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2020 (10) TMI 771 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Debt - existence of debt and dispute or not - HELD THAT - Resolution Plan/Restructuring Package, which was submitted by the Corporate Debtor, was rejected, as is evident from the Minutes of the Consortium Meeting dated 28.03.2018, not only on account of the revised RBI Guidelines but also due to non-routing of sales of the Corporate Debtor through cash credit account. Details on record, more particularly the Minutes of the Meeting of the Consortium on 05.04.2019, wherein the forensic audit report of the account of Corporate Debtor were considered, various irregularities have been recorded. Thus, prima facie, the Financial Creditor has succeeded in establishing that the proceedings initiated by them against the Corporate Debtor under IBC 2016 is primarily due to failure of the Corporate Debtor to pay the outstanding amount dues as under taken in the loan agreement and not only on account of RBI Circular dated 12.02.2018. Thus, there being debt payable by the 'Corporate Debtor' and having committed default, it is held that the Financial Creditor has made out a case for initiating of 'Corporate Insolvency Resolution Process' against the 'Corporate Debtor', which needs to be decided on its merits. Application admitted.
Issues Involved:
1. Application for dismissal of proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016. 2. Validity of the RBI Circular dated 12.02.2018. 3. Financial debt and default by the Corporate Debtor. 4. Initiation of Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Application for Dismissal of Proceedings Initiated Under Section 7 of IBC, 2016: The Corporate Debtor, M/s. Rashi Steel and Power Limited, filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) seeking dismissal of the proceedings initiated by the Financial Creditor, Punjab National Bank (PNB), under Section 7 of IBC, 2016. The proceedings were initiated for an alleged default in paying financial debt amounting to ?141,66,79,953.83 as of 17.12.2018. 2. Validity of the RBI Circular Dated 12.02.2018: The Corporate Debtor contended that the petition filed by the Financial Creditor was a consequence of the RBI Circular dated 12.02.2018, which was later quashed by the Supreme Court in the case of Dharani Sugars and Chemicals Vs. Union of India & Ors. The Supreme Court had declared all actions taken under the said circular as "bad in law" and "non-est." 3. Financial Debt and Default by the Corporate Debtor: It was undisputed that the Corporate Debtor had availed Term Loan and Cash Credit Facilities from PNB and Allahabad Bank. Despite several restructuring proposals and consortium meetings, the Corporate Debtor defaulted on its repayment obligations. The Financial Creditor classified the Corporate Debtor's accounts as Non-Performing Assets (NPA) on 17.10.2016 due to irregularities and non-payment of dues. The Financial Creditor recalled the loan facilities vide a letter dated 03.04.2018, and the Corporate Debtor failed to comply with the recall notice. 4. Initiation of Corporate Insolvency Resolution Process (CIRP): The Financial Creditor initiated CIRP due to the failure of the Corporate Debtor to repay the outstanding dues and deficiencies in its resolution plan. The Tribunal noted that the proceedings were not solely based on the RBI Circular but primarily due to the Corporate Debtor's failure to pay the debts. The Tribunal referenced the Supreme Court's judgment in Innoventive Industries Ltd. Vs. ICICI Bank and Anr., which emphasized that the insolvency resolution process begins when a default occurs, and the application must be admitted if the default is established. Conclusion: The Tribunal concluded that the Financial Creditor had established a case for initiating CIRP against the Corporate Debtor due to the default in repayment of financial debt. The application for dismissal of the proceedings was dismissed, and the initiation of CIRP was to be decided on its merits. Order: The I.A. No. 78/CTB/2019 connected with TP No. 197/CTB/2019 arising out of CP (IB) No. 4707/MB/2018 was dismissed. The Registry was directed to communicate the Order to the petitioner and respondent and issue a certified copy upon compliance with requisite formalities.
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