M/s. Srivathsa Power Projects Private Limited vs M/s. Coastal Infrastructure Private Limited

This Application is filed by M/s. Srivathsa Power Projects Private Limited (“hereinafter referred to as Financial Creditor”) seeking initiation of Corporate Insolvency Resolution Process (CIRP) in respect of M/s. Coastal Infrastructure Private Limited (“hereinafter referred to as Corporate Debtor”) alleging that the Corporate Debtor committed default in making payment to the Financial Creditor in view of the invoices raised by them upon the Corporate Debtor, by invoking Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The facts as stated in the synopsis filed by the Financial Creditor are briefly as follows:

The Corporate Debtor filed counter, denying the contents of the Petition but however, not disputing the ICD loan amount, seeking extension of time for repayment and admitting that the interest payments were charged only for Financial Year 2007-08 to 2011-12 and further contending that the Financial Creditor issued a letter SPPL/HYD/2018-19 dated 31.03.2019 to the Corporate Debtor, categorically and without any force has stated that the total ICD outstanding, along with interest, is Rs.21,71,61,133/- and further contended that the Financial Creditor has not revealed the reason to the Tribunal for freezing interest from Financial Year 2011-12 and contended that it is because the Corporate Debtor has made certain transactions on behalf of Financial Creditor by the instructions of the Financial Creditor and these transactions are carried out in lieu of payment of interest and principal and the Corporate Debtor dated 25.05.2011 acknowledged the outstanding interest is Rs.4,36,33,133/- as of 31.03.2011 and the same was confirmed by the Corporate Debtor vide letter dated 01.04.2014 and further confirming that the outstanding amount of interest for the Financial Years 2013-14 to 2018-19. It is further submitted that even the letters sent by the Financial Creditor also showed the outstanding amount of interest is Rs.4,36,33,133/- from FY 2011-12 and the Financial Creditor never asked to calculate the interest for the remaining periods even though the ICD has a specific clause that Corporate Debtor will pay interest on the balance due @10% P.A. quarterly until the Corporate Debtor repays the ICD and the Financial Creditor has not charged the interest on outstanding because the Corporate Debtor has carried out several transactions on the instructions of Financial Creditor from time to time and further stated that the final outstanding amount that needs to be paid by the Corporate Debtor needs to be ascertained only after carrying out of reconciliation of books of accounts and the Corporate Debtor has asked the Financial Creditor for several times to come for negotiations to finalize the accounts. It is further stated that the Financial Creditor in his letter requested the Corporate Debtor to confirm the unpaid balance due, for the purpose of an audit of their books of accounts, in the ordinary course of business and the Financial Creditor also categorically stated that the confirmation of unpaid balance is no way treated as a request for payment. Due to several transactions undertaken by Corporate Debtor on behalf of Financial Creditor, there exists no debt, as on date and it needs a detailed trail by examining each of the transactions made by the Corporate Debtor on behalf of Financial Creditor. It is further stated the Corporate Debtor requested the Financial Creditor to appoint an arbitrator to settle all outstanding pending issues regarding payment of ICD and settling the transactions carried out by the Corporate Debtor on behalf of the Financial Creditor. The Corporate Debtor seeks the Tribunal to dismiss the Petition.

Rejoinder is filed, by the Financial Creditor contending that the Corporate Debtor attempted to mislead the Tribunal by making false submissions and stated that the Corporate Debtor has admitted the execution of the Inter-Corporate Deposit Agreement (ICD) and that it has received the amount and admitted that the Corporate Debtor has sought for extension of time for repayment of the Inter-Corporate Loan from time to time. It is further submitted that though the Corporate Debtor had promised to repay the principal and interest from time to time, it failed to repay the same. After the Corporate Debtor had failed to repay the amounts, it had merely stopped accounting for the interest amounts as Corporate Debtor had incorrectly stopped recognising the same in their books nor paying the said amount and whereas the Financial Creditor is offering interest amount and paying the tax on the same. However, this does not amount to any waiver. When the amounts are repaid, the same would be received and the tax payable is to be adjusted. As per the terms of the ICD Agreement, it is clearly stated the interest is payable from the date of default till payment, hence the Financial Creditor is eligible for the same. The Financial Creditor, clarified the same to the Corporate Debtor through letters. The Financial Creditor has denied the contentions made by the Corporate Debtor in its counter and further contended that the Financial Creditor has charged interest up to 2011-2012 in its books which have been confirmed by the Corporate Debtor from time to time. The Corporate Debtor also admits in his counter that as per the ICD clause, the Corporate Debtor is liable to pay interest on the balance until the Corporate Debtor repays the ICD amounts. The Corporate Debtor has falsely concocted a premise that there has been a waiver by the Financial Creditor in relation to the interest amounts. But there was no such correspondence between the parties in this regard. All the accusations made by the Corporate Debtor are vague and lack backing. Hence, in view of the above, the Petition shall be allowed.

Heard the counsel for both the sides. In the counter, there is a clear admission that the Corporate Debtor has received the money and that they asked for extension of time for repayment of the ICD amount on 30.07.2008, 30.07.2009 & 25.07.2010. The contention of the Corporate Debtor's Counsel is that the Financial Creditor, in his pleadings, admitted that interest payments were charged only till the Financial Year 2011-12. It is contended that the Financial Creditor is claiming different amounts as outstanding. On one hand in his letter addressed to the Corporate Debtor on 31.03.2019, it is stated that the total ICD outstanding along with interest is Rs.21,71,61,133/-, on the other hand the amount claimed in the petition is Rs.34,61,13,133/-. It is contended that the Financial Creditor has not revealed the reasons for freezing interest from Financial Year 2011-12 and the contention is that the Financial Creditor did not charge interest on outstanding because the Corporate Debtor has carried out several transactions, on the instructions of Financial Creditor from time to time.

At the time of hearing, the counsel for the Corporate Debtor submitted that the Corporate Debtor would settle the matter with the Financial Creditor, on which this Tribunal posted the matter for settlement by 07.05.2022 and facilitating the Corporate Debtor to settle the matter by 07.05.2022 if it so chooses. But no settlement was reported on 07.05.2022 and even today, when the matter was called. As regards the dispute with regard to the interest, it is well settled that the NCLT shall admit the claim when once it is found that the Corporate Debtor has admitted the claim, which is beyond the threshold limit. In support of the said reasoning a judgment of the NCLAT, Principal Bench, New Delhi in Company Appeal (AT) (Ins) No.718/2020 between Mr.Joseph Jayananda Vs. M/s.Navalmar (UK) Limited and others can be looked into. It was categorically held therein that when Corporate Debtor owes a debt of more Rs.1 Lakh which is above the threshold limit and committed default in discharging the same and if there is no pre-existing dispute it is not for the Adjudicating Authority to ascertain, investigate or fix the exact amount of liability at the admission stage. After the admission of the Petition, it is a duty of the Resolution Professional (RP) to collate the claims and ascertain the liability. In the said judgment the Corporate Debtor's main contention was that the amounts paid by the Operational Creditor and its financial statements do not match. In this case, by virtue of the letter dated 01.04.2019, the Corporate Debtor has acknowledged the due amount as Rs.20,28,33,133/-, which is beyond the threshold limit.

Hence from the above, it is evident that the Corporate Debtor is due a debt to the Financial Creditor which is admittedly beyond Rs.1 Crore. In these circumstances, there cannot be any other option for the Tribunal, except to order for Corporate Insolvency Resolution Process (CIRP).

Hence I am of the considered view that it is a fit case to admit and order initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Financial Creditor has suggested one name i.e., Mr.Pradeep Kumar Sravanam (IBBI/IPA-003/IP-N00100/2017-2018/11009) as Insolvency Resolution Professional (IRP).

The Company Petition is admitted. The Corporate Insolvency Resolution Process of the Corporate Debtor shall commence from this date and shall be completed within 180 days hence.