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TMI Blog2019 (11) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ber (Technical) Ratakonda Murali Member (Judicial) Animesh Bisht, D. Narendar Naik and Vikram C. Putlapaga, Advs. for the Petitioner. G. Arun, Adv. for the Respondent. JUDGMENT The present petition is filed by State Bank Of India/ financial creditor alleging that the financial creditor had, inter alia, granted certain fund based and non-fund based facilities to Messrs GKC Projects Limited/ corporate debtor and the corporate debtor has defaulted in its payments to the extent of (Rupees three hundred and sixty eight crores thirteen lakhs thirty five thousand three hundred and seventy eight and seventy nine paise). First of such default was committed on 24.07.2018.Hence this petition is filed under Section 7 of Insolvency and Bankruptcy Code, 2016, read with Rule 4 of Insolvency Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, seeking commencement of Corporate Insolvency Resolution Proceedings (CIRP) against the Corporate Debtor. 2. The averments of the petition filed by the Petitioner/Financial Creditor in brief are: (i) Pursuant to sanction letters dated 26.06.2007, 06.10.2009, 09.06.2010, 09.08.2011, 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate debtor vide its letter of irregularity dated 06.11.2018 that due to the default cornmitted by the corporate debtor it is facilities have been classified as non- performing assets and the corporate debtor is required to regular the facilities. A recall notice date 05.12.2018 has also been issued. (viii) It is further averred that consequent on the impugned default an application under section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has been filed to initiate corporate insolvency resolution process against the respondent/ corporate debtor under the Insolvency and Bankruptcy Code, 2016. 3. The respondent/ corporate debtor filed reply. The objections raised in the counter in brief are as under:- (i) The corporate debtor has at the outset denied all the averments made by the petitioner/ financial creditor. However, the corporate debtor has attributed such default to liquidity issues, difficulties arising out in execution of projects on account of delays in land acquisition, obtaining regulatory and other clearances, etc. Consequently, the corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, delayed/ non issuance of LC BGs, disruption of supplies and other reasons as set out in the counter. The scenario during financial year 2018-19 turned precarious. (vi) It is further submitted by the corporate debtor that the corporate debtor experienced serious liquidity stress towards the end of quarter 1 of the financial year 2019 impacting operations of the ongoing projects. The site liabilities went upto unsustainable level which led to possible termination of projects and invocation of bank guarantees. The liquidity stress also led to Letter of Credits getting devolved since aggregating to ₹ 106.42 crore as on date. The corporate debtor could not service loan liabilities and the accounts turned irregular. (vii) It is further submitted by the corporate debtor that several consortium meetings were held during July- November 2018. In the consortium meeting dated 27.07.2018, upon the request of the corporate debtor, the lenders agreed to release NFB limits including additional Bank Guarantee for the new projects subject to corporate debtor using mobilisation advance to progressively regularise the bank dues. However, the agreed arrangement too could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular scrapped all the past restructuring mechanisms, such as, CDR, Strategic Debt Restructuring and S4A with immediate effect. All accounts, including the ones, whereby any of the schemes had been invoked but not yet implemented were to be governed by the revised framework. (xi) It is further submitted by the corporate debtor that consequent on issuance of circular dated 12.02.2018 by the RBI the financial creditor decided not to restructure the debts and instead was compelled to file an application under section 7 of the IBC before the Hon'ble Tribunal as per the directive of the Circular. It is submitted that the Hon 'ble Supreme Court in the matter of DHARANI SUGARS AND CHEMCIALS LIMITED vs. UNION OF INDIA AND OTHERS has declared the Circular issued by RBI uttra vires of section 35AA of the Banking and Regulation Act, 1949. 4. Rejoinder has been filed by the petitioner/ financial creditor, reiterating the averments made in the petition and denying all the submissions made by the respondent/ corporate debtor in the counter. The petitioner has further submitted in its rejoinder as under: (i) The reply filed on behalf of M/S GKC Projects Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar, it is filed under the provisions of IBC, 2016. The petitioner is entitled under the provisions of IBC, 2016 to initiate corporate insolvency process in case of default of over ₹ 1 lakh. Default of ₹ 368,13,35,378.79 (Rupees three hundred and sixty eight crores thirteen lakhs thirty five thousand three hundred and seventy eight and seventy nine paise) has clearly been established and has not been disputed by the corporate debtor. (iv) It is submitted by the petitioner/ financial creditor that the corporate dcbtor did not pay heed to the repeated communications issued to him and discussions held between the parties and remained perpetual defaulter. (v) It is submitted by the petitioner/ financial creditor that the petitioner is entitled to file application under section 7 of IBC, 2016 for initiating CIRP in case of default arising from IBC and is completely independent of the RBI circular. The petitioner/ financial creditor relied on the decision of the Hon'ble High Court of Gujarat in the case of ESSAR STEEL INDIA LIMITED vs. RESERVE BANK OF INDIA, reported in 2017 SCC Online Guj. 995, wherein it is held that, 24. All such issues c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process begins. Default is defined in section 3(12) in very wide terms as meaning non-payment Of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instatment amount (emphasis supplied) 28. The moment the adjudicating authority is satisfied that a default has occurred the application must be 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 a notice from the adjudicating authority. (Emphasis supplied) 30. On the other hand as we have seen in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is due , i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished the default. Counsel contended that there is absolutely no dispute raised by the corporate debtor about the sanctioning of various types of loans to the corporate debtor from time to time and further the corporate debtor has not raised any dispute with regard to non-payment of the debt. Counsel contended that the corporate debtor cited several other reasons for its failure to service the debt, which has no relevance at all. 9. The main contention of the learned counsel for the financial creditor is that the proceedings under section 7 of Insolvency and Bankruptcy Code, 2016, are not initiated against the corporate debtor only on the basis of the Circular issued by the RBI dated 12.02.2018. In other words, the contention of the learned counsel is that the financial creditor initiated action against the corporate debtor under the provisions of the Insolvency and Bankruptcy Code, 2016 on the ground that the corporate debtor committed default of debt which right was conferred on the financial creditor by the Code. The learned counsel relied on the decision of the Hon'ble Apex Court in the case of Dharani Sugars and Chemicals Ltd and others Vs. Union of India and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the otherhand the counsel for the corporate debtor would contend that the corporate debtor committed default of debt because of various reasons enumerated in the counter. The counsel contended that in the minutes of JLF meeting dated 30.11.2018 Circular Of RBI dated was referred to. Counsel contended that the decision of the Hon'ble Apex Court in Dharani Sugars and Chemicals Ltd and others Vs. Union of India and others, (2019) 5 SCC 640 (supra) is applicable. 12. The financial creditor filed five volumes along with application under section 7 of Insolvency and Bankruptcy Code, 2016, to establish that the financial creditor extended credit facility to the corporate debtor from time to time and further the financial creditor is able to establish the default. Absolutely there is no dispute with regard to the debt payable and further the default committed by the corporate debtor. Other contentions raised by the corporate debtor in the counter that the proceedings are initiated against it in pursuance of Circular dated 12.02.2018 which was subsequently held to be ultra vires section 35AA of the Banking Regulation Act, 1949 and the proceedings initiated in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany is requested to resubmit resolution plan making required improvement in sustainable debt portion. The lenders informed the company that a resolution is also possible outside IVCLT before EOI is called for, subject to approval by all the lenders. 14. From the above, 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. 15. Initially, as brought out in para 3 above the corporate debtor has relied on judgment of the Hon'ble Supreme Court in the matter of DHARANI SUGARS AND CHEMCIALS LIMITED vs. UNION OF INDIA AND OTHERS (supra) and has contended that the Hon'ble Supreme court has declared the Circular of RBI ulra vires section 35AA of the Banking Regulation Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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