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2017 (8) TMI 298 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process under Section 7 of Insolvency and Bankruptcy Code 2016 - wilful defaulter. - ESSAR stated that there is no diversion of funds fraud or malfeasance. - It is the case of ESSAR that it has submitted proposals for restructuring of its debts to the Lenders for approval - Held that - Appearing for SCB that the Interim Resolution Professional proposed by SCB has to be appointed on the ground that SCB s Application is prior in point of time in my considered view is not an argument that merit acceptance. If the date of initiation of the Corporate Insolvency Resolution Process is taken as criteria if two Applications by two different Creditors for initiation of Corporate Insolvency Resolution Process were filed on one day then it has to be seen which Application was presented first in point of time on the same day. Therefore the date of initiation of Insolvency Resolution Process cannot be taken as a yardstick or as a guideline for appointing. Interim Resolution Professional. By this Common Order this Adjudicating Authority admitted both the Applications. - Interim Insolvency Resolution Professional appointed to commence Corporate Insolvency Resolution Process in respect of ESSAR. Order of moratorium shall be in force from the date of order till the completion of Corporate Insolvency Resolution Process subject to the Proviso under sub-section (4) of Section 14.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Standard Chartered Bank (SCB) and State Bank of India (SBI). 2. Competency of the person signing the application for SBI. 3. Interpretation of the word "may" in Section 7(5)(a) of IBC. 4. Consideration of Debt Restructuring Process and its impact on CIRP. 5. Appointment of Interim Resolution Professional (IRP). Issue-wise Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP): SCB and SBI initiated CIRP against ESSAR Steel India Limited (ESSAR) under Section 7 of IBC. SCB provided a loan of USD 413,000,000 to ESSAR's subsidiary, secured by ESSAR's guarantee. ESSAR failed to repay, leading to a default. SBI granted a total debt of ?14860.82 Crores to ESSAR, which also defaulted. Both banks filed applications with supporting documents, including financial debt records and evidence of default. 2. Competency of the Person Signing the Application for SBI: ESSAR challenged the competency of the person signing SBI's application, arguing that only the Central Board could authorize such actions. However, the tribunal found that SBI's Deputy General Manager, Mr. Kshitij Mohan, had valid authority under Regulations 76 and 77 of the State Bank of India General Regulations, 1955, supported by a Gazette Notification. Hence, the objection was dismissed. 3. Interpretation of the Word "May" in Section 7(5)(a) of IBC: SCB argued that "may" in Section 7(5)(a) should be read as "shall," making it mandatory for the Adjudicating Authority to admit the application if complete. ESSAR contended that "may" indicates discretion. The tribunal, referencing the Gujarat High Court's judgment, concluded that the Adjudicating Authority must exercise discretion judiciously, considering all facts and circumstances, and not mandatorily admit every application. 4. Consideration of Debt Restructuring Process and Its Impact on CIRP: ESSAR argued that ongoing Debt Restructuring Process should preclude CIRP, fearing it would disrupt operations and stakeholder interests. The tribunal noted that the Debt Restructuring Process had been ongoing since 2014 without resolution and emphasized that CIRP is a time-bound process aimed at reviving the company. The tribunal held that CIRP would not hinder the Debt Restructuring Process and could include it in the Resolution Plan. 5. Appointment of Interim Resolution Professional (IRP): SCB and SBI proposed different IRPs. SCB's application was earlier, but SBI's proposal was backed by the Joint Lenders Forum (JLF) after extensive evaluation. The tribunal appointed Mr. Satish Kumar Gupta, proposed by SBI, as the IRP, considering the thorough selection process and the higher value of debt owed to JLF. Findings and Orders: - The applications by SCB and SBI were complete, and ESSAR had defaulted on financial debts. - No disciplinary proceedings were pending against the proposed IRPs. - CIRP was deemed beneficial for ESSAR and its stakeholders. - Mr. Satish Kumar Gupta was appointed as the IRP. - SBI was directed to make a public announcement of CIRP and call for claims. - A moratorium was declared, prohibiting certain actions against ESSAR during the CIRP. The tribunal admitted both applications, initiated CIRP, and directed necessary actions to commence the process.
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