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TMI Blog2020 (10) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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. - IA No. 78/CTB/2019 and TP No. 197/CTB/2019 Arising out of CP (IB) No. 4707/MB/2018 - - - Dated:- 2-3-2020 - Sucharitha R., Member (J) And Satya Ranjan Prasad, Member (T) For the Appellant : Manoj Kumar Mishra ORDER Satya Ranjan Prasad, Member (T) 1. This application has been filed by M/s. Rashi Steel and Power Limited, the Corporate Debtor herein, under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as IBC, 2016 ) praying for dismissal of the proceedings initiated by the Financial Creditor/Punjab National Bank (PNB) against them under section 7 of the IBC, 2016 for allegedly committing default in paying financial debt to the tune of ₹ 141,66,79,953.83 as on 17.12.2018. 2. This is an undisputed fact that the Corporate Debtor has availed Term Loan Facility and Cash Credit Facility from the Financial Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Creditor resolved to follow up with their respective competent authorities for sanction of the restructuring package. e) During the meeting held on 21.12.2017, the Financial Creditor informed the Corporate Debtor that the decision on restructuring package is under active consideration and accordingly the Corporate Debtor was advised to deposit instalments as per restructuring package. f) In the meantime, the Reserve Bank of India issued Revised Framework for Resolution of Stressed Assets ( RBI Framework ) vide its Circular dated 12.02.2018. Pursuant to issuance of the RBI Circular of 12.02.2018, the Financial Creditor delisted the then pending Restructuring Proposal and directed the Corporate Debtor to submit a new Resolution Plan in terms of the aforesaid RBI Circular. g) Applicant submitted a fresh Resolution Plan in terms of the aforesaid RBI Circular, which was subsequently rejected. 5. We have noted that the earlier Resolution Plan/Restructuring Package, which was submitted by the Corporate Debtor, was rejected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, all actions taken under the said circular, including actions by which the Insolvency Code has been triggered must fall along with the said circular. As a result, all cases in which debtors have been proceeded against by financial creditors under Section 7 of the Insolvency Code, only because of the operation of the impugned circular will be proceedings which, being faulted at the very inception, are declared to be non-est. 8. The Financial Creditor in its reply presented before this Tribunal on 26.08.2019 has inter alia made submissions to the effect that- i) Since the Corporate Debtor failed to repay the instalments charges and serve interest in its respective accounts on time, its accounts have become highly irregular and consequently, the Financial Creditor has classified the same as NPA on 17.10.2016 as per the banks/RBI Guidelines. ii) The irregularities were not redressed hence, Financial Creditor vide letter dated 03.04.2018 called upon the Corporate Debtor to pay the entire outstanding interest and other charges failing which proceeding under IBC 2016 shall be initiated. iii) Corporate Debtor failed to comply with its recall notice. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 the abovesaid RBI Circular. 11. In Innoventive Industries Ltd. Vs. ICICI Bank and Anr. - (2018) 1 SCC 407 , the Hon'ble Supreme Court observed and held- The Scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution 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 include non-payment of even part thereof or an instalment amount. For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim to mean a right to payment even if it is disputed. The Code get triggered the moment default is of rupees one lakh or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Under sub-Section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission of rejection of such application, as the case may be. 12. Relying on the above judgement, Hon'ble NCLAT in the matter of State Bank of India Vs. Rohit Ferro Tech Limited, Company Appeal (AT) (Insolvency) No. 671 of 2019 had held that - Petition under Section 7 of the I B Code is to be considered by the Adjudicating Authority on its own merits taking into consideration the records and in absence of any evidence to show that the State Bank of India filed the application only because of the 'Circular' issued by Reserve Bank of India, it was not open to the Adjudicating Authority to reject the application . 13. In light of the facts and circumstances of the case, material on record and also aforesaid decision of the Hon'ble Supreme Court as well as Hon'ble NCLAT and there being debt payable by the 'Corporate Debtor' and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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