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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2024 (6) TMI AT This

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2024 (6) TMI 52 - AT - Insolvency and Bankruptcy


Issues Involved:
1. Development of the SEZ Project
2. Sublease Agreements
3. Fundraising and Loan Agreements
4. Challenges Leading to Default
5. Demand Notice and Company Petition
6. One Time Settlement (OTS) Agreement
7. Failure to Adhere to OTS Terms
8. Respondent's Defense
9. Analysis and Judgment

Summary:

Development of the SEZ Project:
The Corporate Debtor, a private limited company, specialized in developing Special Economic Zones (SEZs). The project, initiated in 2008, faced challenges including a lack of buyers and economic slowdown, leading to financial difficulties.

Sublease Agreements:
In 2013, the Corporate Debtor entered into sublease agreements with M/s. HBS City Pvt. Ltd. and later with Mahansaria Tyres Pvt. Ltd. for portions of the SEZ land.

Fundraising and Loan Agreements:
To fund the SEZ project, the Corporate Debtor secured a loan facility of Rs. 60 Crores from the Financial Creditor in 2017, followed by an additional Rs. 6 Crores in 2019. Both agreements were insufficiently stamped.

Challenges Leading to Default:
The Corporate Debtor faced several challenges, including lack of buyers, illegal non-utilization charges by GIDC, and an economic slowdown, leading to an inability to meet repayment obligations.

Demand Notice and Company Petition:
On January 27, 2020, the Financial Creditor issued a Demand Notice for Rs. 6.74 Crores. Subsequently, a petition u/s 7 of the Insolvency and Bankruptcy Code was filed on September 14, 2020, claiming a default amount of Rs. 58.38 Crores.

One Time Settlement (OTS) Agreement:
An OTS Agreement was reached on December 1, 2021, where the Financial Creditor agreed to accept Rs. 55.6 Crores in phased payments. The Corporate Debtor made an initial payment of Rs. 6 Crores.

Failure to Adhere to OTS Terms:
The Corporate Debtor failed to pay Rs. 34 Crores by March 31, 2022, as per the OTS terms. Despite several requests for extensions, the Financial Creditor terminated the OTS agreement and continued insolvency proceedings.

Respondent's Defense:
The Financial Creditor argued that the Corporate Debtor repeatedly acknowledged their debt and inability to pay, defaulted on both loans, and failed to fulfill promises in two OTS agreements. The insolvency process aims to resolve financial distress, and the Corporate Debtor's attempts to negotiate a settlement do not negate the existing financial obligation.

Analysis and Judgment:
The Adjudicating Authority correctly applied the provisions of the IBC in admitting the Company Petition and initiating CIRP. The Corporate Debtor's inability to service its debt, as per the loan agreements and the OTS, substantiates the Financial Creditor's petition u/s 7 of the IBC. The appeal against the order of the Adjudicating Authority lacks merit, and the initiation of CIRP is justified by the Corporate Debtor's persistent defaults and failure to comply with the OTS terms.

Conclusion:
The order of the Adjudicating Authority is upheld, and the Appeal is dismissed. The Corporate Insolvency Resolution Proceedings against the Corporate Debtor shall continue as per the provisions of the Insolvency and Bankruptcy Code. No orders as to costs.

 

 

 

 

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