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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + AT Insolvency and Bankruptcy - 2023 (11) TMI AT This

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2023 (11) TMI 906 - AT - Insolvency and Bankruptcy


Issues Involved:
1. Determination of the applicable rate of interest for the Corporate Debtor.
2. Compliance with procedural requirements by the Resolution Professional (RP).
3. Validity of actions taken by the Committee of Creditors (CoC) and the RP.
4. Contempt proceedings for alleged willful disobedience of tribunal orders.

Summary:

1. Determination of the Applicable Rate of Interest:
The core issue was whether the applicable rate of interest for the Corporate Debtor should be 22% or 14.85%. The Adjudicating Authority determined the rate of interest as 22% per annum based on the Settlement Agreement dated 28.02.2011 and the Modification Agreement dated 29.09.2011. However, the Appellate Tribunal found that the Sanction Letter dated 28.02.2011, which provided for 22% interest, was revoked by ARCIL on 17.06.2013. Consequently, the Modification Agreement, which was based on the Sanction Letter, could not survive independently. The Tribunal concluded that the Financial Creditor could not charge 22% interest and determined the correct rate of interest to be 14.85%.

2. Compliance with Procedural Requirements by the RP:
The Resolution Professional was criticized for not pressing the application for the determination of the rate of interest, which led to the approval of claims at an inflated rate of 22%. The Tribunal highlighted that the RP should have ensured the correct determination of the rate of interest before proceeding with the Corporate Insolvency Resolution Process (CIRP).

3. Validity of Actions Taken by the CoC and the RP:
The Tribunal noted that the CoC proceeded to approve the Resolution Plan without the determination of the correct rate of interest, which was essential for the accurate calculation of claims. The Tribunal directed the RP to re-verify the claim of ARCIL based on the rate of interest of 14.85% and prepare an addendum to the Resolution Plan to be placed before the CoC.

4. Contempt Proceedings for Alleged Willful Disobedience:
The Appellant filed a Contempt Case alleging willful disobedience of the Tribunal's order dated 02.02.2023, which directed the Adjudicating Authority to determine the rate of interest before approving any Resolution Plan. The Tribunal, however, closed the Contempt Case in light of its decision on the main appeal, which addressed the issues raised.

Conclusion:
The Tribunal allowed the appeal, set aside the order dated 21.07.2023 of the Adjudicating Authority, and directed the RP to re-verify ARCIL's claim at the correct rate of interest of 14.85%. The Tribunal also provided a timeline for completing the necessary processes and extended the CIRP process by 60 days.

 

 

 

 

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