9911796707
TMI Blog2024 (6) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... rity"), whereby the Adjudicating Authority admitted the Company Petition (IB) No. 966 of 2020 filed by Respondent No.1 against the Corporate Debtor under Section 7 of the Code. Appellant's case: The Development of the SEZ Project 2. The Corporate Debtor, a private limited company established under the Companies Act, 1956, specializes in the development of Special Economic Zones (SEZs) and other infrastructure projects. In 2008, pursuant to a Lease Deed dated 7th October 2008 with the Gujarat Industrial Development Corporation (GIDC), the Corporate Debtor embarked on developing various infrastructure facilities for a SEZ. This included industrial, business, and social amenities such as land development, roads, buildings, sewerage, and warehouses over approximately 309 acres at GIDC Panoli Industrial Estate in Ankleshwar, Gujarat (hereinafter referred to as "the Project"). By 2011, the Project was completed and began operations as a Pharma SEZ, though substantial interest from prospective buyers was not forthcoming. Sublease Agreements 3. In 2013, the Corporate Debtor entered into two Deeds of Sublease (dated 18th March 2013 and 23rd August 2013) with M/s. HBS City Pvt. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan Agreement, the payment terms were revised, and Respondent No. 1 postponed the repayment of the Credit Facilities. The Corporate Debtor committed to making the following payments to Respondent No. 1: Rs. 6 Crores upfront within 10 days from the date of the letter; Rs. 34 Crores on or before March 31, 2022; Rs. 15.60 Crores on or before March 31, 2025. It was mutually agreed that a formal Settlement Agreement capturing the terms of the Settlement would be filed before the NCLT, Mumbai Bench, at the next hearing on January 7, 2022, to obtain an appropriate order. Initial Payment and Acceptance 9. On December 20, 2021, the Corporate Debtor, acting in good faith, paid the upfront amount of Rs. 6 Crores to Respondent No. 1, which was accepted without protest. Covid-19 10. From December 2021 till February 2022, there was a sudden rise in the Covid-19 cases, on account of which most of the offices, including that of the Government, were either temporarily shut or were operating on a partial basis. Due to which, the third party purchaser/financer could not comply with the OTS letter dated 1st December, 2021 and also further could not get the requisite permissions from the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with MAK Living Realty Pvt. Ltd. and Bhakti, preventing the Corporate Debtor from making the March 31, 2022, instalment payment. The Corporate Debtor kept Respondent No. 1 informed of these developments. Further Payments and Revised Proposals: 17. As noted earlier, the Corporate Debtor demonstrated good faith by paying Rs. 6 Crores on December 20, 2021, and further amounts totalling Rs.5 Crores by MAK Living Realty Pvt. Ltd. and Bhakti in September 2022. 18. In response to the inability to meet the March 2022 deadline due to the pandemic and other delays, the Corporate Debtor requested extensions and proposed revised payment schedules, including paying Rs. 5 Crores by June 30, 2022, and Rs. 29 Crores by July 31, 2022. The Financial Creditor, however, threatened to terminate the OTS Agreement without actually doing so. Revised OTS Proposal (March 14, 2023): 19. In light of the ongoing issues, the Corporate Debtor sent a revised OTS proposal to Respondent No. 1 on March 14, 2023, which was in principle accepted. Respondent No. 1 communicated its conditional approval of the revised OTS on April 3, 2023, subject to incorporating certain terms and conditions. 20. Subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itial default amount of Rs. 6.74 crores, it still surpasses the threshold for initiating insolvency proceedings. 28. Heard Learned Counsels for both the parties and perused all the documents placed before us. Appraisal : Background and Factual Matrix 29. The Corporate Debtor was engaged in the development of Special Economic Zones (SEZ) and other infrastructure projects. The project, located at GIDC Panoli Industrial Estate in Ankleshwar, Gujarat, faced numerous challenges including a lack of buyers, economic slowdown, and substantial non-utilization charges imposed by GIDC. To fund the SEZ project, the Corporate Debtor secured a loan facility from the Financial Creditor totalling Rs. 66 Crores under two agreements. Financial Default and Demand Notice 30. The Corporate Debtor failed to service the loan as per the agreed schedule due to various financial difficulties. Consequently, the Financial Creditor issued a Demand Notice on January 27, 2020, seeking payment of Rs. 6.74 Crores. This notice was followed by a Company Petition filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) on September 14, 2020, claiming a default amount of Rs. 58.38 Crores. The Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made upon sanction of the Second OTS. The Respondent No. 1 by letter dated 03.04.2023 accorded an in-principle sanction to the Second OTS proposal, subject to the terms and conditions mentioned therein. In case of non-adherence to timelines, the original loan liabilities were to revive and the OTS was to be treated as acknowledgment of the debts under the entire loan. The Corporate Debtor did not make any payment under the Second OTS till date. Therefore, the debt and default have been admitted by the Corporate Debtor again and again. 36. We find that the CD has failed to settle their debt through OTS in both instances. In the First OTS it was terminated due to their non-payment the second OTS was sanctioned initially but remains unpaid. 37. The oral arguments of the Corporate Debtor that the OTS novates the original loan agreements cannot be accepted for the reasons that the OTS document clearly states that "any non-adherence to the time lines as stipulated shall amount to revocation of the OTS". First OTS and Second OTS in the present case did not novate the debt under the original loan agreements. The First OTS was terminated by the Respondent No. 1 and the original loan ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Creditor's decision to terminate the agreement. Assessment of Financial Creditor's Conduct : 42. The Financial Creditor acted within its rights by accepting the initial OTS payment and subsequently seeking to recover the remaining dues through insolvency proceedings when the Corporate Debtor defaulted. There is no evidence of bad faith or unfair obstruction by the Financial Creditor. The acceptance of partial payments does not negate the default or the legitimacy of the insolvency proceedings. Adjudicating Authority's Decision : 43. The Adjudicating Authority correctly applied the provisions of the IBC in admitting the Company Petition and initiating CIRP. The Corporate Debtor's inability to service its debt, as per the loan agreements and the OTS, substantiates the Financial Creditor's petition under Section 7 of the IBC. Conclusion 44. In light of the above analysis, the appeal against the order of the Adjudicating Authority lacks merit. There is a clear admission of debt and default is clearly established. The default amount is more than Rs.1 crore. The Financial Creditor acted within its legal rights throughout the process, and the initiation of CIRP is j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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