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TMI Blog2017 (8) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... IONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI] has held that once default. has occurred; application is complete; no disciplinary proceedings are pending against proposed IRP, Adjudicating Authority, on its satisfactions of above is required to admit the case. Adjudicating Authority for the purposes of Insolvency and resolution liquidation for corporate persons is National Company Law Tribunal, constituted under section 408 of the Companies Act, 2013. So the instant application/petition is properly instituted by duly authorized officer of IDBI and submitted application in a prescribed form with required fee along with all the relevant documents duly certified by the competent officer - It is not in dispute that various working capital term loans/working capital facilities/Restructured term loans/funded interest term loans/Priority Loans/Long Term working capital term loans, granted by the IDBI and availed by the respondent-LITL. The total overdue as on June 15th 2017 is ₹ 2,34,96,12,889/-. The default of the loans in question are also not in dispute as date of defaults in all the loans happens to be 28th /30th November 2016 with 197/199 days of default in each case. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dred and Fifty Seven Only). (c) IDBI had granted certain working capital facilities and term loans to the Corporate Debtor from time to time, which were restructured on the terms and conditions as set out under the Master Restructuring Agreement dated December 27, 2013 ( Original MRA ) entered into inter alia, the Corporate Debtor, IDBI and certain other lenders (collectively, the JLF Lenders ). (d) The Original MRA was amended by an Amendment Agreement to the Master Restructuring Agreement dated June 28, 2014 ( First Amendment Agreement ) and a Second Amendment Agreement to the Master Restructuring Agreement dated July 29, 2015 ( Second Amendment Agreement , and together with the Original MRA and the First Amendment Agreement, the MRA ). (e) The Original MRA contemplated the restructuring of various credit facilities granted to the Corporate Debtor by the JLF Lenders (as set out in the MRA), which includes credit facilities granted by IDBI. (f) Under the MRA, the total financial exposure of IDBI to the Corporate Debtor is as follows: (i) Working Capital Term Loan I of ₹ 84,85,00,000 (Rupees Eighty Four Crores and Eighty Five Lakhs Only), details of which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Priority Loan will hereinafter be referred to as MRA Facilities ). The MRA Facilities and the LTWC Term Loan will hereinafter be collectively referred to as IDBI Facilities . (i) The Financial Creditor has also issued the following guarantees ( Guarantees ): i. Corporate Guarantee dated September 06, 2010, in relation to the obligations of Lanco Babandh Power Limited, in favour of IDBI Trusteeship Services Limited (the security trustee) on behalf of inter alia IDBI; ii. Corporate guarantee dated June 25, 2015, in relation to the obligations of Lanco Babandh Power Limited, in favour of IDBI Trusteeship Services Limited (the security trustee) on behalf of inter alia IDBI; iii. Corporate guarantee dated June 30, 2015, in relation to the obligations of Lanco Amarkantak Power Limited, in favour of Power Finance Corporation Limited (the security agent) on behalf of inter alia IDBI; and iv. Corporate guarantee dated January 19, 2016, in relation to the obligations of Lanco Vidarbha Thermal Power Limited, in favour of PNB Investment Services Limited (the security trustee) on behalf of inter alia IDBI. (j) It is stated that in consideration of the financial assistanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on November 24, 2014; (f) Pledge over 9,30,51,500 (Nine Crores Thirty Lakhs Fifty One Thousand and Five Hundred) unencumbered equity shares of Lanco Hoskote Highway Limited held by the Company/ Corporate Debtor and Avior Power Private Limited, created on November 24, 2014; (g) Pledge over 8,60,24,800 (Eight Crores Sixty Lakhs Twenty Four Thousand and Eight Hundred) unencumbered equity shares of Lanco Devihalli Highway Limited held by the Company/ Corporate Debtor and Avior Power Private Limited, created on November 24, 2014; (h) Pledge over 2,00,00,000 (Two Crores) unencumbered preference shares and 22,19,99,900 (Twenty Two Crores Nineteen Lakhs Ninety Nine Thousand and Nine Hundred) unencumbered equity shares of Lanco Hills Technology Park Private Limited held by the Company/Corporate Debtor, created on November 24, 2014; (i) Pledge over 7,99,17,000 (Seven Crores Ninety Nine Lakhs Seventeen Thousand) unencumbered equity shares of Lanco Amarkantak Power Limited held by the Lanco Thermal Power Limited, created on November 24, 2014; (j) Pledge over 91,25,000 (Ninety One Lakhs Twenty Five Thousand) unencumbered equity shares of the Company/Corporate Debtor held by La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the securities mortgaged (except the corporate and personal guarantees) with the applicant as on 31.03.2016 is estimated approximately at ₹ 10,504,00,00,000 (Rupees Ten Thousand Five Hundred Four Crores Only).In addition to the aforesaid, 1,25,79,000 (One Crore Twenty Five Lakhs Seventy Nine Thousand) unencumbered equity shares of the Company/Corporate Debtor held by Mr. L. Rajagopal and Lanco Group Limited, with respect to which pledge has been created on November 10, 2015 have an estimated value of ₹ 1,51,00,000 (Rupees One Crore and Fifty One Lakh) and the Ramabainagar Land has an estimated value of ₹ 230,00,00,000 (Rupees Two Hundred Thirty Crores Only). (m) The Corporate Debtor has failed and/or neglected to make payment of amounts due under the Facilities, when such amounts have became due and payable. As on June 15, 2017, there is an amount of ₹ 234,96,12,889 (Rupees Two Hundred Thirty Four Crores Ninety Six Lakhs Twelve Thousand Eight Hundred and Eighty Nine Only) which is due and payable by the Corporate Debtor to IDBI, particulars whereof are mentioned herein below: (a) Working Capital Term Loan I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 12,93,24,105/- Total ₹ 12,93,24,105/- Grand Total - ₹ 2,34,96,12,889/- (n) In the above circumstances, the applicant/financial creditor is praying the Adjudicating Authority to initiate Insolvency resolution process and pass necessary order as prayed for. 3. Heard Shri Animesh Bisht, Dhanunjay Kumar, Megha Sharma, Divya Datla, 1/b Cyril Amarchand Mangaldas the learned Advocate for the petitioners; and Shri C. V. Mohan Reddy, Senior Advocate with Avinash Desai, Pooja Mahajan, Satya Siva Darshan, Amaljeet Jaiswal, Counsels for the respondents. We have carefully perused all the pleadings made by both the parties along with material documents filed by the respective parties in support of their contentions. 4. Shri Animesh Bisht learned counsel for the applicant/financial creditor, while reiterating various Contentions/averments made in the application, has submitted that IDBI is eligible to file the present application as it qualifies as a Financial Creditor of the Corporate Debtor under IBC 2016 R/w rule 4 of I B (appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, including the JLF. ' The learned counsel has also relied upon the common order dated 2nd August, 2017 passed by NCLT, Ahmedabad Bench, in Standard Chartered Bank Ltd. v. Essar Steel India Ltd. [C.P. No. (I.B.) 40/7/NCLT/AHM/2017, dated 2-8-2017]. 7. The learned Counsel for the petitioner has also filed written submissions dated 27th July, 2017, by inter alia contending as follows: (a) The Reserve Bank of India directed the IDBI to file the instant company petition and it was also authorized by joint lenders forum of LITL ( JLF ), in their meeting held on June 19, 2017. (b) In the present case, the Corporate Debtor/ LITL has defaulted in payment of interest in relation to the facilities advanced by IDBI (as detailed in the CIRP Application) on November 30, 2016 as evident from the statement of accounts in relation to these facilities (c) As per the Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances issued by the RBI dated July 01, 2015 (bearing number RBI/2015-16/101 DBR.No.BP.BC.2/21.04.048/2015-16, as amended from time to time, RBI Master Circular ), a loan account becomes an NPA where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V of the application have not been enforced, and thus the liability of the respondent is only contingent in nature, and has not crystallized into a debt , so inclusion of same in the total amount of debt is not correct. (ii) They have also objected the proposal of the petitioner to appoint Vijay Kumar V. Iyer, as IRP as he is currently engaged in one and subsequently appointed as IRP in two more companies namely: Binani Cement Limited (Bank of Baroda v. Binani Cement Limited, CP (IB) No. 359/KB/2017, Order dated 25 July 2017) and Bhushan Steel Limited (State Bank of India v. Bhushan Steel CP No. (IB) No.-201 (PB)/2017, Order dated 26 July 2017). In support of their contention, they relied upon paragraph 22 of the Code of Conduct for Insolvency Professionals as provided in the First Schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. (iii) It is disputed the certificate provided by the applicant in respect of entries in its books as same is not in accordance with the Bankers' Book Evidence Act 1891 (BBE Act.) As per Section 4 of the BBE Act, Certified Copy of any entry in a banker's books shall in all legal proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project. Therefore, so far, LITL has executed 13 power Projects, totaling a significant 4740 MW, which is only second to BHEL as a contractor in India. (viii) LITL has 5 (five) under construction projects in the power section ( Under construction Projects ). (i) 3 (three) large coal based power projects of 1320 MW each, which are being executed by LITL and developed through its SPVs Lanco Babandh Power Limited, Lanco Vidarbha Thermal Power Limited and Lanco Amarkantak Power Limited (Phase II); and (ii) 2 (two) Hydro Power Projects totaling 576 MW, which are being executed by LITL and developed through its SPVs Lanco Teesta Hydro Power Limited (500 MW) and Lanco Mandakini Hydro Energy Private Limited (76 MW); (Collectively, Under construction SPVs ). (ix) LITL is therefore essentially a holding company with EPC assets (whose value is very low compared to the value of its holdings and investments in SPVs) and which derives majority of its consolidated revenue from the SPVs and from the contracts given by these SPVs. It is further stated that in order to reserve the issues placed by LITL and SPVs a steering committee of Lanco group considered a re-organization scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resolution plan that would enable the industry to survive but not push industries into liquidation. He further submits that the Adjudicating Authority should consider granting additional time to enable the lenders to decide whether resolution plan for the resolution of under construction SPVs can be undertaken outside the Code. It is also stated that if the lenders are unable to decide outside the code, the relevant SPVs/lenders may also be constrained to approach concerned adjudicating authorities. This Bench (Adjudicating Authority) is concerned authority for four out of five under construction SPVs. So, the applications/petitions if filed by other SPVs may also be admitted together with the instant petition by adjourning the instant case till other cases are filed The learned Senior Advocate has also submitted that applicant may be directed to remove the Corporate Guarantees in question under total debt due and to direct to recommend another IRP other than the proposed IRP. 11. We have carefully considered all the pleadings of both the parties with in the ambit of powers conferred on this Adjudicating Authority under various provisions made under IBC, 2016.As stated sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured. 13. As stated supra, the Hon'ble NCLAT in the case of Innoventive Industries Ltd. (supra) has reiterated the above requirements, and held that once default. has occurred; application is complete; no disciplinary proceedings are pending against proposed IRP, Adjudicating Authority, on its satisfactions of above is required to admit the case. Adjudicating Authority for the purposes of Insolvency and resolution liquidation for corporate persons is National Company Law Tribunal, constituted under section 408 of the Companies Act, 2013. 14. The IDBI Bank (the applicant herein) has passed a resolution by Board of Directors on 23rd June 2017, by delegation powers for initiation of action under IBC 2016, in addition to existing delegation of powers, in favour of all the Executive Directors, all Chief General Managers (Grade 'F') , All General Managers (Grade 'E'). The following officers are singly and severally authorized on behalf of IDBI Bank Limited; Shri Mahesh Kumar Jain ; Managing Director Chief Executive Officer, Shri Gurudeo Madhukar Yadwadkar; Deputy Managing Director, Shri Krishna Prasad Nair ; Deputy Managing Director. In pursuant of above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Interim Resolution Professional for the applicant company.The Respondents by reply dated 04.08.2017 submitted that Mr. Vijay Kumar V. Iyer has been appointed as Interim Resolution Professional for two more companies viz Binani Cement Ltd. (Bank of Baroda v. Binani Cement Ltd. [CP (IB) No. 359/KB/2017, dated 25-7-2017], and Bhushan Steel Ltd. (State Bank of India v. Bhushan Steel Ltd. [2018] 90 taxmann.com 194 (NCLT - New Delhi)). Therefore, not only does this vitiate Form 2 filed by him but the Respondent Company has serious concerns on the availability of the interim resolution professional to effectively perform his functions, verify numerous claims, prepare information memorandum, run LITL as a going concern etc. especially in context of the Respondent Company, whose debt structure and operations are very complicated and complex. In this regard, attention of this Hon'ble Tribunal is drawn to Paragraph 22 of the Code of Conduct for Insolvency Professionals as provided in the First Schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, which reads as under:- 22. An insolvency professional must refrain from accepting too m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erim Resolution Professional, in pursuant to a public notification given by IRP. So the respondent is having every right to plead the same before IRP to consider its contentions. 22. The other contention made by Mr. C.V. Mohan Reddy, the learned senior counsel for respondent with regard to granting further time is concerned, it is to be stated that the instant case is filed by IDBI against Lanco Infratech Limited, in the Registry of NCLT, in the first week of July 2017, after duly serving copy of application along with all material papers to respondent Company. However, the case was listed for admission before the Bench on 25th July, 2017 for admission, after scrutiny of case papers by the Registry of NCLT, and after hearing the case, the Bench was of prima facie opinion that it is a fit case for admission. However, Shri Avinash Desai representing respondents has requested two days time to get instruction from his client, after accepting notice for the respondents. Accordingly, the case was again listed on 27th July 2017, and on this day, Shri C.V. Mohan Reddy, learned senior Advocate requested a week's time further to get necessary instructions/papers. Accordingly, the Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this order, we have duly considered all the pleadings of both the parties in a dispassionate manner and strictly in four corners of law. We have also afforded reasonable opportunity, by duly following principles of natural justice, to the respondent to put forth their views of the matter. 24. It is relevant to mention here that it is not the case of respondent that they have paid substantial amount of debt in question, while the case is pending. In the normal course, whenever an un-disputed debt remains to be paid to lender, borrowers are supposed to come forward to pay some amount, and then negotiate for some type of instalment(s) with lender(s). In the instant case, as detailed supra, the respondent is pleading several issues, which are hardly have any relevancy to the issue in question as the IDBI has extended Loans and facilities in question independently to the respondent and they would not depend on other projects of Respondent Company. The circumstances in the case indicate that all remedies available to the Respondent stated to have been exhausted. Any way, we are not concerned with other issues of Respondent, and it is for the Concerned Authorities and Financial Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed mode of communication, by duly taking all guidelines and instructions issued from time to time by IBBI for the initiation of Corporate Insolvency Resolution Process call for submission of claims under section 15 of IBC; (h) The IRP is directed to follow all extant rules of IBC and all the rules and regulations framed by Insolvency and Bankruptcy Board of India (IBBI)(Insolvency Professionals) Regulations, 2016. Afford full opportunity to all parties to the issue by duly following principles of natural justice; (i) The IRP shall perform all his functions religiously, strictly which are contemplated inter alia, by Sections 15, 17, 18, 19, 20 and 21 of IBC. It is further made clear that all the personnel connected to the corporate debtor, its promoters and any other person associated with the management of the corporate debtor are under legal obligation under Section 19 of IBC to extend every assistance and co-operation to the IRP as may be required by him in managing the affairs of the Corporate Debtor; (j) The IRP shall be under duty to protect and preserve the value of the property of the corporate debtor as a part of its obligation imposed by Section 20 of IBC and perf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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