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Judgment
The Company Chhotagovindpur and Bagbera Drinking Water Supply Project Limited, the Corporate Applicant has filed this petition under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC) with a prayer to initiate Corporate Insolvency Resolution Process (CIRP) against it.
In Part-I of the Petition, it is stated that the Corporate Applicant was incorporated on 14.05.2015 as Chhotagovindpur and Bagbera Drinking Water Supply Project Limited, a company under the Companies Act, 2013, in Chennai as a special purpose vehicle pursuant to a joint venture agreement executed between Infrastructure Leasing & Financial Services) Limited and IL&FS Water Limited ("IWL") to provide piped clean drinking water to 47,706 families or over to a population of 2.50 lakh people in 38 panchayat areas within Chhotagovindpur and Bagbera in Jamshedpur, Jharkhand.
In Part-II of the petition, it is stated that the Corporate Applicant has proposed the name of Mr. Anshul Pathania as the IRP. He has filed his written consent in Form-2 and his AFA is valid till 31.12.2025.
Part-III of the Petition, discloses the details of the total amount of default with respect to Financial Creditors (Pradip RefineryWater Limited) as on 19.09.2022 an Rs.26,90,67,707/-, amount payable to the Sundry Creditors as Rs. 35,50,522/- and amount payable to the Operational Creditors (retention monies) as Rs.56,35,115/-. The date of default as per Part III of the Petition is 19.09.2022. The list of documents to substantiate the existence of debt is as follows:
Copy of the Inter-Corporate Deposit agreements receipts dated 12.09.2016, 19.09.2016 of the Corporate Debtor from IL&FS Paradip Refinery Water Limited
Letter of extension issued by IL&FS Paradip Refinery Water Limited to the Petitioner for the dates 08.08.2017, 24.08.2018, 12.09.2019, 18.09.2020, 20.11.2020, and 04.08.2021
Certificate copy of the e resolution passed by the board of directors of the Corporate Debtor.
Order of the Hon’ble National Company Law Tribunal, Mumbai in C.P. No. 3638 of 2018 dated 1.10.2018.
Copy of the audited financials of the Corporate Debtor for the financial year ending 31.03.2022, 31.03.2023 and 31.03.2024.
Copy of the statement of affairs of the Corporate Debtor as at 13.02.2025.
Copy of the resolution passed at the meeting of the board of directors of Infrastructure Leasing & Financial Services Limited (“IL&FS”) held on 2.04.2024
Copy of the resolution passed in the extraordinary general meeting of the Corporate Debtor on 02.04.2024
Application from IL&FS to Justice (Retd.) D.K. Jain dated 03.07.2024 seeking approval for initiation of winding up of the Corporate Debtor under Section 10 of the Insolvency & Bankruptcy Code 2016.
Letter dated 25.07.2024 from Justice (Retd.) D.K. Jain to the Managing Director of ILFSL accepting the proposal made by IL&FS dated 03.07.2024, subject to approval of the Hon’ble Bench-I of NCLT, Mumbai.
Application under Rule 11 of the National Company Law Tribunal Rules 2016, by IL&FS in C.P. No. 3638 of 2018
Order of the Hon’ble National Company Law Tribunal, Mumbai in C.P. No. 3638 of 2018 dated 08.01.2025.
List of financial creditors and operational creditors of the Corporate Debtor.
The Applicant has filed audited financial statements for the year ended 31.03.2022 & 31.03.2023 and 31.03.2024 and statement of affairs of the Corporate Debtor as on 13.03.2025.
The Applicant Company has placed on record the Board resolution dated 13.02.2024 authorising all the directors of the Company to submit an application before this Tribunal for initiation of Corporate Insolvency Resolution process under Section 10 of the Code against the Corporate Applicant. The Corporate Applicant has filed Extra Ordinary General Meeting Resolution dated 02.04.2024 for approval of members / shareholders to initiate the CIRP against the Corporate Applicant.
The Applicant has filed an additional typeset on 19.03.2025, annexing various letters of extension qua financial assistance granted by way on Inter-Corporate Deposits (ICDs) issued by IL&FS Paradip Refinery Water Limited to the Corporate Applicant. It includes:
– Letter dated 08.08.2017 for an amount of ₹300 million,
– Letter dated 24.08.2018 for an amount of ₹230 million,
– Letter dated 12.09.2019 for an amount of ₹230 million,
– Letter dated 18.09.2020 for an amount of ₹230 million,
– Letter dated 20.11.2020 for an amount of ₹230 million, and
– Letter dated 04.08.2021 for an amount of ₹230 million.
It is stated that these documents collectively show that financial assistance was extended from time to time in the form of Inter-Corporate Deposits, the terms of which were acknowledged and agreed to by the Corporate Applicant.
It is stated that the Petitioner Company, Chhotagovindpur and Bagbera Drinking Water Supply Project Limited (CBDWSPL) had entered into an Engineering, Procurement, and Construction (EPC) contract with the Drinking Water and Sanitation Division (DWSD) on 25.05.2015, covering both construction and operation & maintenance (O&M) of water supply projects in Chhotagovindpur and Bagbera. The Chhotagovindpur project was completed in November 2018, with costs revised to ₹310.26 crores. However, DWSD delayed payments for over 15 months, resulting in CBDWSPL issuing termination notices in late 2020. Though a completion certificate was issued on 31.07.2021, O&M work continued until July 2022 amid withheld payments.
It is stated that the Bagbera project also faced delays due to land disputes, design issues, and the COVID-19 pandemic. Final termination notice was issued in January 2022. DWSD issued its own termination notice in April 2022. An Arbitration proceedings were initiated by CBDWSPL in October 2022. An arbitrator was appointed by the Hon’ble Delhi High Court on February 13, 2024, and final hearings are going on.
It is stated that in 2018, the Ministry of Corporate Affairs (MCA) filed a petition leading to supersession of the IL&FS Board due to group-wide financial distress. A new Board was constituted to resolve IL&FS’s overall debt, including winding up of subsidiaries which had no ongoing business due to inadequate cash flows.
It is stated that CBDWSPL has no ongoing operations but there are significant liabilities (₹278.42 million as against assets of ₹59.54 million in FY 2023–24). It is stated that the Resolution Consultant Alvarez & Marsal recommended for initiating a Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016 (page 200-204).
It is stated that Justice (Retd.) D.K. Jain vide a letter dated 25.07.2024 approved the proposal for initiating CIRP under Section 10 of the Code.
“I have examined the Proposal. Having regard to the fact that as on 31.03.2024, the outstanding liabilities of CBDWSPL are stated to be to the tune of ₹413.87 Million as against the total assets valued at ₹59.16 Million only with no likelihood of its undertaking any significant revenue generating business ventures in the near future, I am inclined to agree with the decision of the Board, based on the recommendation of the Resolution Consultants, that Initiation of CIRP proceedings under Section 10 of the IBC is the best way forward for the Resolution of the sald Entity. Needless to add that this approval is premised on the legal opinion, obtained by IL&FS, that admission of CBDWSPL's Application under Section 10 of the IBC is not likely to have any impact on the ongoing Arbitral Proceedings, wherein a Claim of approximately 115.00 Crores has been preferred by CBDWSPL as against a Counter claim of approximately 32.65 Cores by DW &SD.”
It is stated that the New Board also approved the proposal on 02.04.2024 for initiating CIRP of the Corporate Applicant. It is stated that the NCLT Mumbai Bench approved the proposal for initiation of CIRP of CBDWSPL under Section 10 of the Code on January 8, 2025 in C.P. No. 3638 of 2018.
We have heard Ld. Counsel for the Petitioner and perused the records.
Section 10 of IBC, 2016 provides as under:
“Section 10. Initiation of corporate insolvency resolution process by corporate applicant.
(1)Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority.
(2)The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed.
3)The corporate applicant shall, along with the application furnish the Information relating to-
(a)its books of account and such other documents relating to such period as may be specified; and
(b)the resolution professional proposed to be appointed as an interim resolution professional.
(c)the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application.
(4)The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order—
(a)admit the application, if it is complete; 2[and no disciplinary proceeding is pending against the proposed resolution professional]; or (b) reject the application, if it is incomplete: 2[or any disciplinary proceeding is pending against the proposed resolution professional:] Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority. (5) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section.”
A perusal of the documents placed on record reveals that the Petitioner Company is a Special Purpose Vehicle (SPV). It was incorporated on 14.05.2015, pursuant to a Joint Venture Agreement executed between Infrastructure Leasing & Financial Services Limited (IL&FS) and IL&FS Water Limited (“IWL”). It had availed an Inter-Corporate Deposit (ICD) from IL&FS Paradip Refinery Water Limited. Letters evidencing the extension of ICD dated 08.08.2017, 24.08.2018, 12.09.2019, 18.09.2020, 20.11.2020, and 04.08.2021 are annexed in the Additional Type Set filed by the Petitioner. The Petitioner has placed a list of creditors, disclosing the outstanding liabilities i.e. ₹26,90,67,707/- towards Financial Creditors (Paradip Refinery Water Limited), ₹35,50,522/- towards Sundry Creditors, and ₹56,35,115/-towards Operational Creditors (retention monies). In the year 2018, the Ministry of Corporate Affairs (MCA) had filed a petition which resulted into supersession of the IL&FS Board, in light of group-wide financial distress. A new Board was constituted with a mandate to resolve the overall debt of IL&FS, including initiating winding-up of the subsidiaries which had no ongoing business operations or were generating inadequate cash flows.
It is seen that the Petitioner Company currently has no ongoing operations. It is burdened with significant liabilities to the tune of ₹278.42 million. The total assets are valued only at ₹59.54 million for the Financial Year 2023–2024. The shareholders of the Petitioner Company (CBDWSPL) passed a resolution approving the winding up of the company on 02.04.2024. Subsequently, Justice (Retd.) D. K. Jain, appointed by the Hon’ble Delhi High Court as the sole arbitrator, approved the initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016. Thereafter, the NCLT, Mumbai Bench, by order dated 08.01.2025, granted approval to initiate CIRP of the Petitioner under Section 10 of the Code.
Hon’ble National Company Law Appellate Tribunal (hereinafter, Hon’ble NCLAT), New Delhi in M/s. Unigreen Global Private Limited vs. Punjab National Bank and others (Company Appeal (AT) (Insolvency) 81/2017) has held that if an application under Section 10 is complete and in absence of any ineligibility of Corporate Applicant, the Adjudicating Authority is bound to admit the application. The relevant portion of the judgement is reproduced hereunder,
“22.Section 10 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the informations as required to be submitted in Form 6 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11. If all informations are provided by an applicant as required under Section 10 and Form 6and if the Corporate Applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground”
This Tribunal is satisfied that there is a default in the repayment of debt and the petition filed under Section 10 is complete with all the necessary information. Further, the Corporate Applicant is not ineligible to make petition as per Section 11 of IBC, 2016. We are of the view that this Company petition is required to be admitted u/s 10 of the Code. We order accordingly.
The Corporate Applicant has proposed the name of Mr. Anshul Pathania having Registration No. IBBI/IPA-001/IP-P-01529/2019-2020/12461 (E-mail ID: [email protected]) as the Interim Resolution Professional (IRP). He has filed his written consent in Form 2 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 which is placed at Page Nos. 285-284. We therefore appoint Mr. Anshul Pathania as the IRP in the present petition.
The IRP shall take forward the process of Corporate Insolvency Resolution of the Corporate Debtor. He shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.
As a consequence of the Application being admitted in terms of Section 10 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor;
a. The institution of suits or continuation of pending suits or proceedings against the respondent including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
b. Transferring, encumbering, alienating or disposing of by the respondent any of its assets or any legal right or beneficial interest therein;
c. Any action to foreclose, recover or enforce any security interest created by the respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
d. The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the respondent.
Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period;
However, during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;
(2)The supply of essential goods or services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.
(3)The provisions of sub-section (1) shall not apply to
(a)such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;
(b)a surety in a contract of guarantee to a corporate debtor.
The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;
(4)The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process: Provided that where at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the Resolution Plan under sub-Section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or Liquidation Order, as the case may be.
The Corporate Applicant is directed to pay a sum of Rs.5,00,000/-(Rupees Five Lakh Only) to the Interim Resolution Professional to meet out the expenses and to perform the functions assigned to him in accordance to Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Based on the above terms, the Petition stands admitted in terms of Section 10 of the Code. The Moratorium shall come into effect as of this date.
Copy of the Order be communicated to the Corporate Debtor above named by the Registry. In addition, a copy of the Order be forwarded to IBBI for its records. The Interim Resolution Professional above named be also furnished with copy of this Order forthwith by the Registry, who will communicate the initiation of the CIRP in relation to the Corporate Applicant to the Registrar of Companies concerned.