TMI Blog2022 (11) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores from ATC and INR 351 from BSNL in pending arbitration proceeding. The amount received would be sufficient to pay the debt of the Petitioner. The ratio of the Vidarbha Industries [ 2022 (7) TMI 581 - SUPREME COURT] is squarely applicable to the present case as the business of the Corporate Debtor is sustainable and it is a viable going concern under its current management and the overall financial health of the Corporate Debtor is not bad enough to be admitted under CIRP. Moreover, the adjudicated and un-adjudicated claims of the Corporate Debtor are far more than the debt claimed in the present petition. So, in view of Judgement of the Hon ble Supreme Court in Vidarbha Industries Power Limited Vs. Axis Bank Limited, the present petition should be dismissed. Petition dismissed. - Hon ble Member (Judicial), Justice P.N. Deshmukh (Retd.) And Hon ble Member (Technical), Shri Shyam Babu Gautam For the Financial Creditor : Counsel, Mr. Rohit Gupta For the Corporate Debtor : Senior Counsel, Mr. Vikram Nankani Counsel, Mr. Rohan Rajadhyaksha ORDER Per- Justice P.N. Deshmukh (Retd.), Member Judicial 1. The present Company Petition (IB)-4541(MB)/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and control in the Corporate Debtor. However, while the sale process was underway, there was a significant loss in tenancies due to the bankruptcies or closure of Aircel, Reliance Communications and Tata Teleservices. As a result, the lenders were unable to identify a new buyer for their shareholding. Pursuant to the JLF meeting dated 13.07.2018, Union Bank of India circulated a note amongst all the lenders regarding sale of the debt to EARC Consortium. The note of the Union Bank of India recorded that the merits of the sale of the debt to the EARC Consortium as well as the fact that the Corporate Debtor had been servicing the financial obligations under the SDR regularly without any default. The said note also noted that the SDR process had to be abandoned due to the Revised Framework for Resolution of Stressed Assets dated 12.02.2018 issued by RBI, wherein the existing schemes of debt resolution including the SDR were withdrawn. This resulted in 79.34% of the total debt of the Corporate Debtor being assigned to the EARC Consortium. However, by a letter dated June 27, 2018, the Petitioner declared that the account of the Corporate Debtor was classified as NPA w.e.f. July 1, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outstanding payments, but the Corporate Debtor failed to do so. Hence, the Corporate Debtor filed the present Company Petition. 3. In relation to this, the Respondent has filed an IA/677/2020 to dismiss the said petition on the limited ground that the said petition is filed by one Amrit Ghose, who is purportedly authorised to file the same on behalf of the Petitioner vide a Power of Attorney dated 01.06.1999. The Respondent submits that the said power of attorney is a general power of attorney which does not authorize the said Amrit Ghose to file a petition under the IBC, 2016 or a petition against Respondent. The Respondent relied on the fact that the said power of attorney is dated 01.06.1999, which makes it ex facie evident that the said power of attorney could never have been used to authorized anyone to file any proceedings under the IBC as the IBC itself came into force only in December 2016. Further in relation to his contention, the Respondent relied in the matter of Palogix Infrastructure Private Limited Vs. ICICI Bank Limited, wherein, Hon ble NCLAT has held that- 36. As per Section 7 of the I B Code an application for initiation of Corporate Insolvency Resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition to this, the Corporate Debtor has filed a separate reply and has submitted that they have made best efforts to request the lenders to restructure the debt to sustainable levels. The Corporate Debtor has submitted seven resolution plans from time to time. However, the Petitioner arbitrarily rejected all the plans without even assigning any reasoning. In fact, while the process for sale to an ARC was under consideration, vide its letter dated 27.04.2018, the Corporate Debtor submitted the first Resolution Plan wherein the Corporate Debtor provided for payment of 100% of the outstanding debt to its lenders. Furthermore, the Corporate Debtor has raised various contentions before this Tribunal in the light of Hon ble Supreme Court s judgement in case of Vidarbha Industries Power Ltd. Vs. Axis Bank [2022 SCC Online 841]. The Corporate Debtor submits that the present Petition ought to be dismissed on the following grounds: i. Incorrect and illegal declaration of default by the Petitioner (a) without due regards to the actual facts and circumstances; (b) based on an unsustainable interpretation of the applicable laws and regulations; (c) with complete disregard to matters which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 65 of the IBC and the present Petition has been filed by the Petitioner with malicious intent for purpose other than resolution of insolvency: i. The Petitioner recalled the financial facilities on the basis that SDR had failed . However, the Petitioner conveniently overlooked the fact that at that stage the Corporate Debtor had not defaulted in any of its obligations under the SDR. It was the lenders who had failed to find a new investor and transfer the management and shareholding of the Corporate Debtor to such new investor. Thus, the Petitioner sought to punish the Corporate Debtor for its own failure. ii. By the Notice dated August 23, 2018, the Petitioner sought repayment of the entire outstanding dues under the original financial facilities allegedly amounting to INR 540.35 crores even though the Petitioner continued to hold equity shares of the Corporate Debtor which were allotted against the debt of INR 271.47 crores (as stated in the Note circulated by Union Bank of India). In other words, the Petitioner deliberately and maliciously refused to give credit to the Corporate Debtor for the amounts voluntarily converted by the Petitioner from debt to equity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f IBC for recovery of debt, which is impermissible as held by the Hon'ble NCLT, Bengaluru Bench in Co-operative Rabobank U.A. vs. Coffee Day Global Ltd.-Order dated March 29, 2022 passed in C.P.(IB)No.19/BB/2021 (Paras 27 to 29). It is submitted that Learned Counsel appearing for the Petitioner has plainly submitted that they do not want to provide any further opportunities for revival or resolution of the Corporate Debtor. viii. This follows the spirit of the law laid down by Hon ble Supreme Court in Swiss Ribbons Pvt. Ltd. wherein at para 28 it has been held that maximizing value is underlying objective of the IBC and the objective is to put the corporate debtor back on its feet and not mere recovery of debt. The Respondent also relied on the rulings of the Hon'ble National Company Law Appellate Tribunal in the matters of Praveen Kumar Mundra v. CIL Securities Limited (2019 SCC Online NCLAT 334) and Navin Raheja v. Shilpa Jain Ors. (2020 SCC Online NCLAT 46) wherein it was held that if a corporate insolvency resolution process is initiated fraudulently or with malicious intent for any purpose other than the resolution of the insolvency, the same is liable to be dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip proceedings against the other party or Infrastructure Provider going into liquidation or ordered to be wound up by competent authority. Thus, if the CIRP is initiated in respect of the Corporate Debtor, the same will not only shake the confidence of telecom operators (who are customers) in the ability of the Corporate Debtor to provide continued services under the existing contracts but also likely to lead to the telecom operators terminating the said contracts without having to pay any exit penalty whatsoever to the Corporate Debtor. In either case, the operations of the Corporate Debtor will suffer a huge setback and cause further stress to the Corporate Debtor s financial position. It is in these circumstances that, in order that Corporate Debtor s value is preserved and it is kept as a going concern, which in turn would serve the object of IBC that the Hon ble Tribunal need to exercise its discretion of not admitting the present application. 7. The Corporate Debtor has also raised a preliminary objection to this Petition and has submitted that the as a part of the SDR, INR 4501.17 crores of debt was converted into equity, resulting in the lenders (mostly PSU lenders) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Section 7(5)(a) of the IBC should be a mandatory provision, Legislature would have used the word shall and not the word may . There is no ambiguity in Section 7(5) (a) of the IBC. Purposive interpretation can only be resorted to when the plain words of a statute are ambiguous or if construed literally, the provision would nullify the object of the statute or otherwise lead to an absurd result. In this case, there is no cogent reason to depart from the rule of literal construction. 76. Significantly, Legislature has in its wisdom used the word 'may' in Section 7(5) (a) of the IBC in respect of an application for CIRP initiated by a financial creditor against a Corporate Debtor but has used the expression shall in the otherwise almost identical provision of Section 9(5) of the IBC relating to the initiation of CIRP by an Operational Creditor. 77. The fact that Legislature used may in Section 7(5) (a) of the IBC but a different word, that is, 'shall' in the otherwise almost identical provision of Section 9(5)(a) shows that may and shall in the two provisions are intended to convey a different meaning. It is apparent that Legislature intended Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly of the view that the Adjudicating Authority (NCLT) as also the Appellate Tribunal (NCLAT) fell in error in holding that once it was found that a debt existed and a Corporate Debtor was in default in payment of the debt there would be no option to the Adjudicating Authority (NCLT) but to admit the petition under Section 7 of the IBC. In view of the judgment in Vidharbha Industries (supra), the Corporate Debtor has submitted that the present Petition ought to be dismissed. 9. In response to this, the Petitioner/Financial Creditor has filed rejoinder and raised preliminary contention that the majority of lenders including the EARC Consortium, which is holding more than 75% of debt of Corporate Debtor have consented for filing IBC proceeding. In relation to this, the Corporate Debtor has submitted that the Petitioner s contention is wholly misconceived. It is writ large on the present proceedings that no other lender has filed insolvency proceedings or come forward to support the initiation of insolvency proceedings by the Petitioner. In any event, the detailed submissions already set out hereinabove make it clear that the Corporate Debtor s case is that: (i) the so-called ..... X X X X Extracts X X X X X X X X Extracts X X X X
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