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TMI Blog2020 (1) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant/Financial Creditor who is having a negligible 1.64% voting power in the total claim has come forward for the CIRP process. In the instant case, the Financial Creditor has complied with all the requirements with respect to initiating the CIRP process against the Corporate Debtor Company and produced all the applicable documents in support of initiating the CIRP process in the prescribed manner. Accordingly, this Adjudicating Authority is satisfied that default has occurred and the application under sub-section 2 of Section 7 of I B Code, 2016 is complete in all respects notwithstanding the fact that the Financial Creditor has acted against the interest of other lending institutions in violation of the Joint Lending Arrangements and stipulations contained in various agreement such as Joint Deed of Hypothecation, Master Inter Credit Agreement [MICA], necessary inter se agreements, Trust and Retention Agreement, etc. This Tribunal is required to adjudicate the matter within contours prescribed under Section 7 of the Insolvency and Bankruptcy Code without having regard to any other policy matter or guideline issued by the competent authority with respect to the Joint Lending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched the Punjab National Bank, the Financial Creditor herein namely Syndicate Bank, Indian Bank, Vijaya Bank (now Bank of Baroda) and State Bank of Hyderabad (now State Bank of India) for financial assistance. The Punjab National Bank was the lead Bank and it was referred to as 'PNB Consortium', for working capital needs. 5. It is averred that the Corporate Debtor sought financial assistance for the purpose of meeting working capital needs in relation to 2 x 150 MW coal based captive power plant of the Corporate Debtor situated at Bhadreshwar village, Mundra Taluk, Kutch, Bhuj District, Gujarat. Pursuant to the request made by the Corporate Debtor, the competent authority of the Financial Creditor has sanctioned Fund Based limit of ₹ 31 Crores and Non-Fund Based limit of ₹ 105.00 Crores, totaling ₹ 136 Crores to the Corporate Debtor. Copy of Sanction Letter dated 16.11.2015 is placed at pages 45 to 54 of the typed set filed with the Application. The Corporate Debtor accepted the conditions of the sanction in its Board Meeting held on 14.12.2015, copy of which is placed at page 55 of the typed set filed with the Application. 6. It is averred that in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assets (other than current assets) of Units 1 and 2 both present and future, pertaining to projects viz., Coal based Captive Power Plants Units 1 and 2 situated at Bhadreshwar Village, Mundra Taluk, Kutch-Bhuj District, Gujarat owned by the Corporate Debtor, b) the balance lying in Trust and Retention Account both ranking after the Charges created and/or to be created in favour of the Term lenders for Units 1 and 2 of the Corporate Debtor; iii) Second charge by way of Hypothecation/Creation of Security Interest of/on all rights, title, interest, benefits, claims and demands whatsoever of the Corporate Debtor viz., a) In the project documents/contracts, as amended, varied or supplemented from time to time, b) In the clearances relating to the project and c) in any letter of credit, guarantee, performance bond provided by any party to the project ranking after the charges creating and/or to be created in favour of the Term lenders for Units 1 and 2 of the Corporate Debtor. 8. Besides above, the Corporate Debtor had executed a Letter of Undertakings for compliance of pre release terms and conditions and post release terms and conditions. Copies of Undertakings dated 17.12.2015 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from REC Limited (formerly known as Rural Electrification Corporation Limited) of ₹ 998.26 Crores, Punjab National Bank of ₹ 252.74 Crores and State Bank of India of ₹ 246.40 Crores. 14. The details of the project costs and its source have been given in a tabular form as under:- Particulars (Rs. Cr) Original Cost Cost Overrun-1 Cost Overrun-II Total Project Cost Debt 1215.41 175.11 106.88 1497.40 REC Limited 810.27 116.74 71.25 998.26 SBI 200.00 28.81 17.59 246.40 PNB 205.14 29.56 18.04 252.74 Promoter Equity 405.14 58.37 35.63 499.14 Total Project Cost 1620.55 233.48 142.51 1996.54 15. It is stated that the Corporate Debtor has commissioned the project in spite of various delays and difficulties faced by it, in obtaining environmental clearance, statutory clearance, aggregation of land, permission to obtain government lands, delay in setting up the transmission line by State Transmission Utility and various other litigations. After facing all the pain and stress in setting up the Power Plant, the Corporate Debtor finally developed and implemented a 300 MW (2x150 MW) coal based sub-critical power project in Gujarat under the Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of funds and the inter-se obligations between the Consortium Lenders. 18. Subsequently, post sanction and installation of working capital consortium, the Financial Creditor has reduced its Cash Credit (fund based facilities) from ₹ 31 Crores to ₹ 7.92 Crores and further the Financial Creditor was not releasing from sanctioned "non-fund" based limits and reduced the other limits such as LC limits from ₹ 70 Crores to Nil and BG limits to Nil and thereafter, on 05.12.2018, the Financial Creditor totally cancelled the "non-fund" based limits of ₹ 98 Crores. The said reduction was done in spite of the availability of non-fund based Working Capital limit and specific requests of the other consortium members to allow opening of letters of credit. The Corporate Debtor has regularly serviced the interest on the Working Capital facilities to the consortium of banks till 31.05.2019. 19. Corporate Debtor states that on 02.05.2018, the Corporate Debtor requested the Financial Creditor to open a Letter of Credit for a sum of ₹ 21,25,36,500/- for the purpose of purchase of coal from one AS Bajaj Sales and Marketing Pvt. Ltd., copy of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no doubt about the viability and operational efficiency of the Plants of the Corporate Debtor and the Corporate Debtor have been enjoying fullest co-operation and confidence of the lenders. 22. The operational and financial performance of the project since its Commercial Operation Date distinguishes the Corporate Debtor from other contemporaries in the power sector the Corporate Debtor's Plant is fully commissioned, technically capable to run on full capacity and it has been operating continuously since Commercial Operation Date. It is stated that in this situation, the Corporate Debtor is capable of continuing its operations without any interruptions and continues to service the debt of all the lenders including the Financial Creditor on the basis of cash flow provided that adequate and sanctioned working capital limits are disbursed. 23. The details of installments and interest paid to all the lenders during the period from financial year 2016-17 to October, 2019 have been given in a tabular form as under:- Financial Year Principal Repaid Rs. in crores Interest paid Rs. in crores Total Paid Rs. in crores 2016-17 2.06 195.32 197.38 2017-18 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot;) shall give notice of its intention to initiate Enforcement Action ("Enforcement Action Notice") to all the other Lenders, the Lenders' Agent. After receipt of notice from the Enforcement Intending Party, a meeting of the Lenders shall be convened and if the course of action proposed by the Enforcement Intending Party in the Enforcement Action Notice or any other course of action is approved by the Lenders holding more than 60% of the then outstanding Secured Obligations, then all the Lenders shall jointly take or cause to be taken by the Lenders' Agent/Security Trustee such approved course of action. 27. It is stated that since the binding agreements contemplate a decision by a prescribed majority, the present action initiated by the Financial Creditor is contrary to the same and any unilateral action would jeopardize the interests of not only the Corporate Debtor but also those of other lenders, and hence, the Application is liable to be rejected. 28. The Corporate Debtor further referred to the Clause 3 (a) and (c) of the Inter-se Agreement dated 17.12.2016 which stipulate that all the members (consortium Lenders) shall act in the spirit of the Consorti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stake is a meager 1.64%. Further, since the Corporate Debtor and the Consortium of Lenders are working out for a proper Resolution Plan which is also the objective of I&B Code, 2016, the action of the Financial Creditor is premature. Therefore, the Corporate Debtor has prayed this Tribunal that the Application filed by the Financial Creditor may be dismissed with costs. 32. The Corporate Debtor has also filed a Memo on 13.12.2019, wherein it is stated that the policy of the Government of India on joint lending arrangement issued on 30.01.2013 which is based on the report of the Diwakar Gupta Committee and as per letter of Ministry of Finance, the policy is required to be placed before the Board of the respective banks. It is further stated in the Memo that Para 36 of the policy clearly stated that the exit of a member is possible only with the approval of all the members of the joint lending arrangement subject to applicable haircut. Therefore, the action of the Financial Creditor is contrary to the public policy and it should have first approached the joint lenders seeking exit. 33. This Tribunal examined the averments in the documents, terms and conditions contained in the vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A contention is seen to have been made by the Authorized Representative who appeared on behalf of the Corporate Debtor that a Resolution Plan is already under consideration by all other Financial Creditors and only the Applicant/Financial Creditor who is having a negligible 1.64% voting power in the total claim has come forward for the CIRP process. 36. Be it as may; the Committee of Creditors to be constituted once the CIRP is initiated will be competent to decide upon the viability of the Resolution Plan reportedly under consideration. This Authority is concerned only with either admission or rejection of the Petition submitted by the eligible Financial Creditor seeking Corporate Insolvency Resolution Process against the Corporate Debtor who is at default. 37. Further, at this point it is relevant to refer to the Judgment of the Hon'ble NCLAT in the matter of Dr. Esther Malini Victor -Vs- Oriental Bank of Commerce & Ors. in Company Appeal (AT) (Insolvency) No. 822 of 2019, wherein the similar set of issue fell for consideration before the Hon'ble NCLAT and after examining the same, it was held that if the debt and default is proved, the Adjudicating Authority is bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er [IBBI/IPA-002/IP-N00741/2018-2019/12211] (Email id:- [email protected]) as Interim Resolution Professional (IRP) and a written communication in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 has been filed by the proposed IRP who is appointed as the IRP to take forward the process of Corporate insolvency Resolution of the Corporate Debtor. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15, 17, 18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIR Process in relation to the Corporate Debtor in terms of the provisions of I&B Code, 2016. 41. As a consequence of the Application being admitted in terms of Section 7 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor; (a) the institution of suits or continuation of pending suits or proceedings against the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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