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TMI Blog2020 (6) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ations filed by the Financial Creditors are in relation to the same Corporate Debtor, both are taken up together to be disposed of by way of a common order, as the proceedings under IBC, 2016 in relation to CIRP being a proceeding in rem. 2. Heard the Learned Counsel for the Financial Creditors and the Learned Counsel for the Corporate Debtor and perused the pleadings including the documents placed on the case file. 3. The brief facts of the case of the Financial Creditor namely Canara Bank in IBA/1045/IB/2019 are as follows: i. The outstanding amounts claimed by the Financial Creditor in IBA/1045/1B/2019 against the Corporate Debtor is Rs. 59,31,10,589.42p with interest till 18.07.2019. The amount claimed to be in default is set out in a tabular column at page 26 of the typed set filed with the Application, a perusal of which shows that the default is said to have arisen in relation to the overdraft cash credit facility granted by the Financial Creditor to the Corporate Debtor. ii. The Financial Creditor states that the Corporate Debtor is engaged in the business of providing complete range of Power Management Products, Systems, Solutions and Services spread across generation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Acknowledgement of Debt and Security dated 15.10.2014 in favour of the Financial Creditor, copy of which is placed at page 113 of the typed set filed with the Application. viii. The Corporate Debtor after availing the loan and executing the loan documents in favour of the Financial Creditor had become irregular in repayment of both the principal and interest amounts due to the Financial Creditor. On account of the continued default committed by the Corporate Debtor, the Financial Creditor vide its communication dated 28.10.2015, requested the Corporate Debtor to clear the entire overdue immediately, copy of which is placed at page 114 of the typed set filed with the Application. Since no amount was forthcoming, the Financial Creditor issued a recall notice dated 31.10.2015 to clear the entire liability, copy of which is placed at pages 115 and 116 of the typed set filed with the Application. ix. On 02.03.2017, the Corporate Debtor executed Acknowledgement of Debt and Security in favour of the Financial Creditor acknowledging the outstanding amount due to the Financial Creditor, copy of which is placed at page 117 of the typed set filed with the Application. x. The Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availing the loan, the Corporate Debtor executed the following documents in favour of the Financial Creditor on 19.02.2000 as security for due repayment:- (a) Agreement of Loan for Overall Limit, (b) Agreement of Hypothecation of Goods and Assets, (c) Deed of Guarantee for overall limit, (d) Letter Regarding the Grant of Individual Limits within the Overall Limit v. The Financial Creditor from time to time renewed/ revised Fund Based Working Capital, Non- Fund Based Limits to the Corporate Debtor vide Sanction Letters dated 13.11.2001, 29.01.2003, 19.02.2004 and 25.08.2004 for their business. Copies of Sanction Letters are placed at pages 128 to 146 of the typed set filed with the Application. vi. In order to secure the said renewed/ revised sanctions, the Corporate Debtor executed the following documents on 30.08.2004 in favour of the Financial Creditor as security for due repayment:- a. Letter regarding the grant of individual limits within the overall limit and b. Revival letter vii. Again, the Financial Creditor vide Sanction Letter dated 06.12.2004, copy of which is placed at pages No. 158 to 163 of the typed set filed with the Application, sanctioned/ renewed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Debtor to repay the outstanding amount due to the Corporate Debtor, copy of which is placed at pages 716 to 718 of the typed set filed with the Application to which the Corporate Debtor has not sent any reply. xiii. Despite several reminders, the Corporate Debtor failed to repay the liability owed by it to the Financial Creditor. Therefore, the Financial Creditor was constrained to classify the account of the Corporate Debtor as Non-Performing Asset (NPA) on 28.10.2015. At this juncture, the Financial Creditor states that after the classification of the loan account of the Corporate Debtor as NPA, the Corporate Debtor executed two Revival Letters dated 10.02.2018, copies of which are placed at pages 705 to 708 of the typed set filed with the Application, acknowledging the outstanding balance amount due to the Financial Creditor. xiv. Further, the statement of accounts and the Certificate issued under the Banker's Books Evidence Act, 1876 are placed pages 748 to 751 of the typed set filed with the Application. It is also stated that the OA No. 426 of 2019 filed by the Financial Creditor before the DRT-2, Chennai is pending. 5. Counter Affidavit filed by the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain setbacks which brought down the performance of the Company. The company had to face loss for the past few years which is mainly on account of its working capital that had been affected. Further, the trends of the industry shifted to offering turn key projects leaving the independent equipment manufacturing entities to a back stage. As a result, the Company's main focus has shifted to undertaking turn key projects. Some of the projects were delayed for over a period of five years and some other had to come to a standstill because of certain extraneous factors like security issues, issues with right of way clearances for lines, etc. As a result of the same, the sub-contractors also suffered substantially leading to minimal bids in the subsequent projects. In fact, as on date a sum of Rs. 103,88,77,875/- is due to be received from various state utilities like Andhra Pradesh Power Utility Corporation, Assam Power Distribution Company, Bangalore Electricity Supply Corporation Limited, Eastern Power Distribution Limited, Indian Oil Corporation Limited, Karnataka Power Transmission Corporation Limited, Power Grid Corporation of India, Tamil Nadu Electricity Generation Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 22,780.47 18,715.34 6265.30 3,456.31 Relays and Control Panels 16,222.36 10,971.08 6562.69 3392.51 2913.19 Substation Automation/ Meters 2,606.64 143.08 50.87 -- -- RMU -- -- -- 461.86 20.76 Switchgear 3044.01 2250.18 1079.68 41.17 102.51 Projects 1291.27 8093.77 10,009.95 2,081.12 278.11 xi. In addition, the Corporate Debtor has been receiving and executing various orders from time to time. The Corporate Debtor has current orders worth Rs. 34.29 Crores in relation to its protection system business and orders worth Rs. 5.93 Crores in relation to protection products business, in addition to orders worth Rs. 1.75 Crores in the switch gear business. As estimated and recorded in the viability report of the Corporate Debtor, the Company has a projected total possible market opportunity of Rs. 242 Crores for the year 2020-21 with up to Rs. 337.9 Crores in the year 2026-27. xii. During 1997-98, the Company has received ISO- 9002 accreditation from Electricity Association Quality Assurance Limited, UK for the quality systems in Hosur and Bangalore factories. The Corporate Debtor has been actively working in relation to revival of the Company. Recently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the Corporate Debtor is not a fit Company to be subject to CIR Process, and the Company ought to be allowed to function in its current framework, especially in the light of the fact that various industries are dependent on the Corporate Debtor, the workforce, both in direct and indirect employment and the substantial public shareholding involved in the Company and especially on account of the fact that the Corporate Debtor is one of the largest suppliers for various state electricity projects. Therefore, if the company is subject to CIR Process, its growth potential and the interest of the stakeholders will be substantially crippled and prejudiced. Hence, the Corporate Debtor has prayed to dismiss the Application. 6. We have carefully considered the rival submissions as well as the pleadings and the documents as filed by the Counsel for the parties before this Tribunal. The Counter Affidavits filed by the Corporate Debtor in both the matters reveal that though the Corporate Debtor has filed separate Counter Affidavits on different dates, the contentions raised therein by the Corporate Debtor are the one and the same. A perusal of the Counter Affidavit shows that the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the individual Financial Creditor in their respective petitions the debt is also not time barred in view of acknowledgments given by the Corporate Debtor to each of the Petitioner banks as contemplated under Section 18 of the Limitation Act, 1963. In any case, there is no denial of liability owed to the individual Financial Creditor by the Corporate Debtor. 10. Thus, taking into consideration the facts and circumstances of the case as well as the position of law, we are of the view that the Applications, as filed by the Financial Creditors are required to be admitted under Section 7 (5) of the I&B Code, 2016. 11. Both the Financial Creditors have proposed the names of Interim Resolution Professional (IRP) and written communications in the format prescribed under Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 have been filed by the proposed IRPs. However, in relation to the appointment of IRP, upon perusal of Part - IV of the Application, it may be seen that the debt due to the State Bank of India, prima facie appears substantially to be more than that of the Canara Bank and in such a circumstance, it is just and nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified (3) The provisions of sub - section (1) shall not apply to such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority." 14. 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 may be." 15. Based on the above terms, the Applications stand admitted in terms of Section 7 of the I&B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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