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2019 (11) TMI 1213 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor has defaulted in its repayments - debt due and payable or not - section 7 of Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is abundantly clear that the present petition under section 7 of the 1B Code has been filed solely and exclusively in the background and in pursuance of RBI Circular dated Even the last date for filing of petition under 1B Code has been discussed and mentioned in Minutes dated 30.11.2018 making it clear that compliance of RBI Circular dated 12.02.2018 was very much in the mind of Financial Creditor. Accordingly, the present petition under section 7 of the Code has been filed on 06.12.2018 i.e. just five days before the date of 11.12.2018. The present petition filed by financial creditor under section 7 of the Code is solely filed in pursuance of RBI Circular dated 12.02.2018 - the present petition filed under section 7 of the 1B Code deserves to be dismissed - Petition dismissed.
Issues Involved:
1. Granting of fund-based and non-fund-based facilities by the financial creditor to the corporate debtor. 2. Default by the corporate debtor on payments. 3. Restructuring of loans and facilities under various schemes. 4. Classification of the corporate debtor's account as non-performing assets. 5. Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016. 6. Corporate debtor's objections and reasons for default. 7. Impact of the RBI Circular dated 12.02.2018 and its subsequent invalidation by the Supreme Court. 8. Admissibility of the petition under Section 7 of the IBC, 2016. Detailed Analysis: 1. Granting of Fund-Based and Non-Fund-Based Facilities: The financial creditor, State Bank of India, granted various fund-based and non-fund-based facilities to the corporate debtor, GKC Projects Limited, through several sanction letters and agreements dated between 2007 and 2013. These facilities were secured by mortgages, hypothecation, personal guarantees, and pledges of shares. 2. Default by the Corporate Debtor: The corporate debtor defaulted on its payments, with the first default occurring on 24.07.2018. The amount of default was ?368,13,35,378.79. The financial creditor classified the account as non-performing assets and issued a recall notice on 05.12.2018. 3. Restructuring of Loans and Facilities: The initial facilities were restructured under the CDR (Corporate Debt Restructuring) scheme in December 2014 and further restructured under the S4A (Scheme for Sustainable Structuring of Stressed Assets) scheme in April 2017. The sustainable debt was classified at ?471,22,00,000. 4. Classification as Non-Performing Assets: The corporate debtor's account was classified as SMA-2 by the Central Repository of Information on Large Credits (CRILC) on 30.09.2018 due to the default. The financial creditor informed the corporate debtor about the irregularities and classified the facilities as non-performing assets. 5. Application Under Section 7 of the IBC, 2016: The financial creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the commencement of Corporate Insolvency Resolution Proceedings (CIRP) against the corporate debtor. The application was filed independently of the RBI Circular dated 12.02.2018. 6. Corporate Debtor's Objections and Reasons for Default: The corporate debtor attributed the default to liquidity issues, delays in project execution, regulatory clearances, and higher operational costs. The corporate debtor faced difficulties even after the implementation of the CDR and S4A schemes. Despite securing substantial orders, the corporate debtor experienced liquidity stress, leading to operational losses and the inability to service loan liabilities. 7. Impact of the RBI Circular Dated 12.02.2018: The corporate debtor argued that the proceedings under Section 7 of the IBC, 2016, were initiated in pursuance of the RBI Circular dated 12.02.2018, which was later declared ultra vires by the Supreme Court in the case of DHARANI SUGARS AND CHEMICALS LIMITED vs. UNION OF INDIA AND OTHERS. The Supreme Court held that all actions taken under the said circular, including the initiation of insolvency proceedings, must fall along with the circular. 8. Admissibility of the Petition: The financial creditor contended that the application was filed independently of the RBI Circular and based on the rights conferred under the IBC, 2016. The Tribunal examined the minutes of consortium meetings and found references to the RBI Circular, indicating that the petition was filed in pursuance of the circular. Consequently, the Tribunal held that the petition was non-est as per the Supreme Court's decision in DHARANI SUGARS AND CHEMICALS LIMITED vs. UNION OF INDIA AND OTHERS. Conclusion: The Tribunal dismissed the petition filed under Section 7 of the IBC, 2016, as it was found to be initiated solely in pursuance of the RBI Circular dated 12.02.2018, which was declared ultra vires. The petitioner was granted liberty to file a fresh petition.
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