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2019 (11) TMI 1518 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - It is not the case of the Corporate Debtor that there is no default, but they are submitting that right of the Petitioner to bring action under the Code is subject to and controlled by Inter-Creditor Agreement wherein the Creditors has set out certain procedures before taking any action. In a nutshell, the Corporate Debtor is trying to say that the Code is subservient to the Inter-Creditor Agreement, comply with the conditions in the Inter-Creditor Agreement and ignore the Code at least for the time being. This Adjudicating Authority, on perusal of the documents filed by the Petitioner, is of the view that the Corporate Debtor defaulted in repaying the loan availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of Section 7 is taken as complete. Application admitted - moratorium declared.
Issues Involved:
1. Default in repayment by the Corporate Debtor. 2. Right of the Petitioner to initiate Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Compliance with the Inter-Creditor Agreement by the Petitioner. 4. Admission of the Petition under Section 7 of the IBC. Issue-wise Detailed Analysis: 1. Default in repayment by the Corporate Debtor: The Petitioner, Bank of India, sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, TD Toll Road Private Limited, due to a default of ?21,68,44,477/- as of 16.07.2019. The Corporate Debtor had entered into a Common Rupee Loan Agreement with multiple lenders, including the Petitioner, for an aggregate loan of ?322.40 Crores. The Petitioner provided evidence of the default, including the statement of the loan account and a recall notice dated 12.11.2018. 2. Right of the Petitioner to initiate CIRP under Section 7 of the IBC, 2016: The Corporate Debtor acknowledged the default but contended that the Petitioner’s right to initiate CIRP was controlled by the Inter-Creditor Agreement, which required certain procedures to be followed before any action could be taken. The Corporate Debtor argued that the Petitioner acted contrary to the agreement by filing the petition independently and without the consent of other consortium members. However, the Tribunal referred to the Supreme Court’s decision in "Innoventive Industries Ltd. Vs. ICICI Bank and Ors. - (2018) 1 SCC 407," which clarified that once a default is established, the application under Section 7 must be admitted unless it is incomplete. 3. Compliance with the Inter-Creditor Agreement by the Petitioner: The Corporate Debtor cited various clauses of the Inter-Creditor Agreement, arguing that actions against the Corporate Debtor should be taken collectively by all Rupee Lenders and not individually. The clauses emphasized consultation among lenders and obtaining approval from lenders holding more than 75% of the outstanding amounts before initiating any enforcement action. The Corporate Debtor claimed that the Petitioner’s action violated these clauses. However, the Tribunal noted that Section 238 of the IBC provides that the provisions of the Code shall have effect notwithstanding anything inconsistent in any other law or instrument. Therefore, the Inter-Creditor Agreement could not override the statutory rights under the IBC. 4. Admission of the Petition under Section 7 of the IBC: The Tribunal concluded that the Petitioner had established the debt and default beyond doubt as required under Section 7 of the IBC. The Tribunal emphasized that the overriding effect of the IBC, as provided under Section 238, meant that the Inter-Creditor Agreement could not impede the admission of the petition. Consequently, the Tribunal admitted the petition, prohibiting various actions against the Corporate Debtor, including the institution of suits, transferring or encumbering assets, and recovery of property by owners or lessors. The Tribunal also appointed an Interim Resolution Professional to carry out the functions under the IBC. Conclusion: The Tribunal admitted the petition under Section 7 of the IBC, 2016, initiated the CIRP against the Corporate Debtor, and appointed an Interim Resolution Professional. The Tribunal held that the provisions of the IBC override any conflicting terms in the Inter-Creditor Agreement, thereby upholding the Petitioner’s right to initiate CIRP despite the Corporate Debtor’s contentions.
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