2019 (9) TMI 1384 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - It was pleaded that in terms of Debt Asset Swap Agreement dated 20th December, 2014, the Aditya Estates Private Limited ( Corporate Debtor ) defaulted to pay the debt - HELD THAT - In addition to ICICI Bank India and Corporate Debtor, ICICI Bank UK PLC has been separately included in the Debt Asset Swap Agreement as a confirming party. Though ICICI Bank UK PLC has not separately signed the Debt Asset Swap Agreement inspite of that it is stated therein as a party, however, the same is immaterial as the Corporate Debtor has undertaken obligation under the Debt Asset Swap Agreement and ICICI Bank UK PLC being a beneficiary of the obligation undertaken by the Corporate Debtor and other parties under the said Agreement - The subsequent Multi-Party Undertaking dated 14th April, 2015 placed on record shows that it was executed in favour of both ICICI Bank India and ICICI Bank UK PLC by Corporate Debtor re-asserting the rights in favour of ICICI Bank UK PLC to claim its outstanding dues qua M/s Assam Oil Company Ltd from the proceed of the sale of the property owned by the Corporate Debtor . Clause 5.1 of the said Agreement, created right in favour of ICICI Bank UK by the Corporate Debtor . Therefore, it is clear that an unequivocal obligation has been undertaken by the Corporate Debtor under the Agreement to repay the loans availed by M/s Assam Oil Company Ltd from ICICI Bank UK PLC. The acknowledgement liability of financial debt by Corporate Debtor towards ICICI Bank UK PLC for M/s Assam Oil Company Ltd is further fortified by the amendments made to its Articles of Association by inserting Article 34(c) whereby it lists of Creditors ICICI Bank UK has been shown as lender, in relation to the debts owned by ICICI Bank UK from M/s Assam Oil Company Ltd . ICICI Bank U.K. PLC has successfully made out a case that it is the Financial Creditor of the Corporate Debtor and the Adjudicating Authority has rightly admitted the application under Section 7 of I B Code - Appeal dismissed.

Summary

Issues Involved:
1. Whether ICICI Bank UK PLC qualifies as a 'Financial Creditor' under the Insolvency & Bankruptcy Code, 2016.
2. Whether the debt claimed by ICICI Bank UK PLC is payable by the Corporate Debtor.
3. Validity and implications of the 'Debt Asset Swap Agreement' and 'Multi-Party Undertaking'.
4. Whether the claim by ICICI Bank UK PLC is barred by limitation.

Issue-wise Detailed Analysis:

1. Whether ICICI Bank UK PLC qualifies as a 'Financial Creditor' under the Insolvency & Bankruptcy Code, 2016:

The appellant contended that ICICI Bank UK PLC cannot be considered a 'Financial Creditor' of the Corporate Debtor as the loan was given to M/s Assam Oil Company Limited, an overseas company, and not to the Corporate Debtor. The Corporate Debtor neither guaranteed the loan nor mortgaged any property for it. However, the Tribunal found that ICICI Bank UK PLC had a valid claim as a 'Financial Creditor' because the Corporate Debtor had undertaken obligations under various agreements, including the 'Debt Asset Swap Agreement' and 'Multi-Party Undertaking', which acknowledged the liability towards ICICI Bank UK PLC.

2. Whether the debt claimed by ICICI Bank UK PLC is payable by the Corporate Debtor:

The appellant argued that there was no debt payable to ICICI Bank UK PLC by the Corporate Debtor as per the definitions in the I&B Code. The Tribunal examined the 'Facility Agreement' dated 21st December 2007 and its amendments, which defined the Corporate Debtor as a 'Relevant Person' obligated to make payments. The Tribunal concluded that the Corporate Debtor's assets were integral to the loan arrangement, and thus, the Corporate Debtor was obliged to repay the amount outstanding to ICICI Bank UK PLC.

3. Validity and implications of the 'Debt Asset Swap Agreement' and 'Multi-Party Undertaking':

The appellant submitted that the 'Debt Asset Swap Agreement' was not a guarantee and that the sale of the property could only occur if the price was above the 'Reserve Price'. The Tribunal noted that the 'Debt Asset Swap Agreement' and 'Multi-Party Undertaking' clearly created an obligation for the Corporate Debtor to repay the loans availed by M/s Assam Oil Company Ltd from ICICI Bank UK PLC. The Tribunal emphasized that the Corporate Debtor had acknowledged this liability by amending its 'Articles of Association' to include ICICI Bank UK PLC as a lender.

4. Whether the claim by ICICI Bank UK PLC is barred by limitation:

The appellant claimed that the loan default by M/s Assam Oil Company Ltd occurred on 28th December 2011, and thus, the claim was barred by limitation. However, the Tribunal did not find merit in this argument, as the obligations under the 'Debt Asset Swap Agreement' and the 'Multi-Party Undertaking' were ongoing and acknowledged by the Corporate Debtor, thereby extending the limitation period.

Conclusion:

The Tribunal concluded that ICICI Bank UK PLC is a 'Financial Creditor' of the Corporate Debtor and that the application under Section 7 of the I&B Code was rightly admitted by the Adjudicating Authority. The appeal was dismissed with no order as to costs.