ICICI Bank Limited vs M/s. OPTO Circuits (India) Limited

ICICI Bank Limited (herein after referred as Petitioner/Financial Creditor), was incorporated on 5^th January 1994 under the Companies Act, 1956 bearing CIN: L65190GJ1994PLC021012, having its Registered office at Near Chakli Circle, Old Padra Road, Vadodara 390007.

M/s. OPTO Circuits (India) Limited (herein after referred to as Respondent/Corporate Debtor) was incorporated on 8^th June, 1992, bearing CIN No. L85110KA1992PLC013223 having its registered office at Plot No.83, Electronics City, Bangalore-560100.

It is stated that the applicant availed of non-fund based working capital facilities of a Stand by Letter of Credit (SBLC Facility) by way of Credit Arrangement Letters (CALs) executed between the Corporate Debtor and the Applicant. On 09.12.2010, by way of a CAL bearing No. 01/S11BLR/30010, the Respondent availed non-fund based facility for an overall limit of INR 117,50,00,000 (Rupees One Hundred and Seventeen Crore Fifty Lakh). The purpose of the CAL was to provide a financial guarantee for the obligations of Jolt Acquisition Company (JAC) or Cardiac Science Corporation (CSC) or Opto Cardiac Care Limited (OCC). The validity of the CAL was until 29.11.2011. On 05.05.2011, the Respondent entered into an Amendatory Credit Arrangement Letter bearing CAL No. 12/S11BLR/33651 to provide financial guarantees for obligations of JAC or CSC only.

The Respondent entered into a Facility Agreement to avail from the Petitioner various working capital facilities (Facilities) including the CALs executed previously on 18.05.2011. The Facility Agreement along with the General Conditions applicable to the Facilities was attached to the petition. The relevant portion of Clause 3(i) of Article X Part B of the General Conditions pertaining to default is extracted below:

As a security, the Respondent also entered into a Deed of Hypothecation dated 18.07.2011 whereby the Corporate Debtor hypothecated its current assets by way of first charge ranking pari passu in favour of certain other banks and hypothecated receivables by way of first charge ranking pari passu with the charges created in favour of certain other banks. The value of the current assets including receivables of the Corporate Debtor is INR 1,567,071,548, as per financial statements for F.Y. 2016-17. By way of further security on 05.03.2014, Criticare Sytems (M) Sdn. Bhd, a company incorporated under the laws of Malaysia has executed a guarantee in favour of the Petitioner, towards all money payable by the Corporate Debtor in respect of the Facilities provided by the Applicant and has guaranteed to the Petitioner due and punctual performance of all the obligations of the Respondent under the agreements. Criticare has also executed a Charge over Designated Account and a Charge over Moveable and Current Assets dated 05.03.2014 whereby the Criticare hypothecated its moveable, current assets and designated accounts by way of exclusive charge in favour of Applicant.

In accordance with the Facility Agreement and the CALs, and at the request of the Respondent, on 19.09.2011 the Petitioner provided SBLC No. 002SB00000812 to U.S. Bank National Association (US Bank) (US Bank SBLC) for USD 1,00,00,000 (US Dollars 10 million) against which credit facility has been provided by US Bank to CSC. As per the US Bank SBLC, the Petitioner has undertaken to remit proceeds on the first demand of US Bank and states that such payment will be made without any contestation or protest or delay. The validity of the US Bank SBLC was until 18th September 2014. The US Bank SBLC was extended on 04.09.2014 until 18th September 2015 and further extended on 31st August 2015 until 31st March 2016. On 04.01.2013 the SBLC Facility was amended.

It is stated that, the limit of the non-fund based working capital facilities of an SBLC payable on demand sanctioned on December 09, 2010 to the Respondent was reduced to an overall limit of INR 600,000,000 (Rupees Sixty Crores) by the Petitioner through a CAL bearing No. 23/CBGBLR/51954 dated 04.01.2013. The purpose of the CAL was to provide a financial guarantee to be utilised for raising working capital resources of CSC (a 100% subsidiary of the Corporate Debtor). The validity of the CAL was until 26.12.2013. On 15th May 2014, the Respondent acknowledged the Debt for the SBCL Facility of INR 600,000,000 (Rupees Six Hundred Million) under the Facility Agreement and Deed of Hypothecation.

On 27th August 2014, a letter of amendment, amending the Facility Agreement with effect from 26th December 2013 was executed between the Petitioner and Respondent. Further, on the same date, a non-fund based working capital facilities of an SBLC payable on demand of an overall limit of USD 10,000,000 (US Dollars Ten Million) was extended by the Petitioner through a CAL bearing No. 45/CBGBLR/73415. Additionally, pursuant to the transaction documents, Respondent had undertaken to repay the Facilities in six monthly instalments and six post-dated cheques were provided to the Petitioner for a total amount of INR 61,00,00,000 (Rupees Sixty One Crore) and the Respondent also issued a declaration dated 3rd September 2014. These cheques were returned with the endorsement "insufficient funds". The Petitioner initiated criminal proceedings in the courts at Bangalore under Section 138 of the Negotiable Instruments Act, 1881 for five cheques, in proceedings bearing C.C. No. 17177 of 2015; C.C. No. 22503 of 2015; P.C.R. No. 14593 of 2015; P.C.R. No. 14588/2015; and P.C.R. No. 14597/2015, which are pending.

On 27th August 2015, the Facilities provided by the Facility Agreement and the CAL No. 45/CBGBLR/73415 dated 27 August 2014 at the request of the Respondent were renewed for a further period until 11th August 2016. On 7th October 2015, the US Bank SBLC was irrevocably invoked by US Bank for USD 10,000,000 (US Dollars Ten Million) along with a payment fee of USD 200 (US Dollars Two Hundred) citing that the obligation of CSC are due and payable. Further on 12th October 2015, the Petitioner wrote letter to the Respondent ICBK/BLR/OCIL/2015-16/125 asking the Corporate Debtor to fund their current account with the Petitioner for the amount demanded by US Bank, but the Respondent failed to fund their current account. On 19th October 2015, in pursuance of the SBLC invocation the Petitioner remitted the amount of INR 651,413,028 (Rupees Sixty Five Crores Fourteen Lakhs Thirteen Thousand and Twenty Eight) (INR equivalent of USD 10 million) to the US Bank.

Since the Respondent failed to make payment, hence on 20th October 2015, the Petitioner wrote a letter to the Respondent bearing No. ICBK/BLR/OCIL/2015-16/126 informing the Respondent that the Petitioner has remitted the amount of INR 651,413,028 (Rupees Sixty Five Crores Fourteen Lakhs Thirteen Thousand and Twenty Eight) (INR equivalent of USD 10 million) pursuant to the invocation of the US Bank SBLC by US Bank and requested the payment of such amount to the Applicant.

On 30th May 2018, the Petitioner issued a notice of default by way of letter bearing No. ICBK/BLR/OCIL/2018-19/010 (Notice) demanding payment of INR 103,79,56,016.96 (Rupees One Hundred and Three Crore Seventy Nine Thousand Fifty Six Lakhs and Sixteen point Ninety Six) which is an aggregate of the over dues consisting of instalments of the principal amount together with other charges and costs payable in relation to the Facilities as on 30 May 2018. The Notice states that pursuant to the terms of the transaction documents, the Respondent is obligated to pay/repay the principal and interest in relation to the Facilities with other charges and costs to the Applicant in accordance with the terms of the transaction documents. It notes that despite repeated reminders and requests made, the Respondent has failed and neglected to make payment/repayment of principal, interest, other charges and costs overdue in respect of the Facilities. On 2nd June 2018, the Respondent responded to the Notice denying its liability to make payments stating as follows:

On 18th June 2018, the Petitioner responded to the letter dated 2nd June 2018 reiterating that the unconditional obligation of the Respondent to repay the amounts. On 24 November 2017, the Hon'ble Karnataka High Court passed an order in winding up petitions filed by HDFC Bank Limited (bearing Co.P. No.273/2014) and the Bank of Nova Scotia (bearing Co.P. No.124/2014), concluding that the Respondent is unable to pay its debts and is required to be ordered to be wound up. However, the appointment of the liquidator and publication of the order of winding up has been deferred at the request of the Respondent. No payments have been made by the Respondent till date. The total default amounting to INR 1,078,559,340.96 (Rupees One Hundred and Seven Crore Eighty Five Lakh Fifty Nine Thousand Three Hundred and Forty point Nine Six) are due and payable along with applicable interests and charges in terms of the Facility Agreement and the transaction documents is due from the Respondent. The acknowledged debt became due and payable when the Petitioner informed the Respondent that US Bank had irrevocable invoked the US Bank SBLC. No payment has been received till date. Further as on 31st August 2018, there is total default amounting to INR 1,078,559,340.96 (Rupees One Hundred and Seven Crore Eighty Five Lakh Fifty Nine Thousand Three Hundred and Forty point Nine Six) which includes interest levied from time to time at the applicable rate of interest. Hence the petition.

In the given facts and circumstances, the present petition being complete and having established the default in payment of the financial debt and for the default amount being above Rs.1,00,00,000/-, the petition is admitted in terms of Section 7 of the IBC, 2016 and accordingly, moratorium is declared in terms of Section 14 of the Code. As a necessary consequences of the moratorium in terms of Section 14, the following prohibitions are imposed, which must be followed by all and sundry: The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in

any court of law, tribunal, arbitration panel or other authority;

Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor;

It is further directed that the supply of essential goods or services to the Corporate Debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period;

The provisions of Section 14(3) shall however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a Corporate Debtor;

The order of moratorium shall have effect from the date of this order till completion of the Corporate Insolvency Resolution Process or until this Bench approves the Resolution Plan under sub-section (1) of Section 31 or passed an order for liquidation of Corporate Debtor under Section 33 as the case may be;