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2020 (8) TMI 644 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and default or not - HELD THAT - The Ld. Adjudicating Authority have failed to consider the letter dated 27.12.2018 filed before this Tribunal at Page No. 17 vide Diary No. 18698 dated 06.02.2020 whereby refer to the minutes of the consortium meeting dated 18th September, 2018 the Syndicate Bank (Respondent No. 1) agreed to open further LCs in favour of the Appellant as the Appellant was going through cash difficulties and also agreed to restore the sanctioned limits of the Appellant. The LC limits to the extent of ₹ 46.50 Crores and further it was agreed that the amount which have been deposited in TRA, the amount will be paid to Respondent No. 1 after opening the TRA. There was no fault on the part of the Corporate Debtor - As the Ld. Adjudicating Authority failed to notice the aforesaid facts, the impugned order passed by National Company Law Tribunal, Division Bench-I, Chennai, is set aside. The Order(s) passed by the Ld. Adjudicating Authority appointing Interim Resolution Professional / Resolution Professional , declaring moratorium, freezing of account, and all other order(s) passed by the Ld. Adjudicating Authority pursuant to impugned order and action taken by the Interim Resolution Professional / Resolution Professional , including the advertisement published in the newspaper calling for applications, all such orders and actions are declared illegal and are set aside - application dismissed - appeal allowed.
Issues Involved:
1. Whether the Corporate Debtor committed a default in payment of debt. 2. Whether the unilateral actions by Respondent No. 1 (Syndicate Bank) were justified. 3. Whether the Adjudicating Authority correctly admitted the application under Section 7 of the IBC. 4. Whether the Corporate Debtor was correctly classified as a Non-Performing Asset (NPA). Issue-Wise Detailed Analysis: 1. Whether the Corporate Debtor committed a default in payment of debt: The Corporate Debtor, Bhadreshwar Vidyut Pvt. Ltd. (BVPL), had entered into financing arrangements with a consortium of lenders, with Punjab National Bank (PNB) as the lead bank. The Respondent No. 1, Syndicate Bank, held only a 1.64% stake in the total outstanding debt. The Corporate Debtor required letters of credit to purchase coal for its power plant, which was provided by Syndicate Bank. Despite having sufficient funds in the Trust Retention Account (TRA), Syndicate Bank unilaterally reduced the letters of credit facility, causing financial difficulties for BVPL. The Appellant argued that there was no default by the Corporate Debtor, as funds were available in the TRA account but were not released due to inter-bank disputes. 2. Whether the unilateral actions by Respondent No. 1 (Syndicate Bank) were justified: The unilateral reduction of the letters of credit facility by Syndicate Bank was contrary to the understanding with other lenders. This action adversely impacted BVPL's operations and jeopardized the interests of other lenders. Despite requests from PNB and other consortium lenders, Syndicate Bank refused to restore the sanctioned limits. The Appellant argued that this refusal led to the classification of BVPL's account as an NPA, which was incorrect as the Corporate Debtor had placed its entire collection in the TRA account. 3. Whether the Adjudicating Authority correctly admitted the application under Section 7 of the IBC: The Adjudicating Authority admitted the application under Section 7 of the IBC, filed by Syndicate Bank, claiming an outstanding amount of ?32,22,50,660.16. The Appellant argued that the Adjudicating Authority failed to consider the facts and circumstances, including the availability of funds in the TRA account and the inter-bank disputes. The Tribunal found that the Adjudicating Authority overlooked key evidence, such as the minutes of consortium meetings and the certificate issued by Chartered Accountants, which indicated that there was no default by the Corporate Debtor. 4. Whether the Corporate Debtor was correctly classified as a Non-Performing Asset (NPA): Syndicate Bank declared BVPL's account as an NPA retrospectively from 30.06.2018. The Appellant argued that this classification was incorrect, as funds were available in the TRA account, and the default was due to inter-bank disputes rather than any failure by the Corporate Debtor. The Tribunal found that the classification of NPA was not challenged legally and that the Corporate Debtor had complied with its obligations by placing its entire collection in the TRA account. Findings: The Tribunal concluded that the Corporate Debtor was not at fault, as it had complied with the terms of the agreements by placing its entire collection in the TRA account. The default could not be attributed to the Corporate Debtor, as the funds were available but not released due to inter-bank disputes. The unilateral actions by Syndicate Bank were not justified, and the Adjudicating Authority failed to consider the relevant facts and evidence. The Tribunal set aside the impugned order, dismissed the application under Section 7 of the IBC, and released the Corporate Debtor from all proceedings. Order: The impugned order dated 27th January, 2020, passed by the National Company Law Tribunal, Division Bench-I, Chennai, was set aside. All orders and actions taken by the Interim Resolution Professional/Resolution Professional were declared illegal and set aside. The application under Section 7 of the IBC was dismissed, and the Corporate Debtor was allowed to function independently. The Adjudicating Authority was directed to fix the fees of the Interim Resolution Professional/Resolution Professional, which would be paid by the Corporate Debtor. The case was remitted to the Adjudicating Authority for determination of fees, and the appeal was allowed with no costs.
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