summary

Issues Involved:
1. Filing of Insolvency Applications under Section 7 of the Insolvency & Bankruptcy Code, 2016.
2. Default in repayment of debts by the Corporate Debtor Companies.
3. Objections by the Corporate Debtor Companies regarding the initiation of Corporate Insolvency Resolution Process (CIRP).
4. Legal proceedings and actions taken by the Financial Creditor.
5. Admissibility and maintainability of the Insolvency Applications.

Issue-wise Detailed Analysis:

1. Filing of Insolvency Applications under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The Financial Creditor, Bank of Baroda, filed Insolvency Applications CP No.(IB)70/ALD/2017 and CP No.(IB)71/ALD/2017 against Rotomac Global Private Limited and Rotomac Exports Private Limited under Section 7 of the Insolvency & Bankruptcy Code, 2016. The applications aimed to trigger the Corporate Insolvency Resolution Process (CIRP) due to the default in repayment of debts.

2. Default in repayment of debts by the Corporate Debtor Companies:
The Corporate Debtor, Rotomac Global Pvt. Ltd., defaulted on debts amounting to ?553.78 crores, with Rotomac Exports Pvt. Ltd. acting as guarantor. The total outstanding debts, including other secured creditors, amounted to ?4,420 crores. The Applicant Bank provided evidence of default through various documents, including statements of accounts, CIBIL reports, and auditor reports.

3. Objections by the Corporate Debtor Companies regarding the initiation of CIRP:
The Corporate Debtor Companies raised several objections:
- The debt owed to the Applicant Bank was only 22% of the total debts owed to a consortium of seven banks.
- The Applicant Bank had already initiated proceedings before the Debts Recovery Tribunal (DRT) and under the SARFAESI Act.
- The declaration of the Corporate Debtor as a wilful defaulter by the Applicant Bank was challenged in a writ petition before the Hon'ble Allahabad High Court.
- The Corporate Debtor Companies argued that the filing of the present applications would jeopardize the restructuring process under the Joint Lender's Forum (JLF).

4. Legal proceedings and actions taken by the Financial Creditor:
The Financial Creditor had initiated proceedings before the DRT and under the SARFAESI Act. The Corporate Debtor Companies contended that these proceedings should bar the initiation of CIRP. However, the Financial Creditor argued that the pendency of these proceedings did not impede their right to file an application under Section 7 of the Insolvency Code.

5. Admissibility and maintainability of the Insolvency Applications:
The Tribunal considered the objections raised by the Corporate Debtor Companies but found them insufficient to reject the applications. The Tribunal emphasized that the provisions of the Insolvency & Bankruptcy Code have an overriding effect over other laws, and the pendency of other proceedings does not bar the initiation of CIRP. The Tribunal referred to various judgments, including the Hon'ble Supreme Court's decision in Innoventive Industries Ltd. v. ICICI Bank, to support its decision.

Conclusion:
The Tribunal admitted the Insolvency Applications under Section 7 of the Insolvency & Bankruptcy Code, 2016, and appointed an Interim Resolution Professional (IRP). The order of moratorium under Section 14 was imposed, prohibiting the institution or continuation of suits or proceedings against the Corporate Debtor. The IRP was directed to manage the operations of the Corporate Debtor as a going concern and to protect the interests of all stakeholders. The Tribunal's decision was based on the evidence of default and the legal framework provided by the Insolvency & Bankruptcy Code, 2016.