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TMI Blog2020 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. Adv. for the Respondent. ORDER R. Varadharajan, This Application has been filed by State Bank of India (hereinafter referred to as 'Financial Creditor') on 12-7-2019 under section 7 of the Insolvency Bankruptcy Code, 2016 (I B Code) r/w rule 4 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against M/s. Kamachi Industries Limited (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP). 2. Heard Learned Counsel for the Financial Creditor and Learned Senior Counsel for the Corporate Debtor and perused the documents filed by the parties. 3. The Financial Creditor has claimed the total amount of ₹ 492,53,00,849.74p as outstanding against the Corporate Debtor as on 30-6-2019. Clause 2 of Part-IV of the Application discloses the details of the loan amount due to the Financial Creditor by the Corporate Debtor. Submissions of Financial Creditor 4. The case of the Financial Creditor is that the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor and in consideration of acceptance of the terms and conditions and as a security, the Corporate Debtor and the consortium members executed the following documents in favour of the Financial Creditor, on 26-3-2013:- (i) Master Restructuring Agreement, (ii) Consortium Working Capital Term Loan cum Hypothecation Agreement, (iii) Supplementary Agreement for Reschedulement of Term Loan and (iv) Inter Se Agreement amongst the lenders. Copies of the above documents executed on 26-3-2013 are placed at pages 38 to 205 of the typed set filed with the Application. 8. Again the Corporate Debtor approached the Financial Creditor and other consortium members and submitted a proposal seeking for further renewal and enhancement of credit facilities. Considering the same, the Financial Creditor and other consortium members renewed the existing credit facilities and had also sanctioned further credit facilities subject to various terms and conditions. In order to secure the said credit facilities, the Corporate Debtor executed the following documents, on 27-5-2013 :- i. Consortium Term Loan cum Hypothecation Agreement and ii. Consortium Working Capital Loan cum Hypotheca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit facilities from ₹ 611.76 Crores to ₹ 659.66 Crores out of which the Financial Creditor has a share of around ₹ 391.57 Crores. The Corporate Debtor in its Board Meeting held on 25-4-2016 resolved to avail the enhanced facilities, copy of which is placed at pages 469 to 472 of the typed set filed with the Application. In consideration of the said enhanced facility, the Corporate Debtor executed Second Supplementary Working Capital Consortium cum Hypothecation Agreement on 2-5-2016, copy of which is placed at pages 473 to 535 of the typed set filed with the Application. Besides that, the Financial Creditor and other members of the consortium members executed Second Supplementary Inter Se Agreement on 2-5-2016, copy of which is placed at pages 536 to 566 of the typed set filed with the Application. 13. In addition, the Corporate Debtor deposited the title deeds in respect of its properties with intention to create an equitable mortgage over the same by executing Memorandum/Letter relating to deposit of title deeds on 24-8-2016, 6-9-2013, 23-4-2005, 22-6-2005, 5-10-2006, 6-6-2008, 28-5-2011, 13-8-2013, 4-6-2013, 5-9-2013 and 27-08-2015, copies of which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 160(E) dated 22-2-2017 issued by the Ministry of Finance, Department of Financial Services, New Delhi, for amalgamation of State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore with State Bank of India w.e.f. 22-2-2017. Copies of the Notifications dated 22-2-2017 issued by the Ministry of Finance are placed at pages 1 to 24 of the Index to additional documents filed with the Application. Besides above, the Financial Creditor has also filed the Independent Auditor's Report of the Corporate Debtor for the Financial Year ended 31-3-2019 at pages 25 to 66 of the Index to additional documents filed with the Application. Submissions of the Corporate Debtor 18. The Corporate Debtor has filed a detailed Counter Affidavit along with typed set of documents wherein it is stated that the Corporate Debtor is primarily engaged in the business of manufacturing Sponge Iron, Billets, TMT Bars and generation of power at Pappan Kuppam in Gummidipoondi in the State of Tamilnadu. With a view to expand its business, the Corporate Debtor undertook a project for setting up an integrated Steel Plant including power pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further stated that the Corporate Debtor filed a Suit in CS No. 462/2018 before the High Court of Madras seeking (i) Specifically perform the understanding dated 5-3-2018 recorded on 12-3-2018 between the Corporate Debtor and the Consortium, (ii) Permanent Injunction restraining the Consortium, its men, agents assignees, executors, etc., from interfering with the Corporate Debtor's business activities in furtherance of the understanding dated 5-3-2018 recorded on 12-3-2018 between the Consortium and the Corporate Debtor and (iii) Costs of the Suit. It is further averred that the OA-10/2019 has been filed by the Financial Creditor before the DRT-II, Chennai for recovery of a sum of ₹ 392,10,692.60p and has simultaneously filed the instant Application as a sheer abuse of process of law. Therefore, the Corporate Debtor has prayed to dismiss the Application with exemplary costs. Analysis 23. We have carefully considered the rival submissions as well as the pleadings and the documents as filed by both the parties before this Tribunal. During the course of arguments, the Learned Counsel for the Financial Creditor has brought to the notice of this Authority para-wise admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12-7-2019, to which the Learned Counsel for the Financial Creditor has submitted that initially the account of the Corporate Debtor was showing incipient sickness and was classified as Non-Performing Asset (NPA) on 2-1-2013, but thereafter, the Creditors thought that as the sickness seem to be temporary, they had recommended for granting CDR Packages in the year 2013. However, even after sanctioning the CDR Packages, the Corporate Debtor could not come out of the sickness which resulted in the failure of the CDR Packages and consequently account was once again classified as NPA on 19-12-2016, and hence, the instant Application is filed within the period of limitation. Therefore, the objection that the Application is barred by limitation is spurious and the Application has been filed within the period of limitation as stated above. Hence, the objection taken by the Learned Senior Counsel for the Corporate Debtor stands rejected. 27. The second objection that has been raised by the Learned Senior Counsel for the Corporate Debtor is that the CC limit which was revised from ₹ 56 Crores to ₹ 105 Crores as per Supplementary Inter Se Agreement dated 5-8-2015, was never d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LAT, after examining the same, it was held that if the debt and default is proved, the Adjudicating Authority is bound to admit the section 7 Application under I B Code, 2016 and upheld the Order passed by NCLT, Chennai. 31. Moreover, as consistently held by Hon'ble Supreme Court both in Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 143 SCL 625 as well as Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 144 SCL 37 (SC), after going through the Scheme of I B Code, 2016 in depth in relation to an Application under section 7 filed by a Financial Creditor where there is an existence of a 'financial debt' and its 'default' in excess of ₹ 1,00,000/-, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP). The plea of the Corporate Debtor that the Company is a solvent and going concern, cannot be made a ground for delaying the initiation of CIR Process or to keep in abeyance the instant Application as sought for as this Tribunal is required in case of a 'financial debt' which is due and in the event of 'default' as defined under I B Code, 2016 is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Corporate Debtor. 35. However during the pendency of moratorium period in terms of section 14(2) and 14(3) as extracted hereunder; (2) The supply of essential goods or services to the Corporate Debtor as maybe specified shall not be terminated or suspended or interrupted during moratorium period. (3) The provisions of sub-section (1) shall not apply to such transactions, agreements or other arrangements as maybe notified by the Central Government in consultation with any financial sector regulator or any other authority. 36. The duration of period of moratorium shall be as provided in section 14(4) of the Code which is reproduced below for ready reference; (4) The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process Provided that where at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the Resolution Plan under sub-section (1) of section 31 or passes an order for liquidation of Corporate Debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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