NCLT Admits IDBI Bank's Petition, initiates CIRP against Wind World Infrastructure for Default of over ₹55 Crore [Read Order]

The National Company Law Tribunal (NCLT), held that the petition filed by IDBI Bank was within the period of limitation, as the Corporate Debtor had acknowledged the debt in its audited balance sheets for multiple financial years. Each such acknowledgment, under Section 18 of the Limitation Act, 1963, was construed to have extended the limitation period, thereby rendering the Section 7 application timely.

The Present Company Petition is filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’/ ‘the Code’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by IDBI Bank Limited (‘the Financial Creditor/Petitioner’) for initiating Corporate Insolvency Resolution Process (‘CIRP’) against Wind World (India) Infrastructure Private Limited (‘the Corporate Debtor/Respondent’) for a default amount of Rs. 55,19,28,246.50/- (Rupees Fifty-Five Crores Nineteen Lakh Twenty-Eight Thousand Two Hundred Forty-Six Rupees and Fifty paise Only) including interest as on 29th May 2018.

Wind World India Ltd. (“WWIL”) is the holding company of the Corporate Debtor and the NCLT, Ahmedabad Bench vide order dated February 20, 2018, initiated CIRP against the WWIL. It is submitted that in June 2012, the Corporate Debtor approached the Petitioner for sanction of credit facilities in order to finance the substation and transmission line project aggregating 400 MVA situated at multiple sites, viz. Lalpur, Gujarat, Sipla, and Jaisalmer, Rajasthan. Accordingly, the Financial Creditor sanctioned Term Loan of Rs. 65 Crores with an inner limit of Rs. 50 Crores for LC/LoU for BC to the Corporate Debtor via Sanction letter dated June 28, 2012 (Exhibit “B” is a copy of the Sanction Letter dated June 28, 2012). Further, the Corporate Debtor through its Board Resolution dated July 26, 2012, accepted terms and conditions of the Sanction Letter dated June 28, 2012 (Exhibit “C” is a copy of the Board Resolution dated July 26, 2012).

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The Petitioner contended that, the Corporate Debtor has committed default in its payment obligations, hence, the account of the Corporate Debtor was classified as NPA with effect from August 31, 2016. Consequently, the Petitioner has issued - Recall Notice dated February 13, 2017; SARFAESI Demand notice under Section 13(2) dated February 27, 2017; and Notice dated March 4, 2017 invoking the guarantees. Subsequently, the overdues were cleared by Corporate Debtor and the account was upgraded to performing category during March 2017. However, due to subsequent defaults on the part of the Corporate Debtor, the account of the Corporate Debtor was again classified as NPA on May 29, 2018. As a result, the Financial Creditor reinitiated legal action through issuance of a recall notice on July 5, 2018 and Notice under Section 13(2) of SARFAESI dated July 27, 2018.

It is submitted that vide Acknowledgement of Debt and Confirmation of Security Letter dated June 1, 2018, the Corporate Debtor has acknowledged the debt of Rs.20,89,63,643.50/- as on May 31, 2018 and also acknowledged the debt in its audited Balance Sheet for the year ended March 31, 2019, March 31, 2020, March 31, 2021, March 31, 2022 and March 31, 2023 where the debt is shown under the head of "long term borrowings".

The Tribunal held that the initiation of CIRP against the Corporate Debtor, a subsidiary, was not barred by the fact that its holding company, Wind World (India) Ltd., was already undergoing CIRP. It emphasized that a holding company and its subsidiary are separate legal entities, and the moratorium under Section 14 of the IBC applicable to the holding company did not prevent the initiation of insolvency proceedings against the subsidiary for its own independent defaults.

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The Tribunal concluded that the provisions of Section 14(2), which protect the supply of essential goods or services, were for the benefit of the company under CIRP (the holding company) and did not preclude a creditor from initiating CIRP against the service provider (the subsidiary) for its non-payment of dues.

The Tribunal bench of Charanjeet Singh Gulati Member (Technical) and Mohan Prasad Tiwari, Member (Judicial) concluded that the proceedings under the IBC are for the resolution of a financially distressed corporate debtor and are not merely a recovery mechanism. It noted that the Corporate Debtor, having no source of revenue and being unable to service its debt, was clearly in financial distress, warranting the initiation of CIRP, and the pendency of a recovery proceeding before the DRT was not a bar to admitting the application.

Accordingly, the NCLT admitted the petition and initiated the Corporate Insolvency Resolution Process (CIRP) against Wind World (India) Infrastructure Private Limited. The Tribunal appointed Mrs. Megha Agrawal as the Interim Resolution Professional (IRP) and declared a moratorium on the Corporate Debtor's assets in terms of Section 14 of the IBC.

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