NCLT Hyderabad Initiates Insolvency Proceedings Against Trichy-Thanjavur Expressways Limited
The National Company Law Tribunal (“NCLT”), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Charan Singh (Technical Member), while adjudicating a petition filed in IDBI Bank Limited v M/s. Trichy-Thanjavur Expressways Limited, has initiated Corporate Insolvency Resolution Process (“CIRP”) against M/s....
The National Company Law Tribunal (“NCLT”), Hyderabad Bench, comprising of Dr. Venkata Ramakrishna Badarinath Nandula (Judicial Member) and Shri Charan Singh (Technical Member), while adjudicating a petition filed in IDBI Bank Limited v M/s. Trichy-Thanjavur Expressways Limited, has initiated Corporate Insolvency Resolution Process (“CIRP”) against M/s. Trichy-Thanjavur Expressways Limited, over a default of Rs. 79,71,45,619.23/- (inclusive of interest).
Shri Raghu Babu Gunturu has been appointed as the Interim Resolution Professional.
Background Facts
M/s. Trichy-Thanjavur Expressways Limited (“Corporate Debtor”) is engaged in the business of execution of major infrastructure projects including national highways etc. It had approached a consortium of lenders to avail finance of Rs. 390 Crores approx., for execution of the Project pertaining to widening of the existing 2 lane stretch from km.80.00 to km.135.70 on National Highway No.67 (NH-67) in Tamil Nadu to four lane, in accordance with the Concession Agreement on Build, Operate and Transfer (BOT) basis.
IDBI Bank Ltd. (“Financial Creditor”) being one of the members of the consortium of lenders, part financed an amount of Rs.70 Crores to the Corporate Debtor. On 30.10.2018, the account of the Corporate Debtor was classified as Non-Performing Asset (NPA).
Thereafter on 04.03.2022, the Financial Creditor filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor, over a default of Rs. 79,71,45,619.23/- (inclusive of interest).
The Corporate Debtor submitted that on 15.06.2006 the Corporate Debtor entered into Concession Agreement with the National Highway Authority of India (“NHAI”) for a four-way expressway of Tanjavur section - National Highway 67 on Build, Operate and Transfer basis (“BOT”). Certain disputes cropped up between the Corporate Debtor and NHAI and the latter terminated the Concession Agreement on 17.03.2023. Corporate Debtor claimed that post termination, NHAI stepped into the shoes of Corporate Debtor as per Clause 32.2 of the Concession Agreement.
“Consequent to the termination of the Concession Agreement dated 15.06.2006 by NHAI, by virtue of Clause 32.2 of the said agreement NHAI alone shall pay the 90% of the debt due less insurance claims (if provided) as termination payment, which sum as per the escrow agreement dated 02.12.2006 shall be deposited by the NHAI into the escrow account and that the balance amount of 10% also shall be assigned to NHAI, thus, NHAI had replaced the role of Corporate Debtor from the date of termination of the Concession Agreement i.e. 17.03.2023 , as such no liability can be attributed to the Corporate Debtor”, the Corporate Debtor argued.
NCLT Verdict
The Bench observed that the definition of “Debt Due” under Clause 1.1(i) of Concession Agreement states, “.. but excluding any part of the principal that had fallen due for repayment one year prior to Termination Date unless such repayment had been rescheduled with prior consent of NHAI.”
It was observed that the definition of ‘debt’ in the Concession Agreement excludes the principal sum that had fallen due for repayment one year prior to termination date, unless such repayment had been rescheduled with prior consent of NHAI. The Petition under Section 7 of IBC was filed on 04.03.2022 i.e. more than a year ago from the date of termination on 17.03.2023.
“Since it is nobody’s case that NHAI had consented for rescheduling the payment, NHAI is not liable for the principal sum that had fallen due for repayment one year prior to termination date”, the Bench ruled.
The Bench held that the ruling in Vidarbha Industries Power Limited Vs. Axis Bank, (2022) 8 SCC 352, is inapplicable to the Corporate Debtor since it is in a very poor financial health.
“Therefore, even according to the respondent since the beginning the respondent has been incurring losses and the cumulative financial losses till end of March 2021 is Rs.196.79 Crores against the paid-up capital of Rs.64.65 Crores i.e., entire net worth was eroded and still Respondent is going through financial loss. That apart, admittedly, the claim by NHAI of a sum of Rs.345 Crores from the respondent under the head, ‘NonPayment of Damages/Payment Due to NHAI’ is staring at the respondent. Therefore, even according to the respondent the financial health of the respondent being very poor the ruling in re, Vidarbha Industries Power Limited Vs. Axis Bank (supra) cannot be applied to the case on hand.”
The Bench took the view that a financial debt of over Rs. 1 Crore is due and payable by the Corporate Debtor to the Financial Creditor and that the same remains unpaid. Relying on M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr., Appeals No.8337-8338 of 2017, the Bench admitted the petition and initiated CIRP against the Corporate Debtor. Shri Raghu Babu Gunturu has been appointed as the Interim Resolution.
Case Title: IDBI Bank Limited v M/s. Trichy-Thanjavur Expressways Limited
Case No.: CP (IB) No. 77/7/HDB/2022
Counsel For Financial Creditor: Shri Trivikram Chitturu, Counsel
Counsel for Corporate Debtor: Shri Vikram Poosarla, Sr. Counsel.
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