2017 (11) TMI 420 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - proof of outstanding debt - Held that - We are of the opinion that any decision made by the Joint Lenders Forum is not binding on the Financial Creditor, as the members have not disbursed any financial assistance. The Corporate Debtor therefore cannot seek to take refuge under their resolutions in order to avoid an Insolvency Resolution process, nor can they resist the Financial Creditor s entitlement for recovery under the Code on the basis of some underlying motive, supposedly resulting in some economic detriment or prejudice to national interests, as perceived by them. The correct recognition of National Interest is adherence to the rule of law impartially applicable without exceptions to one and all. The factum of an outstanding amount is admitted by the Corporate Debtor. Their inability to pay mandates Corporate Insolvency Resolution Process. This petition is, therefore, Admitted. The moratorium envisaged under Section 14 of the Code come into immediate effect.

Summary

Issues:
1. Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process.
2. Financial assistance provided for a power generating project in the North East.
3. Non-payment of dues by the Corporate Debtor leading to declaration as a Non-Performing Asset.
4. Creation of charge over movable assets and acceptance of corporate guarantees.
5. Dispute over outstanding liability due to delays in project implementation and various clearances.
6. Arguments regarding restructuring and rescheduling of loans by the Banks.
7. Disagreement over the recall of the loan and initiation of insolvency resolution process.
8. Dispute over the binding nature of decisions made by the alleged Joint Lenders Forum.
9. Admission of outstanding amount by the Corporate Debtor leading to the admission of the petition.
10. Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code.

Analysis:
The judgment by the National Company Law Tribunal, New Delhi, involved a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, where the Financial Creditor sought to initiate Corporate Insolvency Resolution Process against the Corporate Debtor due to non-payment of dues related to a power generating project in the North East. The Corporate Debtor, a Special Purpose Vehicle, had approached the Bank for financial assistance, but delays in project implementation and obtaining necessary clearances led to non-payment, resulting in the declaration of the account as a Non-Performing Asset. Various financial agreements and guarantees were in place, but the Corporate Debtor argued that external factors beyond their control caused delays in project execution, emphasizing ongoing efforts to resolve issues and complete the project.

The Financial Creditor, on the other hand, highlighted multiple extensions and restructuring of the loan facility provided, asserting that the situation warranted resolution of the Corporate Debtor for turnaround or liquidation. Disputes arose over the recall of the loan, the role of alleged Joint Lenders Forum, and the binding nature of their decisions. The Tribunal ruled that the admission of the outstanding amount by the Corporate Debtor mandated Corporate Insolvency Resolution Process, leading to the declaration of a moratorium under Section 14 of the Code, thereby prohibiting certain actions against the Corporate Debtor and appointing an Interim Resolution Professional to oversee the process. The judgment emphasized adherence to the rule of law impartially, without exceptions, and upheld the entitlement of the Financial Creditor for recovery under the Code, disregarding arguments of economic detriment or national interest put forth by the Corporate Debtor.