2019 (1) TMI 138 - AT - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - debt due and payable - Held that - It is not the case of the Appellant that there is no debt payable in law or in fact. Whatever grounds have been taken relate to legality of order of rejection dated 22nd December, 2017 by the State Bank of India relating to restructuring plan which cannot be decided in the application under Section 7 of the I&B Code as the Adjudicating Authority is not authorized/competent to determine the legality of the order of rejection of restructuring plan dated 22nd December, 2017. Whether the refusal to disburse the committed loan amounts led to complete failure of the Corporate Debtor s expansion plan also cannot be taken into consideration to hold that there is no debt due and payable. In the present case, as we find no case made out by the Appellant to interfere with the impugned order, the appeal is dismissed.

Summary

Issues involved:
1. Challenge to rejection of restructuring plan by Adjudicating Authority
2. Dispute regarding credit rating agencies' assessment
3. Allegation of unfair conduct by State Bank of India
4. Debt amount claimed by State Bank of India
5. Legal interpretation of Section 7 of the Insolvency and Bankruptcy Code

Analysis:

1. The Appellant challenged the order initiating Corporate Insolvency Resolution Process against a company under the Insolvency and Bankruptcy Code. The main contention was that the Adjudicating Authority failed to consider the discrepancies in the assessment of the restructuring plan by two credit rating agencies, which led to the rejection of the plan.

2. The Appellant argued that one credit rating agency provided an 'investment grade' rating while another gave a rating below investment grade for the same plan. This discrepancy raised doubts about the fairness of relying on these ratings for rejecting the restructuring plan. The Appellant suggested appointing a third credit rating agency to resolve the conflicting assessments.

3. Additionally, the Appellant claimed that the company had identified an investor willing to settle the debt owed to the lenders. The Appellant requested cooperation from the consortium, including State Bank of India, to defer the insolvency process during the settlement negotiations. The Appellant criticized the unfair conduct of State Bank of India in rejecting the restructuring plan.

4. The State Bank of India claimed a substantial financial debt from the company, which was the subject of the insolvency proceedings. The debt amount claimed differed from the total debt disbursed to the company, leading to a dispute over the exact debt in default.

5. The judgment referred to legal provisions under Section 7 of the Insolvency and Bankruptcy Code, emphasizing the criteria for admitting an application by a financial creditor. The court highlighted the importance of establishing a default within the specified time frame and clarified that the Adjudicating Authority's role is not to determine the legality of decisions related to restructuring plans but to assess the existence of a debt default.

In conclusion, the Appellate Tribunal dismissed the appeal, finding no sufficient grounds to interfere with the impugned order initiating insolvency proceedings. The judgment emphasized the limitations of the Adjudicating Authority in adjudicating the legality of decisions related to restructuring plans and debt repayment, focusing on the procedural aspects of debt default under the Insolvency and Bankruptcy Code.