NCLT Chennai Admits Application Initiating CIRP Against Coastal Energen Pvt. Ltd.

The Applicant in the present case, State Bank of India (the Financial Creditor of the Corporate Debtor) filed an application u/s 7 of the IBC, 2016 against Coastal Energen Pvt. Ltd. in 2018 for initiation of CIRP against the Corporate Debtor for default of a debt of Rs. 2923,62,42,864.46. The Corporate Debtor defaulted to pay the amount for the financial facilities availed by it in order to set up a Thermal Power Plant with 1200 MW capacity at Tuticorin in Tamil Nadu.

During the pendency of the Application, the Corporate Debtor approached the Financial Creditors and consortium of lenders for a One Time Settlement (OTS) of its dues. After amendment and modification, the OTS was acceded to by the consortium of lenders. Thus, the present application was withdrawn.

However, since the Corporate Debtor failed to abide by the terms of the OTS, State Bank of India moved an application to revive the present proceedings, initiating CIRP against the Corporate Debtor, which was allowed by NCLT.

Decision of the Tribunal

The Tribunal noted that Coastal Energen Pvt. Ltd./ Corporate Debtor had failed to repay its credit facilities which it had availed from the Financial Creditor by way of various credit facilities sanctioned, granted and disbursed by the Applicant.

The accounts of the Corporate Debtor had been classified as NPA in 2017. The Tribunal took into account the decision of the Supreme Court in Gaurav Hargovindbhai Dave vs. Asset Reconstruction Company(India) Ltd. & Anr. and B.K. Educational Services Private Limited vs. Parag Gupta and Associates wherein it was held that the right to sue accrues to the Financial Creditor against the Corporate Debtor on the date on which the Corporate Debtor's account is classified as NPA. Since the present petition was well within the period of limitation when it was initially filed in 2018, after classification of the Corporate Debtor's account as NPA (within 3 years), it is not barred by limitation.

The Tribunal placed reliance on the decisions in Innoventive Industries Ltd. v. ICICI Bank & Anr. and Mailbox Innovations Pvt.Ltd. v. Kirusa Software Pvt. Ltd. wherein the Supreme Court analyzed the Scheme of the IBC, 2016 in depth in relation to an application filed u/s 7 of the Code by a Financial Creditor and compared it to one filed u/s 9 by an Operational Creditor and held that when there is in existence a 'Financial Debt' and its default in excess of Rs. 1,00,000 (which was increased to Rs. 1 Crore w.e.f. 24.03.2020), the Tribunal is bound to admit the Application and CIRP against the Corporate Debtor gets triggered in such a circumstance.

The filing of a defense, set off or counter-claim by the Corporate Debtor cannot be considered as a dispute in relation to the Financial Debt.

Since the amount of default in the present case is exceeding Rs. 1 Lakh, the Tribunal would be bound to admit the Application. Considering that the default arose before the Covid-19 pandemic, the Corporate Debtor cannot seek shelter u/s 10A of the Code.

The Application for initiation of CIRP by State Bank of India was admitted u/s 7(5) of IBC, 2016. The Tribunal appointed Mr. Radhakrishnan Dharmarajan as the Interim Resolution Professional (IRP) and consequently, imposed a moratorium u/s 14(1) of the Code.

Counsel For The Financial Creditor: E. Om Prakash, Senior Advocate, Vipin Warrier and Vidyalakshmi Vipin, Advocates

Counsel For The Corporate Debtor: G. Dhanalakshmi, Advocate and R. Padmanabhan, PCS

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