2018 (10) TMI 194 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - existence of financial debt - Held that - There exists a financial debt and there is occurrence of default committed by the Corporate Debtor in respect of repayment of financial debt. Hon ble Supreme Court in the Judgment in Innoventive Industries Limited v. ICICI Bank & ANR 2017 (9) TMI 58 - SUPREME COURT OF INDIA held that if there is a default occurred in respect of financial debt and the movement the Adjudicating is satisfied that the default has occurred, the Application must be admitted unless it is incomplete.In view of the above said findings and in view of the judgment of the Hon ble Supreme Court, this Petition is liable to be admitted since it is complete in all respects.

Summary

Issues Involved:
1. Existence of financial debt
2. Occurrence of default
3. Admission of the petition under Section 7 of the Insolvency & Bankruptcy Code, 2016
4. Appointment of Interim Resolution Professional
5. Declaration of moratorium under Section 13 and Section 14 of the Code

Detailed Analysis:

1. Existence of Financial Debt:
The petitioner, M/s. ICICI Bank Limited, styled as Financial Creditor, filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. Lanco Babandh Power Limited, styled as Corporate Debtor. The petitioner is a banking company under the Banking Regulations Act, 1949, and the respondent is a company under the Companies Act. The petitioner granted various loans to the respondent, including a senior term loan of INR 9300 million, a letter of credit of INR 5000 million, and a subordinate loan of INR 700 million, among others. These loans were restructured and merged into a rupee term loan of INR 10000 million. Additionally, ICICI Bank, Bahrain, granted external commercial borrowings of USD 70 million. The petitioner provided extensive documentation to substantiate the financial debt, including ISDA Master Agreements, JLF meeting minutes, recall notices, deeds of hypothecation, share pledge agreements, and audited financial statements.

2. Occurrence of Default:
The petitioner claimed that the amount under default as of 31.03.2018 was INR 14,283,354,179.89, along with applicable interest, costs, and charges. The account of the Corporate Debtor was declared a Non-Performing Asset (NPA) on 31.03.2016, effective from 13.01.2015. The petitioner recalled all outstanding amounts and demanded payment via a letter dated 03.08.2017. The Corporate Debtor provided security under the facilities, with an estimated value of INR 64,111,500,000. The respondent cited several reasons for the project's failure, including delays in approvals, non-availability of materials, industry sentiment, de-allocation of coal blocks, and lack of lender support. Despite these claims, the tribunal found that there was a clear occurrence of default in repayment of the financial debt.

3. Admission of the Petition under Section 7 of the Insolvency & Bankruptcy Code, 2016:
The tribunal referred to the Supreme Court judgment in Innoventive Industries Limited v. ICICI Bank & ANR, which held that if a default occurred in respect of financial debt and the adjudicating authority is satisfied, the application must be admitted unless it is incomplete. The tribunal found the petition complete in all respects and thus admitted it.

4. Appointment of Interim Resolution Professional:
The tribunal appointed Sri U. Balakrishna Bhat as the Interim Resolution Professional (IRP) under Section 13(1)(b) of the Code. His responsibilities include taking over the management of the Corporate Debtor and initiating the CIRP.

5. Declaration of Moratorium under Section 13 and Section 14 of the Code:
Upon admission of the petition, the tribunal declared a moratorium under Section 13(1)(a) and Section 14 of the Code. The moratorium prohibits:
(a) Institution or continuation of suits or proceedings against the Corporate Debtor.
(b) Transferring, encumbering, or disposing of any assets or legal rights of the Corporate Debtor.
(c) Actions to foreclose, recover, or enforce any security interest.
(d) Recovery of any property by an owner or lessor in possession of the Corporate Debtor.
The moratorium does not apply to transactions notified by the Central Government or the supply of essential goods or services to the Corporate Debtor. The order of moratorium remains in force until the completion of the CIRP.

Conclusion:
The petition was admitted, and the tribunal ordered the commencement of the CIRP, appointed an IRP, and declared a moratorium. The tribunal's decision was based on the existence of financial debt, occurrence of default, and completeness of the petition as per the provisions of the Insolvency & Bankruptcy Code, 2016.