Relief BOI, NCLT Directs to Admit CIRP When Statutory Criteria u/s 7 of IBC Is Satisfied [Read Order]

The National Company Law Tribunal ( NCLT ), Mumbai bench directed to admit Cooperate Insolvency Resolution Proceedings ( CIRP ) when statutory criteria under section 7 of Insolvency Bankruptcy Code ( IBC ), 2016 is satisfied. The Tribunal reiterated that the existence of an arbitral award in favour of the Corporate Debtor did not bar the admission of the CIRP petition.

Bank of India , the applicant as part of a consortium of eight lenders, sanctioned a term loan of Rs. 150 Crores to GF Toll Road Private Limited, the Corporate Debtor/Respondent for capital expenditure in respect of upgradation/widening of Gurgaon-Faridabad & Ballabhgarh-Sohna road in Haryana on build, operate and Transfer (BOT) basis under a concession agreement dt. 31.01.2009 for a period of 17 years upto 30.05.2026. The corporate debtor is an SPV of Reliance Infrastructure Ltd. for envisaging design, engineering, finance, construction, improvement, operation and maintenance and upgrading of the existing road.

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A Common Loan Agreement dated 26.08.2009 was entered. The loan was secured through first charge on project revenues, accounts, and assets (excluding project assets); assignment of rights under the concession agreement and project contracts; and Negative lien and pledge of 51% equity shares of the SPV.

The Applicant filed the petition under section 7 of the IBC, seeking to initiate CIRP against the Respondent. The amount claimed to be in default was Rs. 73.08 crores as on 30.09.2023. The Date of default was 30.09.2018.

The Applicant submitted that the Corporate Debtor acknowledged the debt and later failed to pay the instalments. The corporate debtor also committed other defaults in performance of the conditions of the Common Loan Agreement. Since the Corporate Debtor failed to service the account and clear the outstanding dues of the applicant bank, the applicant bank classified the account of the Corporate Debtor as NPA (Non-Performing Asset) on 30.09.2018.

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The Respondent contested he is temporarily under financial stress and is still a solvent company. It invoked arbitration against Haryana Public Works Department and received an arbitral award of Rs. 164.81 crores (with costs). The Section 34 petition and the Section 36 petition are pending adjudication. In terms of the Award, a sum of Rs. 437.56 crore calculated with interest upto 29.02.2024 is receivable by the Corporate Debtor.

When initiation of CIRP is resisted on the ground of existence of an award in favour of corporate debtor whose amount far exceeds the debt, the Adjudicating Authority has to exercise discretion under Section 7 (5) (a) of the Code to keep the admission in abeyance or even reject the application.

The Tribunal noted that there was no dispute regarding the existence of a financial debt and default. The Corporate Debtor also admitted to its liability. In the case of M. Suresh Kumar Reddy vs. Canara Bank & Ors., it was held that even if it is assumed that the NCLT has the authority to reject a Section 7 application if there are good reasons to do so, the facts of the case did not present any such "good reason" to justify the denial of admission under Section 7.

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The bench comprising Justice V. G. Bisht (Retd.) (Judicial Member) and Prabhat Kumar (Technical Member) admitted CIRP against the Corporate Debtor. Mr. Rahul Jindal was appointed as Interim Resolution Professional of the Corporate Debtor.

To Read the full text of the Order CLICK HERE

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