TMI Blog2020 (1) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for delaying the initiation of CIR Process or to keep in abeyance the instant Application as sought for as this Tribunal is required in case of a 'financial debt' which is due and in the event of default as defined under I B Code, 2016 is perforce required to admit the Application and the parties including the Corporate Debtor can have recourse during CIR process to submit a plan for restructuring if otherwise not disqualified. The Application, as filed by the Financial Creditor is required to be admitted under Section 7 (5) of the I B Code, 2016 - Application admitted - moratorium declared. - IBA/624/2019 - - - Dated:- 6-1-2020 - R. Varadharajan , Member ( J ) And Anil Kumar B. , Member ( T ) For the Appellant : Rajendran Raghavan For the Respondents : Anant Merathia ORDER R. Varadharajan , Member ( J ) 1. This Application has been filed by Indian Overseas Bank (hereinafter referred to as 'Financial Creditor') under Section 7 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against M/s. Coastal Energy Private Limited (hereinafter referred to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor in favour of the Financial Creditor and the agreement are to operate as a continuing security for the ultimate balance with interest thereon that may be payable to the Financial Creditor upon the said Cash Credit account. 7. The Corporate Debtor also agreed that the securities held under the loans shall extend and also to be held as security for any other loans or liability of the Corporate Debtor to the Financial Creditor including ad-hoc facilities/temporary accommodation/exceeding the sanctioned limit granted at the request of the Corporate Debtor, until the entire dues to the Financial Creditor are repaid in full. The Corporate Debtor also in and by various letters and undertaking promised to indemnify the Financial Creditor against any loss. The Corporate Debtor also agreed that the Financial Creditor shall have the right to recall the entire loan amount together with interest and other charges or any part thereof and/or withdraw the concessions, if any, such as reduced rate of interest, subsidy, in case the loan amount has been used for any purpose other than for which it has been sanctioned. 8. The Corporate Debtor executed an agreement of Hypothecation of Book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of all financial lenders including the Financial Creditor. 12. It is stated that several Joint Lenders Meetings were held however, the Corporate Debtor did not come out with any concrete proposal for revival of the Company. The Bank Guarantees were also invoked within its validity period and the Financial Creditor had honoured the same and debited to the Cash Credit account of the Corporate Debtor. The Financial Creditor has made all efforts to persuade the Corporate Debtor to regularize the loan accounts under various facilities availed by it and to repay the astronomical dues. The Financial Creditor had made several demands to the Corporate Debtor to repay the amount borrowed and the earnest efforts of the Financial Creditor went in vain. The Financial Creditor had been accommodating the Corporate Debtor in times of difficulty and to tide over the situation had been giving it helping hands by extending the time for repayment and also by sanctioning required facility to bail out from the distress situation. However, the Corporate Debtor did not keep its promises and failed to keep the account regular. Hence, the account was classified as Non-Performing Assets (NPA) on 30.06. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of which was delayed by around 40 months, causing around revenue losses to the tune of around ₹ 10,400 Crores. 17. It is stated that Coastal Energen being a group company, the Corporate Debtor has supported the project in times of need since there were inordinate delays in sanctioning their share of Term Loan for the project, which would have otherwise become Non-Performing Assets. 18. The Corporate Debtor states that the reasons for the current situation is due to extreme rupee depreciation and International Coal Price Correction resulting in a huge operational loss of about ₹ 220 Crores; the disputes with customs department with MMTC holding on to about ₹ 62 Crores; restrictions on import of coal; reduction in sales volume and delays in recovery of receivables, inadequate working capital, outstanding to be recovered from Coastal Energen which went into Strategic Debt Restructuring and consequent classification of account as NPA leading to further stress in the cash flows. 19. It is stated that Joint Lender Forum of the Coastal Energen had decided to initiate Scheme for Sustainable Structuring of Stressed Assets Scheme as per RBI Guideline to make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al payment of ₹ 150 Crores being the 5% of the total OTS amount was remitted before 15.06.2019 and the same has been fulfilled by the consortium. It is further submitted that on 24.06.2019, a meeting was conducted by the Consortium to consider the OTS proposal and was requested to issue a Letter of Intent (LOI) to initiate the settlement process. 23. It is further stated that State Bank of India, the lead lender of Coastal Energen has sought the support of all the lenders to initiate the resolution process proposition to go through a Swiss challenge route against the base bid received from promoters of Coastal Energen. It is further averred that the approval from the lenders is awaited as the Resolution Plan proposed by State Bank of India is expected to attract bids from the prospective investors competing with the base bid on hand. It is stated that Coastal Energen being in an advanced stage towards implementation of a Resolution Plan, will be completely prejudiced if any legal action is being taken against it and the Corporate Debtor would affect the interests of the stake holders at large including the consortium of member banks. 24. It is stated that OTS is propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 7 filed by a Financial Creditor where there is an existence of a 'financial debt' and its default in excess of ₹ 1,00,000/-, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP). The plea of the Corporate Debtor that restructuring efforts are afoot with the consortium of bankers cannot be made a ground for delaying the initiation of CIR Process or to keep in abeyance the instant Application as sought for as this Tribunal is required in case of a 'financial debt' which is due and in the event of default as defined under I B Code, 2016 is perforce required to admit the Application and the parties including the Corporate Debtor can have recourse during CIR process to submit a plan for restructuring if otherwise not disqualified. 27. 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 Application, as filed by the Financial Creditor is required to be admitted under Section 7 (5) of the I B Code, 2016. 28. The Financial Creditor has proposed the name of Mr. S. Rajagopal. having Registration Number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended 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. 31. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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