2018 (8) TMI 2066 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Doctrine of Estoppel - HELD THAT - The fact remains that all the group companies represented by their Authorised Representative had approached the banks and signed the documents together projecting themselves as one entity. Here an example has to be given wherein five persons put together approach a lender for a loan facility treating them as one unit and the lender consents for advancing/ disbursing the money as per the request of the parties concerned or to whomsoever suggested by the entire group together, then, in the event of default, the lender shall have to treat all the five members as one unit and can proceed against them singly or jointly as per law - the obligor and co-obligors to the debt are a single unit and disbursement to one obligor amounts to disbursement to all of them put together and hence the Videocon group companies are jointly and severally liable. The appointment of different IRP s to each group company separately is perfectly legal and perhaps it s the only way the procedure has to be worked out. Therefore, we are completely in tune with the explanation given by the Ld. Senior Counsel appearing on behalf of the Petitioner and we hereby hold that appointment of different IRP s to each company differently is not hit by any provisions of the Code and hence is perfectly maintainable. The Doctrine of Estoppel is clearly applicable and tilts the entire case in favour of the Petitioner. Apart from that it can be noticed from the documentation that term obligor and co-obligor is used for the entities which means, in so far as the loan agreement, there is no distinction between an obligor and a co-obligor as far as the liability is concerned and legally all of them must be considered as Debtors for the purpose of this Code - the arrangement and the manner in which the documentation was done for the purpose of advancing loans is perfectly legal and the Corporate Debtor herein is liable to pay the debt and is bound by the proceedings as projected in Form 1 and since there is a default in the repayment of the same, the application is hereby admitted. It is satisfied that a debt and default is in existence, therefore this Company Petition is hereby admitted - moratorium declared.

Summary

Issues Involved:

1. Default in repayment of loans by the Corporate Debtor.
2. Joint and several liability of co-obligors under the Rupee Term Loan Agreement.
3. Maintainability of separate insolvency petitions against co-obligors.
4. Appointment of different Interim Resolution Professionals (IRPs) for co-obligors.
5. Classification of financial debt and the role of disbursement.
6. Application of moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC).

Detailed Analysis:

1. Default in Repayment of Loans by the Corporate Debtor:
The Petitioner, State Bank of India (SBI), sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against PE Electronics Limited (Corporate Debtor) under Section 7 of the Insolvency and Bankruptcy Code, 2016, due to a default in repayment of various facilities. The Corporate Debtor defaulted on 31.01.2017, resulting in an outstanding amount of ?3171.37 crores. The Petitioner provided detailed tables showing the facilities granted, disbursed amounts, and the defaults committed by the Corporate Debtor and its associated companies.

2. Joint and Several Liability of Co-Obligors under the Rupee Term Loan Agreement:
The Petitioner argued that all Videocon group companies, including the Corporate Debtor, are co-obligors under the Rupee Term Loan Agreement dated 08.08.2012. The agreement states that each obligor/co-obligor is jointly and severally liable for all obligations and liabilities. The Tribunal noted that the Videocon group companies approached the banks as one unit, and hence, the liability is joint and several.

3. Maintainability of Separate Insolvency Petitions Against Co-Obligors:
The Corporate Debtor contended that separate CIRP petitions against each co-obligor are not maintainable and should be included in the CIRP already initiated against Videocon Industries Limited (VIL). The Petitioner countered that joint and several liability allows for separate proceedings against each co-obligor. The Tribunal agreed with the Petitioner, stating that the Code permits separate petitions and that the co-obligors are distinct legal entities.

4. Appointment of Different Interim Resolution Professionals (IRPs) for Co-Obligors:
The Corporate Debtor argued that appointing different IRPs for each co-obligor would complicate the resolution process. The Petitioner proposed four different IRPs to comply with the Code of Conduct for Insolvency Professionals. The Tribunal found this approach legal and justified, emphasizing that the co-obligors have separate assets and liabilities, and different IRPs can manage the resolution processes effectively.

5. Classification of Financial Debt and the Role of Disbursement:
The Corporate Debtor argued that no amount was disbursed to it, and hence, there is no financial debt. The Petitioner contended that disbursement to one obligor amounts to disbursement to all co-obligors. The Tribunal held that the co-obligors are a single unit for the purpose of the loan agreement, and disbursement to one is considered disbursement to all. The Tribunal cited the Doctrine of Estoppel, stating that the co-obligors cannot repudiate their liability.

6. Application of Moratorium under Section 14 of the IBC:
The Tribunal ordered the application of a moratorium, prohibiting the institution or continuation of suits, transferring or disposing of assets, and recovery actions against the Corporate Debtor. The moratorium will be in effect from 31.08.2018 until the completion of the CIRP or the approval of a resolution plan.

Conclusion:
The Tribunal admitted the petition, initiating the CIRP against the Corporate Debtor. Mr. Divyesh Desai was appointed as the Interim Resolution Professional. The Tribunal directed the Registry to communicate the order to both parties within seven days.