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2020 (9) TMI 599 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor unable to liquidate its financial debt - Financial Debt or not - record of default - information utility or other evidence produced by the financial creditor? - Time Limitation. HELD THAT - This Adjudicating Authority after hearing both the parties and considering the application and documents annexed there to, observes that the contention challenging the maintainability of the petition that the petition is being filed in UP Electricity commission finds no ground for rejecting the application as the petition filed at UP Electricity Commission is between the Respondent (i.e. SEUPPTCL) and UPPTCL and this application cannot be rejected on this ground. Further with regard to the RBI circular dated 09th June, 2019, this Adjudicating Authority agrees with the contention that it will have a prospective effect and no application in the present proceedings. With regard to the proving of debt, this Adjudicating Authority finds that the corporate debtor has not denied the fact that the debt has been taken from the applicant financial creditor thus it is an admitted debt taken by the corporate debtor as Rupee Term Loan through Facility Agreement from the applicant financial creditor - Further, this Adjudicating Authority finds that as the corporate debtor was under obligation to pay the interest and principal amount in terms of Facility Agreement in 48 equal quarterly instalments and interest at the prescribed rate on a quarterly basis from the date of disbursement under the Facility Agreement and the corporate debtor has failed of fulfil its payment obligation thus default has occurred on part of corporate debtor and the applicant has also attached several documents to prove the existence of debt and default. Thus, this Adjudicating Authority is of the view that there is a default as the corporate debtor has failed repay the amount due to the financial creditor. The petitioner succeeded in establishing that there is a debt and existence of default on behalf of corporate debtor and the application is complete in all respect. Time Limitation - HELD THAT - The application filed on behalf of financial creditor/Applicant under Section 7 of IBC is found complete. The present petition being filed in 11.04.2019 is well within limitation and the date of default is 13th July, 2018 is much prior to the amendment made in Insolvency and Bankruptcy Code on 05th of June, 2020 whereby Sec 10A was inserted - in the present application the date of default in the present application is 13th July, 2018, thus the amendment made will not be applicable in the present petition. This adjudicating Authority is inclined to admit this petition and initiate CIRP of the Respondent Company - Moratorium declared.
Issues Involved
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency & Bankruptcy Code, 2016. 2. Financial assistance and loan agreements between the parties. 3. Default in repayment obligations by the Corporate Debtor. 4. Delays and issues in the project implementation. 5. Demand letters and recall of the loan by the Financial Creditor. 6. Objections raised by the Corporate Debtor regarding maintainability of the petition. 7. Applicability of RBI circular dated 7th June 2019. 8. Allegations of suppression of material facts and direct payments received by the Financial Creditor. 9. Requirement of documents from information utility showing default. Detailed Analysis 1. Initiation of Corporate Insolvency Resolution Process (CIRP) The petition was filed by the Financial Creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of CIRP against the Corporate Debtor due to its inability to repay its financial debt. 2. Financial Assistance and Loan Agreements The Corporate Debtor approached the Financial Creditor for financial assistance to part finance its project, which was agreed upon, and a Rupee Term Loan Assistance was sanctioned. The loan was to be repaid in 48 equal quarterly installments along with interest. 3. Default in Repayment Obligations The Corporate Debtor defaulted on its repayment obligations, leading to the issuance of demand letters by the Financial Creditor and the subsequent recall of the loan. The outstanding amount as of March 31, 2019, was INR 2416.96 crores. 4. Delays and Issues in Project Implementation The project faced significant delays due to various reasons, including the failure of GIC to adhere to its obligations under the corporate guarantee. The Corporate Debtor attributed the delays to factors beyond its control, including issues with UPPTCL. 5. Demand Letters and Recall of Loan Demand letters were issued by the Financial Creditor on multiple occasions, and the loan was recalled on October 10, 2018, demanding the outstanding amount inclusive of interest and delay charges. Bank guarantees were invoked, realizing an amount of INR 580.37 crores. 6. Objections Raised by the Corporate Debtor The Corporate Debtor raised several objections, including: - The petition's maintainability due to ongoing proceedings before the Uttar Pradesh Electricity Regulatory Commission. - Alleged arbitrary and illegal approach by the Financial Creditor. - Failure to consider RBI directions applicable to NBFCs. - Concealment of material facts and direct payments received by the Financial Creditor. 7. Applicability of RBI Circular Dated 7th June 2019 The Corporate Debtor argued that the RBI circular dated 7th June 2019 was applicable. However, it was contended that the circular could not have a retrospective effect and did not override the provisions of the Code. The Adjudicating Authority agreed with this contention. 8. Allegations of Suppression of Material Facts and Direct Payments The Corporate Debtor alleged that the Financial Creditor received direct payments from UPPTCL without informing the Corporate Debtor. The Financial Creditor admitted receiving payments and adjusted them against the debt owed by the Corporate Debtor. The Adjudicating Authority found these objections unworthy of consideration. 9. Requirement of Documents from Information Utility Showing Default The Corporate Debtor objected to the lack of documents from the information utility showing default. The Financial Creditor argued that the default could be established based on other evidence, which was accepted by the Adjudicating Authority. Conclusion The Adjudicating Authority, after considering the application and documents, found that: - There was a duly established financial debt. - There was a default in payment by the Corporate Debtor. - The documents attached with the application showed the default in payment of debt. The petition was found complete and within the limitation period. The application was admitted, and a moratorium in terms of Section 14 of the Insolvency & Bankruptcy Code, 2016, was declared. The proposed Interim Resolution Professional (IRP) was appointed, and the registry was directed to communicate the order to the parties involved. The case was listed for the filing of the progress report on 20.08.2020.
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