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TMI Blog2024 (6) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... porate Debtor/JAL") read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 in Form 1 containing all the information as required in Part I, II, III, IV and V of the Form showing a total financial debt of Rs. 1269,10,26,803.06/- (Rupees One Thousand Two Hundred and Sixty Nine Crores Ten Lacs Twenty Six Thousand eight Hundred and three and Six paise only) under default with dates of default being mentioned as 30.04.2016 and 15.05.2016 in respect of various loans under six different facilities for which details have been provided in Annexure A-6 attached with Vol. IV (Pg 787-788) of the Application. 2. The Applicant is a company incorporated under the Companies Act, 2013 and a Banking company within the meaning of the Banking Regulation Act, 1949. The Applicant has appointed Mr. Abhinav Prakash (Manager) as the Authorized Representative in the present case vide Board Resolution dated 27 October 2017 annexed as Annexure A- 1 (Colly) of the instant petition, who has signed the instant petition. 3. The Corporate Debtor i.e. Jaiprakash Associates Limited (JAL) has been incorporated on 15th November, 1995 with registered Office at Secto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Agreement dated June 30, 2012 read with the General Conditions dated June 30, 2012 (collectively "Facility Agreement 6"). Pursuant to the aforesaid Order sanctioning the JSIL Scheme of Arrangement, the debts of JSIL were transferred to the Corporate Debtor. The copy of the Order of Hon'ble High Court of Judicature at Allahabad dated September 14, 2015, is annexed as Annexure-3 to the petition. 5. Details of the loans under the six facilities in respect of which the Corporate Debtor has defaulted in repayment and the default amount as mentioned in the Application are provided at Sl. No. 1 of Part IV of the Application. In support of his contentions showing that the Corporate Debtor has defaulted on repayment of loans under these six facilities, the Financial Creditor has also annexed the computation relating to default amount, dates of default and days of default as Annexure 6 in Vol IV (pg 787-788) to the Application. The same has been reproduced hereunder: Total amount of default and days of default Sr. No. Facility Total Overdue (as on August 31, 2018) (INR) Principal Overdue Interest Overdue Penal/Default Interest Initial Date of Default Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant excerpts of the same have been produced hereunder: "2. It is humbly submitted that the Hon'ble National Company Law Tribunal vide Order dated May 12, 2020 had directed all concerned parties to file default records from the Information Utility ("IU") for all new petitions which are filed under Section 7 of IBC, as well as all cases which are pending for admission. Copy of Order dated May 12, 2020 passed by the Hon'ble National Company Law Tribunal with respect to Record of default from Information Utility is annexed herewith as ANNEXURE-1." Date of Submission 23-01-2020 14:15:12 Type of Submission Default Submission Submission ID 8 Submitted by (CREDITOR) M/s ICICI BANK LTD. Debtor M/s JAIPRAKASH ASSOCIATES LTD. (JAYPEE INDUSTRIES LTD) Default Amount 590298047.20 Status of Authentication by Debtor DEEMED TO BE AUTHENTICATED In case Authentication is Performed by the Debtor, date of completion of authentication Not Applicable Date of Submission 23-01-2020 14:15:12 Type of Submission Default Submission Submission ID 8 Submitted by (CREDITOR) M/s ICICI BANK LTD. Debtor M/s JAIPRAKASH ASSOCIATES LTD. (JAYPEE INDUSTRIES LTD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI giving status as on 09.03.2018. In this report, the Applicant Bank i.e. ICICI Bank Ltd. has been mentioned at Sl. No. 15 showing date of default as 30.04.2016 and status of loan as "Moved to Default". This report has been mentioned at Sl. No. 8 of Part V of the Application under the head "List of Other Documents Attached to This Application In Order to Prove The Existence of Financial Debt , the Amount And Date of Default" 12. After reliance having been placed on all the details and documents in the Application as discussed above, the Applicant/Financial Creditor has pleaded that the Corporate Debtor has defaulted in making payment in excess of Rs. 1,00,000/- to the Financial Creditor, hence this Application to be admitted and order for initiating the CIRP under section 7 of IBC read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority Rules 2016 may be passed. Reply on Behalf of The Corporate Debtor 13. Against the Application filed by the ICICI Bank Ltd. as discussed above, the Respondent/Corporate Debtor filed the Reply/Counter Affidavit dated 16.09.2018, contending that there is no default as defined in section 3(12) of IBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment of loan as alleged in the Application. These facts supported with relevant documents as attached with the Reply, have been stated in Part-III of the Reply as under: -. a. The operations of the Corporate Debtor are financed by various lenders including the Applicant Bank. The following Table shows the credit facilities sanctioned by each lender and their respective outstanding dues as on 31.03.2017 & 31.03.2018: (INR in Cr.) Sr. No. BANK Sanctioned Amount 31.03.17 Outstanding Amount as at 31.03.17 Sanctioned Amount 31.03.18 Outstanding Amount as at 31.03. 18 1 ICICI BANK LTD. 7,163.37 6,151.07 3,427.39 3,651.54 2 ALLAHABAD BANK 125.00 122.48 104.88 121.97 3 ANDHRA BANK - - 68.13 68.31 4 AXIS BANK 2,149.00 1,398.68 845.89 725.19 5 BANK OF BARODA 39.72 42.73 92.65 95.19 6 BANK OF INDIA 190.98 166.14 94.15 101.07 7 BANK OF MAHARASHTRA 880.71 990.48 578.45 636.71 8 CANARA BANK 1,078.80 963.32 645.45 622.25 9 CENTRAL BANK OF INDIA 30.00 33.50 27.73 29.09 10 CORPORATION BANK 132.00 114.34 48.14 66.22 11 DENA BANK - - 4.65 11.23 12 EXPORT IMPORT BANK OF INDIA 213.00 145.31 150.20 149.28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding liability of the Corporate Debtor including the outstanding dues of lenders shown in above table are as under:- TABLE SHOWING TOTAL OUTSTANDING LIABILITIES OF THE CORPORATE DEBTOR AS ON 31.03.2018 Sr. No. Nature of liability Amount Rs. Crores 1. Aggregate dues of Banks/Fis 18764 2. Other loan liabilities (including FCCB, YEID etc.) 1528 3 Other Current liabilities (including Trade payables, Advances from Customers, statutory dues etc.) 5773 Total 26065 d. The Corporate Debtor is merely facing liquidity crunch for reasons that the performance of the Corporate Debtor started deteriorating from FY 2014-15 due to various reasons , beyond the control of management , such as general economic slowdown , change in Government Policy towards Hydro Power Projects , lower price realisation for cement due to excessive capacity in the market , time over run leading to cost overrun in project implemented by the Corporate Debtor due to time taken by various Regulators /Government Departments in giving various clearances /approvals , Coal Block cancellation by the Government for no fault of the Corporate Debtor on development of which it had invested large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has put the entire outstanding debt into three buckets and made provisions for settlement / continuance of each category of debt as under: i. Bucket 1 Debt of Rs. 11,689 crore - being part of the "Other Debt" is to be discharged against sale of identified Cement Plants of the Corporate Debtor & JCCL* to Ultra Tech Cement Ltd. ii. Bucket 2A Debt of Rs. 6367 crores-being "Sustainable Debt" will continue as debt of the Corporate Debtor iii. Bucket 2B Debt of Rs. 13,590 crores -being part of "Other Debt" is to be transferred to a Special Purpose Vehicle (SPV) along with identified land of the Corporate Debtor of the equivalent value. 15. It is admitted position of Applicant as well as the Respondent that the present application has been filed with respect to loan/debt remaining outstanding in Bucket 2B. Therefore, in this order, we have considered all the arguments put forward in respect of payment of loan/debt in Bucket 2B and to examine whether there is any default or otherwise in its repayment by the Corporate Debtor. In respect of the debt of Bucker 2b, the Corporate Debtor in its Reply has submitted that out of the debt of Rs. 13,590 crores placed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred to SPV in the terms of the approved Scheme of Arrangement, hence there is no question of any default in respect of this part of Loan. 17. In the Reply, the Corporate Debtor has further explained that from the facts as brought out in Part III of the Reply as discussed above, it is evident that the Lenders and the Corporate Debtor have performed their obligations and the CRRP stands implemented within the stipulated timeframe contemplated by the RBI in its Press Release dated 13.06.2017 , notwithstanding the pendency of the formal sanction of the Scheme of Arrangement by NCLT. It is also pointed out that the fact that the CRRP stands implemented has been confirmed by the Banks/Lenders and recorded in the minutes of JLF held on 18.10.2018 as recorded in the minutes that Shri Sharad Agarwal, Joint General Manager of ICICI Bank informed that "ICICI Bank as the lead Bank had written to RBI regarding finalisation of DRP and successful implementation of the same" 18. After explaining in the Reply that there is no default on the part of the Corporate Debtor in repaying the debt in Bucket 2B due to Scheme of Arrangement in this respect, has already been devised within the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the 12 stressed accounts. Now, Respondent contends here that Petitioner's Account is not covered in the criteria stated by the IAC. Copy of the Press release dated 13.06.2017 has been annexed as Annexure-8 with the Reply. Para 4 of the Press release dated 13.06.2017 states the criteria for declaring the stressed accounts which is stated as under: - "4. As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within 6 months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC. " 21. The Reserve Bank of India advised the banks to resolve such stressed accounts within six months (i.e. by 13.12.2017), failing which insolvency resolution proceedings under IBC should be initiated by 31.12.2017. It is contended by the Corporate Debtor that the lending Banks/Fls have finalized a resolution plan for the stressed accounts of the Corporate Debtor well before the timeline of 13.12.2017, as notified by the RBI. All the required steps were taken by the lenders and the Corporate Debtor well w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor only after the filing of the Application by the ICICI Bank under section 7 of IBC. 26. Respondent further contends that the impugned direction dated 14.08.2018 given by the RBI is against the interest of all the stakeholders of the Corporate Debtor, including large number of its shareholders, Banks/Financial Institutions and other financial and operational creditors, home buyers, clients/customers including Indian and foreign Government / Statutory Authorities/Government Undertakings, employees etc. Their rights and interest will be adversely affected if the Corporate Insolvency Resolution Process (CIRP) is permitted to commence against the Corporate Debtor. 27. In nutshell, the main argument of the Corporate Debtor against the Application is that the debt restructured to be put under the Bucket 2B , which has been accepted by the Applicant Bank i.e. ICICI Bank Ltd. as per its sanction letter dated 19.05.2017, is to be transferred to an SPV under the Scheme of Arrangement. The said scheme though finalised but pending for final approval before this Tribunal, is effective from 01.7.2017. Such restructuring of the loan facility was done in compliance of RBI Press ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding loans to the Corporate Debtor periodically. However, the Corporate Debtor defaulted on these loans, causing the Applicant and several other banks to declare the Corporate Debtor as a Non-Performing Asset (NPA). Due to liquidity stress faced by the Corporate Debtor, the Debt Realignment Plan (DRP) was initiated, which involved restructuring of JAL. It is stressed that the restructuring of loan itself implies that defaults had occurred and were continuing. 30. It is further submitted that the lenders gave in-principal approval to the DRP on 05.10.2016, followed by several meetings. Ultimately, the final DRP was approved unanimously by all lenders in the JLF meeting held on June 22, 2017. This approval occurred well before the RBI issued its second list of defaulters on August 28, 2017, which included the Corporate Debtor. A copy of the defaulters' list circulated by RBI on August 28, 2017, is attached herewith and marked as "Annexure 1" from pages 22 to 26 of the rejoinder. In this letter, the Corporate Debtor i.e. M/s Jaiprakash Associates Limited has been shown as borrower of the Applicant Bank i.e. ICICI Bank Ltd. in which it is lead bank, with more than 60 percent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant time, but for various reasons it could not be implemented completely within the timeframe stipulated by the RBI. Then it is also pointed out that before the DRP could be fully implemented, the RBI communicated the second list of borrowers to the lenders, who were then required to comply with additional conditions, which were inter alia as follows: a) Implementation of DRP to be completed in all respects by December 13, 2017. b) Investment-grade ratings from 2 accredited rating agencies for sustainable debt. The first two parts of the DRP (Bucket 1 and Bucket 2A) were substantially completed much before the deadline of December 13, 2017 . 33. Meanwhile, several writ petitions and Special Leave Petitions (SLPs) were filed by home buyers in the Hon'ble Supreme Court with respect to the CIRP initiated against Jaypee Infratech Limited, a company promoted by the Corporate Debtor. The lead case was Chitra Sharma and Ors. v. Union of India and Ors., W.P.(C) 744 of 2017 ("Chitra Sharma"). In this case, the Hon'ble Supreme Court directed the Corporate Debtor to deposit Rs. 2,000 crores and issued specific orders regarding the non-alienation of assets and the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring Agreement (MRA) has been signed by all 32 relevant lenders as planned under the DRP before December 13, 2017. However, while the MRA has been executed, the creation of security as per the MRA terms is still incomplete. c) Bucket 2B: The Scheme of Arrangement has been approved by all creditors and shareholders of JAL, but the final order from this Tribunal approving the Scheme is still pending. 36. As regards the consent for the Scheme of Arrangement given by the Applicant for creating a SPV in respect Bucket 2B, it is specifically pointed out by the Applicant that it had given only conditional consent to the SPV Scheme, which was communicated to the Respondent Corporate Debtor in a letter dated January 19, 2018. The Applicant informed the Hon'ble Tribunal of this conditional consent, highlighting the following: "In light of the above, please note that while we have accorded our in principle approval on the SPV Scheme through postal ballot Form dated January 19, 2018, pursuant to your notice, we request you to (i)approach the Hon'ble Supreme Court for seeking necessary orders for permitting JAL TO (a) fulfill its obligations including creation of security Interest f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king Capital Facilities. It is also claimed by the Applicant that the Application pertains only to the Bucket 2B facilities, which are currently pending approval by this Tribunal and are therefore in default. 41. Additionally, any reference to the Credit Arrangement Letter/Sanction Letter dated May 19, 2017, is irrelevant because the Sanction Letter explicitly stated that it should not be construed as creating any binding obligation on ICICI Bank unless the corporate debtor has signed/executed the necessary agreements/documents within 90 days of the date of the facility, or within any extended period allowed by the Applicant in writing at its discretion. Since no agreements/documents were executed concerning the Bucket 2B facilities, the Sanction Letter, specifically regarding the Bucket 2B facilities in the Application, is not effective or binding, and any reliance on the Sanction Letter is misplaced. Furthermore, the Master Restructuring Agreement (MRA) executed by the Lenders and the Corporate Debtor pertains only to the Bucket 2A facility, which is not part of the Application; therefore, the MRA is neither relevant nor material to this Application. 42. Additionally, the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity covered under the present application is still continuing , hence the only pre-requisite for filing an Application u/s 7 of the IBC that there must be a default of debt is fulfilled and once, a default happens , the Adjudicating Authority need not see any other factor for admitting the Application u/s 7 for the initiation of CIRP. For its this contention, the Applicant has placed reliance on the case of Innoventive Industries Limited v. ICICI Bank and Anr. (2018) 1 SCC 407 wherein the Hon'ble Supreme Court has held as follows: "the scheme of the Code is to ensure that when a Default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins... the Code gets triggered the moment default is of rupees one lakh or more (Section 4)." 30. In the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due".. (Emphasis supplied) After relying upon the above decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise its rights under the IBC and file this Application due to the default on the Facilities that were part of the Bucket 2B facilities. Moreover, internal correspondence and previous deliberations are irrelevant factors for the purpose of this Application. Whatever factors may have been considered by the Applicant before filing of this application, they lose their relevance and significance in the background of the action of filing of an Application u/s of IBC later. 49. The Applicant further averred that the implementation of the Scheme of Arrangement was delayed due to various factors, which the Corporate Debtor has admitted. During several meetings of the Joint Lenders Forum, the Lenders discussed the status of the Scheme's implementation and the reasons for the delay. Specifically, in the meeting on January 18, 2018, the Corporate Debtor presented the status of the DRP's implementation and acknowledged the remaining tasks concerning the restructuring plan to be pending. It was clearly discussed that the Hon'ble Supreme Court's order, which restrained JAL or its promoters from creating any third-party interest in the assets, was preventing the lenders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affidavit. 55. The Petitioner in response to this affidavit has filed a rejoinder affidavit vide diary no. 1300 dated 27.04.2023 stating the reasons as to why the Vidarbha Judgement is not applicable in the present case and in response to this rejoinder affidavit , the Corporate Debtor filed a sur-rejoinder on 15.05.2023 further emphasising for applying the decision of Hon'ble Supreme Court in case of Vidarbha Industries Power Limited(supra) FINDINGS AND ORDER 56. We have heard the arguments of Learned Counsels appearing for both Applicant Financial Creditor and Respondent Corporate Debtor and perused the pleadings, records, written submissions and exhibits/annexures marked thereto. Having heard the Learned Advocates appearing for the parties and on perusal of the records, exhibits/annexures and after considering arguments advanced by respective Learned Advocates, the main issues which are before us to be decided in respect of the present Application u/s 7 are: (a) Maintainability of the Application, (especially in the light of the decision of the Hon'ble Supreme Court in case of Dharni Sugar And Chemicals Ltd. vs. Union of India 2019 (5) SCC 480) (b) Whether there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Bucket 2B which covers the loans under the present application has also been finalized with the consent of all related financial creditors and only its implementation is pending due to pending approval of this tribunal , hence there is no question of any default of these loans. It is also argued that as the loans were restructured and schemes for their resolution were finalized within six months, no Application for insolvency resolution process u/s 7 was filed before 13.12.2017 and the Application which is under consideration in this order, was filed much later on i.e. 07.09.2018 in compliance of a direction issued by the RBI vide its letter dated 14.08.2018 u/s 35AA of the Banking Regulation Act 1949, which as argued by the Ld. Counsel of the Corporate Debtor is not maintainable. In this connection, an application no. CA No. 120 of 2019 in this Petition/Application i.e. CP(IB) 330/ALD/2018, has also been filed raising the issue of the present Petition/Application being not maintainable. However, issues raised regarding non-maintainability of the present Petition/Application has been countered by the Ld. Counsel of the Financial Creditor arguing that the present application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of debt under default as claimed by the Applicant in Part IV of the Application is Rs. 1269,10,26,803/- which includes the default amount of principal, interest and overdue interest. 61. The account of the corporate Debtor was classified under SMA-II category on 03.10.2014 for committing default in repayment of the loan amount and it was further declared as NPA by the Banks on 31.03.2015. It is evident from the documents placed on record such as NeSL records as on 08.06.2020 and CRILC Report that the JAL was moved to default category and that there is default committed by the Corporate Debtor. The loan taken by the Corporate Debtor has gone to default category has also been observed by the Hon'ble Supreme Court in the judgment of Chitra Sharma (supra) in para 41 and the same is also reproduced as below "41. JAL was classified under the SMA II category (demands overdue for more than 60 days) by banks as early as on 3 October 2014 and as an NPA since 31 March 2015. We agree with the submission of the RBI that any further viable delay in resolution would adversely impact a resolution being found for JAL and JIL. The facts which have emerged before the Court from the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not to transfer any of its assets without the permission of Hon'ble Supreme Court. 65. As the Scheme of Arrangement could not be implemented, the debt under Bucket 2B remained under default and the Hon'ble Supreme Court in its order dated 09.08.2018 acceded to the request made on behalf of the RBI to allow it to follow the recommendations of the IAC to initiate a CIRP against JAL under the IBC and also ordered to allow the RBI in terms of its application filed in the Supreme Court to direct the banks to initiate corporate insolvency resolution proceedings against JAL under the IBC and consequent to that order, RBI issued a letter dated 14.08.2018 directing the ICICI Bank to initiate proceeding against JAL , the Applicant Bank i.e. ICICI Bank filed the present Petition/Application details of which have already been discussed in earlier part of this order. 66. With regard to the admission of application filed under Section 7 by the Applicant/Financial Creditor for initiating CIRP, the Respondent/Corporate Debtor has at very outset challenged the maintainability of the said application by raising the contention that there is no default committed by the Corporate Debtor. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case on 09.08.2018 and the present Petition/Application having been filed and an Application CA No. 213/2018 in CP(CAA) No. 19/ALD/2018 has been moved by the Applicant Bank with prayer to join the captioned proceeding as party intervener and to keep the captioned proceeding in abeyance pending the final disposal of the Section 7 Application. Consequent upon filing of this intervener application by the Applicant Bank, this Tribunal passed an order dated 06.02.2019 deciding to hear both Petitions/Applications i.e. CP(CAA) No. 19/ALD/2018 (for Scheme of Arrangement) and CP(IB) No. 330/ALD/2018 (for CIRP u/s 7 of IBC), simultaneously. Because of aforesaid reasons, the Scheme proposed for resolving the loans put in Bucket 2B could not be implemented in absence of the necessary order of approval by the NCLT. However, it has been argued by the Ld. Counsel appearing for the Corporate Debtor that once, the trifurcation of loan has been sanctioned by the Applicant Bank vide its letter dated 19.05.2017 and Scheme of Arrangement is made , neither any part of the loan in Bucket 2B is refundable nor any interest thereon is payable by the Corporate Debtor , hence the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en argued by the Ld. Sr. Counsel for the Applicant that consent to a scheme given by the creditor cannot act as an estoppel against such creditor and also, there cannot be no estoppel against an express provision of law. By referring to section 232(3)(e), he said that even the Companies Act contemplates dissent by any person , post sanction of the Scheme and in the present case , filing of the present Application u/s 7 would amount to dissent to such Scheme for initiation of CIRP proceeding against JAL under IBC after necessary directions were issued by the Hon'ble Supreme Court in para 42 of the order dated 09.08.2018 in Chitra Sharma Case allowing RBI in terms of its application filed in the Supreme Court and consequent thereupon , the directions were issued by the RBI vide letter dated 14.08.2018. 72. Furthermore, it is also argued that it is a settled position of law that there can be no estoppel against a statute and the plea of promissory estoppel is negated if the mandate of law has to be followed. Therefore, as the right to initiate an action under Section 7 of the IBC is a statutory right, and any consent given earlier by a creditor to Scheme, cannot act as estoppel agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no default. 75. Ld. Sr. Counsel for the Applicant after arguing to show that there is an existing default, took the plea that under Section 7(5) of the IBC, this Hon'ble Tribunal as the Adjudicating Authority under IBC is merely required to be satisfied that a "default" has occurred. If the "default" is more than Rupees One Lakh, then this Hon'ble Tribunal is required to admit the application, except where there is defect, which can then be removed within seven days from the date of receipt of the notice from the Adjudicating Authority. In support of his argument, he relied upon the case laws of Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 and E.S. Krishnamurthy v. Bharath Hi-Tecch Builders Private Limited, (2022)3 Supreme Court Cases 161. By referring to these case laws, he argued that the only aspect which this Hon'ble Tribunal needs to examine is as to see whether: (a) default has occurred; (b) application is complete; and (c) whether any disciplinary proceedings is there against the proposed IRP. In the present case, default has occurred and ICICI Bank's Section 7 Petition is complete and there is no disciplinary proceeding against the proposed IRP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondence with RBI in letter dated 13.08.2018, it has been argued that it has no significance now, when the Application u/s 7 has been filed in compliance of the subsequent letter dated 14.08.2018 issued by the RBI on direction of the Hon'ble Supreme Court in its order dated 09.08.2018 in Chitra Sharma Case and filing of its validity has also been upheld by the Hon'ble Allahabad High Court in a Writ Petition filed against it and subsequently an SLP filed against the order of the Hon'ble High Court has also been dismissed by the Hon'ble Supreme Court. 79. After considering all the arguments put before us as well as perusing the records before us to decide the issue whether the default existed or otherwise at the time of filing Application u/s 7 on 07.09.2017, we find that as far as occurrence of default in payment of the loan is concerned , the Corporate Debtor has itself admitted in para 16 and 17 of the Reply that due to the liquidity crunch, the Corporate Debtor wasn't able to repay its liabilities owed to the Financial Creditor. Furthermore, the Corporate Debtor in Para 9 (v) of the reply has categorically admitted as regards the restructuring of the loan under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor and hence , new terms and conditions of the Bucket 2A loan has been specified in the letter dated 19.05.2017 and as the loans in Bucket 1 was to be discharged against sale of identified Cement Plant and loan in Bucket 2B to be transferred to SPV along with identified land of the Corporate Debtor of the equivalent value , no new terms and conditions were required for these loans . However , in clause 6 of Annexure 1 , it is provided for cessation of interest on loan to be transferred in Bucket 2B from October 1, 2016 till transfer of debt into the new real estate SPV. While computing the total outstanding amount of the debt under default in the Application, at Rs. 1262 crore, interest has been computed up to 31.08.2018. Looking to this clause., even if charging of interest from 01.10.2016 to 31.10.2018 is not taken into account , the default amount will still remain substantially higher than the threshold limit of Rs. 1,00,000/-. Even the principal amount of outstanding loan under default itself is more than Rs. 240 crores. So, the clause 6 of the letter dated 19.05.2017 will not make any difference for the purpose of determining the default for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case on 09.08.2018, a direction by RBI was issued vide letter dated 14.08.2018 in compliance of which the present Petition/Application u/s 7 has been filed on 07.09.2018. 83. As far as the internal correspondences between RBI and the Applicant Company is concerned , we are of the opinion that. the same will not have any impact on examination of default based on the facts and circumstances and relevant documents of the case as discussed above and significance of these correspondence is lost after a final decision on filing of the present Application was taken that too under the direction of the Hon'ble Supreme Court in para no. 42 of its order dated 09.08.2018 in Chitra Sharma Case. 84. After having deciding on the existence of a default in the present case as discussed above, we agree with the Applicant Bank that at the time of the admission of application u/s 7 , the conditions specified under its subsection (5) are to be only examined , which include whether: (a) default has occurred; (b) application is complete; and (c) whether any disciplinary proceedings is there against the proposed IRP. These criteria for admissibility of Section 7 Application have been exhausta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days of admission or rejection of such application, as the case may be" 85. The Innoventive judgment was followed in the case of ES Krishnamurthy v. M/s Bharath Hi Tech Builders (2022) 3 SCC 161, wherein the Hon'ble Supreme Court observed as follows: "31. On a bare reading of the provision, it is clear that both, clauses (a) and (b) of sub-section (5) of Section 7, use the expression "it may, by order" while referring to the power of the adjudicating authority. In clause (a) of sub-section (5), the adjudicating authority may, by order, admit the application or in clause (b) it may, by order, reject such an application. Thus, two courses of action are available to the adjudicating authority in a petition under Section 7. The adjudicating authority must either admit the application under clause (a) of sub-section (5) or it must reject the application under clause (b) of sub-section (5). The statute does not provide for the adjudicating authority to undertake any other action, but for the two choices available. 34. The adjudicating authority has clearly acted outside the terms of its jurisdiction under Section 7(5) IBC. The adjudicating authority is empowered only to veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(5)(a) and refuse admission of the application by applying the discretionary power considering the above factual matrix of the present case. 88. He argued that it is held by Hon'ble SC in this Judgment that the word "may" in Section 7(5) of IBC makes it clear that even if default is assumed, the Tribunal may refuse to admit the Application, if there are good reasons to do so. He pointed out that some of the good reasons mentioned in this judgment by way of illustration for exercise of discretion under section 7(5)(a) are as under: A: Feasibility of initiating CIRP B: Overall Financial health of the Corporate Debtor C: Viability of the Corporate Debtor D: Receivables which may go to meet the outstanding debts E: Expediency He also emphasised that in Para 88 of Vidarbha Judgment, the Hon'ble SC has observed - "The Adjudicating Authority (NCLT) has to consider the grounds made out by the Corporate Debtor against admission, on its own merits." Thus, the judgment requires a speaking order to be passed for accepting or not accepting the grounds made out by the CD. 89. He further went on to present the details about these good reasons present in case of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first CRRP was approved by the IEC and the JLF on 22.06.2017 only after TEV study and satisfaction about the viability of the Corporate Debtor and now, under the changed circumstances, the earlier Restructuring Plan is being reviewed and a Revised Restructuring Plan is under consideration of the JLF e. EXPEDIENCE OF INITIATION OF CIRP AGAINST CORPORATE DEBTOR In this regard, following points have been mentioned as good reasons: i. Revised Restructuring Proposal is under consideration of JLF ii. Lenders themselves want the present Petition to be withdrawn and resolve the matter outside the IBC iii. NARCEL'S Proposal dated 07.03.2024 for the purchase and acquisition of the outstanding debts of the JAL/JCCL We have considered the above arguments of Ld. Counsel of the Corporate Debtor and also carefully gone through the detailed arguments taken before us in respect of all the above good reasons. We find that in the light of the decisions of Vidarbha Judgment, only the reason for there being any sufficient receivables to be received by the Corporate Debtor in near future needs to be considered to see whether these receivables are crystalised or not and in a case it is cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the resolution scheme - workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximize their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. [See ArcelorMittal (supra) at paragraph 83, footnote 3]. 12. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive policy. First is predictability and certainty. Secondly, the paramount interest to be safeguarded is that of the corporate debtor and admission into the insolvency resolution process does not prejudice such interest but, in fact, protects it. Thirdly, in a situation of financial stress, the cause of default is not relevant; protecting the economic interest of the corporate debtor is more relevant. Fourthly, the trigger that would lead to liquidation can only be upon failure of the resolution process" [ Emphasis Supplied] 91. On the similar line, the Hon'ble Supreme Court has made observation while dealing with the Application of RBI in the case of Chitra Sharma (supra) in which it has stated in para 41 of its order dated 09.08.2018 that "they agree with the submission of the RBI that any further delay in resolution would adversely impact a viable resolution being found for JAL and JIL." The relevant part of this decision is reproduced as under:- The RBI constituted an Internal Advisory Committee (IAC) consisting primarily of its independent directors. The IAC took up for consideration accounts which were classified either partly or wholly non-performing from amongst the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ault has occurred. 93. As far as expediency is concerned , it is for the Financial Creditor to decide whether they want to restructure the debt with the Corporate Debtor and withdraw the application . In the past, several such attempts were made but so far nothing concrete is reported and no application for withdrawal of present Petition/Application is made before us . Therefore , the Expediency cannot be taken as a good reason. 94. Now, we come to receivables. In this regards, the Financial Creditor has submitted that sale proceeds shown on account of sale of Cement Plant is to settle the debt of Bucket 2A and such sale proceed will not help in settling the debt of Bucket 2B. Receivable shown on account of arbitration is still not finally determined and it is not certain as to when it will be received . 75% of the amounts which are claimed to be received as per the scheme of Niti Aayog, is also subject to giving bank guarantee for which , the Financial Creditor/ Applicant Bank has stated that as per the decision taken by it taking into account the commercial consideration , giving of bank guarantee for an amount which is under dispute and might be required to be refunded later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred, there is hardly a discretion left with NCLT to refuse admission on the Application under Section 7 of I & B Code, 2016. The relevant part of this decision of the Hon'ble Supreme Court is reproduced as under. 9. We have given careful consideration to the submissions. This Court in the case of Innoventive Industries Limited v. ICICI Bank and Another has explained the scope of Section 7. Paragraph nos.28 to 30 of the said decision read thus: - "28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under subsection (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise." (Emphasis added) 9. The view taken in the case of Innoventive Industries has been followed by this Court in the case of E.S. Krishnamurthy and others. Paragraph nos.32 to 34 of the said decision read thus: 32. In Innoventive industries [Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, paras 28 and 30: (2018) 1 SCC (Civ) 356], a two-Judge Bench of this Court has explained the ambit of Section 7 IBC, and held that the adjudicating authority only has to determine whether a "default" has occurred i.e. whether the "debt" (which may still be disputed) was due and remained unpaid. If the adjudicating auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. * * * 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise." 33. In the present case, the adjudicating authority noted that it had listed the petition for admission on diverse dates and had adjourned it, inter alia, to allow the parties to explore the possibility of a settlement. Evidently, no settlement was arrived at by all the original petitioners who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code which reads thus: "3. Definitions: - In this Code, unless the context otherwise requires, -.. .. .. .. .. .. .. .. (12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;" Thus, even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtor. In such a case, an order of admission under Section 7 of the IB Code must follow. If the NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application. 11. Reliance is placed on the decision of this Court in the case of Vidarbha Industries and in particular, what is held therein in paragraph nos. 86 to 89 which reads thus:- "86. Even though Section 7(5) (a) IBC may confer discretionary power on the adjudicating authority, such discretionary power cannot be exercised arbitrarily or capriciously. If the facts and circumstances warrant exercise of discretion in a particular manner, discretion would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutes." 13. Thus, it was clarified by the order in review that the decision in the case of Vidarbha Industries was in the setting of facts of the case before this Court. Hence, the decision in the case of Vidarbha Industries cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innoventive Industries and E.S. Krishnamurthy. The view taken in the case of Innoventive Industries still holds good. 96. As now, it has been clarified by the Hon'ble Supreme Court itself that the decision in the case of Vidarbha Industries Power Ltd., was in the setting of facts of that case before the Hon'ble Supreme Court and the decision of Hon'ble Supreme Court in the case of Innoventive Industries Limited v. ICICI Bank & Another 2018 (1) SCC 407 still holds good. In case of Innoventive Industries Limited, it has been clearly held by the Hon'ble Supreme Court that if there is a debt and default in repayment of debt and application filed by the Applicant/Financial Creditor is complete in all respect, the application under Section 7 of I & B Code 2016, is to be admitted. In the present case, we have clearly found that there is a debt and also there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration No. IBBI/IPA-IBBI/IPA-001/IPP01004/ 2017-2018/11655, R/o 204, as Interim Resolution Professional (IRP). 99. In the given facts and circumstances of the case as per our above findings, the present application u/s 7 being complete in all respect and having established the default in payment of the Financial Debt for the default amount being above the threshold limit and an IRP also having been appointed as per above para 32, the application is admitted in terms of Section 7(5) of the I & B Code, 2016 against the Corporate Debtor and accordingly, moratorium is declared in terms of Section 14 of the Code. 100. The IRP is directed to take steps as mandated under section 13 and 15 of the IBC for making public announcement about the commencement of CIRP against the Corporate Debtor and moratorium against it u/s 14, and also take necessary actions as per sections 17, 18, 20 and 21 of IBC, 2016. 101. The IRP shall after collation of all the claims received against the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report certifying the constitution of the Committee to this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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