2020 (1) TMI 104 - Tri - Insolvency and Bankruptcy

Admissibility of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - default of debt or not - Section 7 of Insolvency and Bankruptcy Code 2016 R/w Rule 4 of Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules 2016 - HELD THAT - Hon ble Apex Court held in Innoventive Industries Ltd. v. ICICI Bank 2017 (9) TMI 58 - SUPREME COURT that The moment the Adjudicating Authority is satisfied that a default has occurred the application must he admitted unless it is incomplete in which case it may give notice to the Applicant to rectify the defect within 7 days of receipt of notice from the Adjudicating Authority . The Corporate Debtor admitted the default. The present petition is well within the Limitation. The Petition is in order. The petition is complete and therefore deserves to be admitted - petition admitted - moratorium declared.

Issues Involved:

1. Default in repayment by the Corporate Debtor.
2. Financial Creditor's request for initiation of Corporate Insolvency Resolution Process (CIRP).
3. Corporate Debtor's defense citing Force Majeure and sectoral issues.
4. Admissibility of the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.
5. Appointment of Interim Resolution Professional (IRP) and declaration of moratorium.

Issue-wise Detailed Analysis:

1. Default in Repayment by the Corporate Debtor:

The Financial Creditor, M/s. Punjab National Bank, filed the petition stating that the Corporate Debtor, M/s. Lanco Vidarbha Thermal Power Limited, defaulted in repaying ?786,74,02,966.00. The Corporate Debtor availed various facilities from the Financial Creditor, including a Rupee Loan of ?750 Crores, an Additional Rupee Loan of ?378 Crores, and a Bank Guarantee Limit of ?212 Crores, totaling ?1,340 Crores. Despite repeated requests and reminders, the Corporate Debtor did not maintain financial discipline, resulting in the account being classified as "Non-Performing Assets" on 31.03.2018.

2. Financial Creditor's Request for Initiation of Corporate Insolvency Resolution Process (CIRP):

The petition was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the Insolvency & Bankruptcy (Application to the Adjudicating Authority) Rules, 2016. The Financial Creditor sought the admission of the petition, initiation of CIRP, granting of moratorium, and appointment of an Interim Resolution Professional (IRP). The Financial Creditor relied on various loan documents, including sanction letters, security agreements, hypothecation deeds, and recall notices, to substantiate the claim of default.

3. Corporate Debtor's Defense Citing Force Majeure and Sectoral Issues:

The Corporate Debtor contended that delays due to a Public Interest Litigation (PIL) and other Force Majeure events resulted in cost and time overruns. The project cost escalated from ?6936 Crores to ?10433 Crores. The Corporate Debtor also cited sectoral issues such as policy changes, coal shortages, and non-availability of natural gas, which adversely impacted the project. Additionally, the Corporate Debtor argued that disbursements from lenders were delayed and insufficient, affecting project progress.

4. Admissibility of the Petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016:

The Tribunal examined whether there was a debt due and if it was in default. The Corporate Debtor admitted the default, and the petition was found to be complete and within the limitation period. The Tribunal referred to the Hon'ble Supreme Court's judgment in "Innoventive Industries Ltd. v. ICICI Bank [2018] 1 SCC 407," which stated that the application must be admitted if the Adjudicating Authority is satisfied that a default has occurred. The Tribunal also noted that the petition was not filed solely based on the RBI circular dated 12.02.2018.

5. Appointment of Interim Resolution Professional (IRP) and Declaration of Moratorium:

The Tribunal admitted the petition under Section 7 of IBC, 2016, and declared a moratorium as per Section 14 of the Code. The moratorium prohibits the institution or continuation of suits or proceedings against the Corporate Debtor, transferring or disposing of assets, and recovery of property by owners or lessors. The supply of essential goods or services to the Corporate Debtor shall not be terminated during the moratorium period. The Tribunal appointed Mr. Vijay Kumar Garg as the IRP and directed the public announcement of the Corporate Insolvency Resolution Process.

Conclusion:

The Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process against the Corporate Debtor, declared a moratorium, and appointed an Interim Resolution Professional. The Corporate Debtor's defenses citing Force Majeure and sectoral issues were not considered sufficient to reject the petition, as the default was admitted, and the petition was found to be complete and within the limitation period.

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