Power Finance Corporation Limited vs Shree Maheshwar Hydel Power Corporation Limited

This Court convened through video conferencing.

This petition under section 7 of the Insolvency and Bankruptcy Code, 2016 read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (“Code”) has been filed by Power Finance Corporation Limited, (“Financial Creditor”) through its Deputy General Manager namely Mr. Praveen Verma, authorised vide Board Resolution dated 19/12/2017 (Annexure-A2 Colly), for initiation of Corporate Insolvency Resolution Process in respect of Shree Maheshwar Hydel Power Corporation Limited (hereinafter referred to as the Corporate Debtor.

This petition has a chequered history, noted briefly herein after. This Company Petition was initially filed before the NCLT Ahmedabad Bench on 16^th February, 2018.

This petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was decided on 08.10.2021, however, there was difference of opinion amongst two Ld. Hon’ble Members of National Company Law Tribunal and as a result of which this has now been placed before me by Hon’ble President of NCLT.

The points referred to under section 419(5) of the Companies Act i.e. the points of difference of opinion are as follows:

Part-I of the application contains the particulars of the applicant. Part II contains particulars of Corporate Debtor, Part-III contains particulars of the Proposed IRP.

Part IV contains claims of financial debt for an amount of Rs. 2789,42,00,000/- (Rupees Two Thousand Seven Hundred Eighty-Nine Crore and Forty-Two Lakh only). As is evident from part IV of the application which was filed on 16^th of February, 2018 contains the debt up to 15^th of January, 2018.

Part-V, contains particulars of financial debt along with the documents relied therein.

Besides the above, supplementary affidavit which is part of this application contains factual position contended by the Financial Creditor.

It is contented that the Financial Creditor is a ‘Navaratna’ Central Public-Sector Enterprise under the administrative control of Ministry of Power (MoP), Government of India and is a Non-Banking Financial Company having its registered office at “Urja Nidhi”, 1 Barakhamba Lane, Connaught Place, New Delhi-110001.The Financial Creditor is carrying on its business as a Non-Banking Financial Company inter alia for providing financial assistance to the enterprise dedicated to development of power sector in India, in accordance with the rules, regulations and guidelines issued by the Reserve Bank of India from time to time and other applicable guidelines.

The background along with the dates and events of the project and the credit facilities extended to the Corporate Debtor are contained in ‘Paras b to hh’ from page 14 to 30 in the instant application under section 7 of the Code.

In view of the factual position stated in the above referred paragraphs, it is contended by the Financial Creditor that the Corporate Debtor was unable to repay the outstanding amount of Rs.2789,42,00,000/- (Rupees Two Thousand Seven Hundred Eighty-Nine Crore and Forty-Two Lakh only) and therefore has contended it is just fair and equitable and in the interest of justice the present application be admitted, CIRP initiated in respect of Corporate Debtor and the IRP be appointed to conduct the affairs of the Corporate Debtor till the resolution plan is finalized for the Corporate Debtor or the Corporate Debtor goes into liquidation “ as the case may be” in terms of the provisions of the Code.

At page 32, it mentions the relief sought in the present application.

Ld. Sr. Advocate Sh. Ramji Srinivasan, while addressing his arguments, has taken this Adjudicating Authority to list of dates, events, pleadings/affidavits and written submissions filed by Financial Creditor before this Adjudicating Authority and which are summarised in tabular form herein after.

itself. Copy of correspondence exchanged between the parties in relation to the aforesaid is already on record along with Additional Affidavit filed by Financial Creditor on 31.08.2020 (55/56 Financial Creditor Affidavit 31.08.2020).

Further submissions of Ld. Sr Counsel on various issues raised by Corporate Debtor are summarized as under:

Mr. Arjun Seth, learned Counsel for the Corporate Debtor, while seeking rejection of application under section 7 of the Code, has strenuously argued on the following points and has taken me to its reply affidavit/other pleadings and written submissions filed by and on behalf of Corporate Debtor.

Mr Arjun Seth submitted that he would argue on the following five points:

The contentions of the Corporate Debtor are summarized hereinafter:

The learned Counsel during the course of the arguments submitted that the disbursement of money by the Financial Creditor is not debt. Mr. Puri argued that this Adjudicating Authority should consider whether the Financial Creditor has breached the terms of disbursement, whether it was for normal course business or not or whether it was a collusive transaction

Mr. Puri submitted that the Financial Creditor by controlling and being a management of the Corporate Debtor just wanted to prolong the project so that it keeps receiving the interest from the loan and had no intention of completing the project hence the funding was done by the Financial Creditor only with a view of prolonging the project

Mr. Puri submitted that the control of the management of the Corporate Debtor was with the lender and then to clean up their books by declaring the Corporate Debtor as NPA, there cannot be an equity brought in by the lenders. Mr. Puri submitted that this petition has been filed only with the purpose to bring in blue eyed boy into the Committee of Creditors. Mr. Puri submitted that the money was brought in by the Financial Creditor in 2017 and no instalment was paid. He submitted that vide the additional loan agreement executed on 27.04.2017 an amount of Rs. 600 Crore was disbursed and the same was done for the purpose of the payment of the interest of the said loan as is clear from Clause 2.1 of the loan agreement.

Mr. Puri submitted that this is a premature petition and the Corporate Debtor cannot be taken into insolvency and has been filed for the purpose of recovery and not resolution of the Corporate Debtor.

In the scenario that this Section 7 petition is admitted then the petition filed under section 240-242 of the Companies Act, 2013 would be stayed and Entegra would be out of the Insolvency proceedings in the view of Section 29 A of the Code.

In the aspect of limitation, it was submitted that the Financial Creditors were time barred hence they invoked the shares and then gave an additional loan disbursement in 2017 and they called it within 3 months just to come within the scope of limitation.

Mr. Puri submitted that the judgment passed in Vidarbha Industries Power Ltd. v. Axis Bank Ltd., MANU/SC/0874/2022, gave a way out. He submitted there were other bona-fide lenders. He submitted that due to the MoU, time was wasted for four months not 12 months. The MoU was entered in order to keep Entegra from filing contempt petition and within four months the Financial Creditor breached the MoU.

Mr. Puri submitted that there are three provisions for filing petitions for commencement of insolvency in the Code i.e. Section 7, Section 9 and Section 10. Hence, in this present case the Financial Creditor who was in management of the Corporate Debtor cannot wear another hat i.e. of the Financial Creditor and contest. The present petition should have been filed under Section 10 of the Code as a Corporate Applicant. If the statute prescribes a particular manner, it is to be done in that manner itself. Hence the Financial Creditor if it goes to file under the Code it would have been under Section 10 of the Code and not under section 7 of the Code. He placed reliance Phoenix ARC Pvt. ltd. V. Spade Financial Service ltd. and ors., 2021 SCC Online SC 51.

Mr. Puri then relied on the Hon’ble NCLAT Order dated 12.03.2018 paragraph ‘e’ and ‘f’ to convey that the Financial Creditor was in control and management of the Corporate Debtor. He then refer to paragraph 21(C) wherein it has been stated thus, Petitioner wanted the Board not only to resolve regarding empowering the managing team which it would nominate. Thus, the Financial Creditor was dictating terms. Petitioner also wanted to ensure flow back of funds to itself. With respect to the flow back he led us to page 43 of the said judgment wherein it is stated that “Thus, in spite of earlier agreement, dated 16.09.2005, the restart of the product was being held back by not releasing funds and push in for amendment Articles Association to empower the management team of the lenders to exercise management control till the entire debt is serviced and repaid. Thus, development and completion of the project was not the main object. Management control was targeted to ensure flow back of funds”.

Mr. Puri submitted that the justification of the new loan agreement was due to the high-level committee that was constituted by the Government of Madhya Pradesh vide order dated 16.10.2014 which provided for three scenarios and the agreement was the result of scenario II which is contradictory to the NCLAT order which states that the Financial Creditor has breach scenario II which has been stated in Paragraph 47 of the NCLAT order. Mr. Puri then submitted that vide order dated 29.05.2018, this Tribunal directed that the matter be taken up by the MCA as also the Govt. of Madhya Pradesh and pursuant thereto, the Govt. of Madhya Pradesh constituted a task force on 18.04.2019 to consider a way out of implementation of the project by cooperation between various stakeholders including the lenders and promoters. Thereafter the promoters vide letters dated 03.08.2018 and 19.10.2018 issued to the Financial Creditor presented a complete offer of funding. Vide email dated 05.11.2018 the promoter also submitted the draft MoU to the Financial Creditor. The MoU was executed between the Financial Creditor the Corporate Debtor and the promoters i.e. Entegra Ltd. The term of the MoU was to subsist for 12 months from the date of execution. This was done to ensure that the viability of the project could be assessed and the Articles of Association could be amended, the Board of Directors could be reconstituted, the ownership could be reverted to the promoter and that the settlement plans could be executed as well as interim finance could be brought into the company. However, the MoU was repeatedly breached by the Financial Creditor and the other lenders.

Mr. Puri submitted that in the breach of Clause I and 19 of the MoU, the Financial Creditor continued to prosecute this petition.

Mr. Puri then relied on a judgment passed by this Tribunal dated 18.12.2020 passed in I.A. (IB) no. 67 of 2018 and IA(IB)No.68 of 2018 in CP No. 175 of 2018 wherein it was recorded and directed as follows:

Mr. Puri submitted that the petition is barred by limitation, and there are two arguments to substantiate this. Firstly, the date of default has not be clearly mentioned in Part IV of the petition only the total amount of debt has been mentioned. Hence, the DoD is not clear. Secondly, the loan account was declared as NPA in 2012 and thereafter no documents have been filed along with the petition to give a clear picture of the timeline since 2012 till 2018. The Financial Creditor has annexed the Financial Statements for the FY ending 2014 in its written statement. A written statement cannot be substitute for the pleadings. Mr. Puri then relied on Babulal Vardharji Gurjar v. Veer Gurjar Aluminum Industries Pvt. Ltd., (2020) 15 SCC 1 wherein it has been observed that “It remain indisputable that neither has any other date of default been stated in the application nor has any situation or any acknowledgement be made. As noticed, even in part V of the application, respondent 2 was required to state the particulars of financial debt with documents and evidence on record. In the variety of descriptions which could have been given by the applicant in the said part V of the application and even in residuary point 8 therein, nothing was at all stated at any place about the so called acknowledgement or any other date of default.”

Mr. Puri submitted that Mr. Srinivasan is relying on the so-called acknowledgment in the balance sheet of 2014, which has not been attached to the petition but has been attached to the written notes hence the petition is liable to be returned. He then referred to Asset Reconstruction Company (India) Ltd. v Bishal Jaiswal, 2021 SCC Online SC 321, in support of his contention that any acknowledgment made should be an arm’s length. He then placed reliance on para 56 of the Pioneer(supra) judgment. He further submitted that in the present petition the order the judgment relied on by the Financial Creditor i.e. Jagmohan Bajaj(supra) is not applicable. Mr. Puri then relied on Vidarbha(supra) in support of the proposition that if by virtue of other proceedings and there is a finding that the Insolvency is technical then it is not important to admit the petition. In the present case if the petition of the Financial Creditor is not allowed it will lead to further litigation.

There can be a resolution but not under Section 7 which is tainted with Section 65. He thus concluded that the petition must be dismissed.

Mr. Abhishek Puri led us through the MoU, wherein the parties who have entered into the MoU the Entegra Ltd., Power Finance Corporate ltd. and Sri Maheshwar Hydel Power Corporate Ltd. It is clear that the MoU has been signed between Entegra Ltd. and the Financial Creditor and the Corporate Debtor was only a confirming party and had no obligations.

Mr. Puri then led us to the first paragraph of MoU wherein it has been stated that during the pendency of the MoU, the Financial Creditor will endeavour to persuade the other lenders from not pursuing or withdrawing any legal proceedings, including the IBC proceedings, if filed during the pendency of the MoU.

Thereafter he referred to paragraph 25 of the MoU wherein it has been stated that the parties agree to act in good faith in relation to the performance of each party’s obligation under this MoU and not to make any false representation. Mr. Puri submitted that the Financial Creditor jeopardized the MoU so that no one would invest in the Corporate Debtor.

Mr. Puri then referred to Clause 6 of the MoU in order to show that the Financial Creditor has breached this term of the MoU as well i.e. the Financial Creditor was to take necessary steps to facilitate restoration of Entegra’s ownership in the Corporate Debtor by cancelling the transfer of shares acquired by the Financial Creditor. Mr. Puri submits that the Financial Creditor claims that it has returned its 20% of the shareholding and hence it has complied with the said clause but other lenders have not returned the shares taken by them.

Mr. Puri states that Clause 6(iii) of the MoU lays down two parts as the basis of the resettlement plan i.e. the remaining shares held by the other lenders on account of invocation of pledge shares of Entegra Ltd. shall be restored in the name of Entegra Ltd. and that the Financial Creditor would engage the other lenders to facilitate the same at the earliest. Mr. Puri submitted that the money was not meant for any lender, it was for the immediate payment to the employees.

There was a complete deadlock in the Board of Directors, the Financial Creditors showed that they were complying with the terms of the agreement but were actually jeopardizing the MoU.

Mr. Puri submits that as per Clause 16 of the MoU the parties were to facilitate convening of an extraordinary general meeting as soon as possible for short notice for altering the AOA. However no such EOGM has been held. Mr. Puri then lead us through the AOA wherein the definitions of fundamental issue, amendments, transfer of shares were given. In the internal page 4 of the AoA the definition of “pledge shares S.Kumar’s. Hence if the AoA had to be amended a Board Resolution was required and the shareholders were required to return the shares. Mr. Puri then relied on Clause 22 of the Memorandum of Association which stated that in the event of failure to implement the contents of the MoU in 12 months from the execution date then this MoU would stand automatically terminated. No other termination has been mentioned other than the ones specified in Clause 22 of the MoU. Mr. Puri concluded that since the MoU has come to an end does not mean that it is an acknowledgement.

Ms. Fereshte Sethna submitted that she is representing a FSI and along with two other Mauritius investors comprise 41% shareholding of the Corporate Debtor. Therefore, as per the AOA Power Infrastructure India is a strategic investor. Ms. Fereshte Sethna began her submission citing Section 180 of the Companies Act stating that Section imposes certain restrictions to the borrowing. The Article of Associations also has these restrictions mentioned.

Ms. Sethna Submitted that a sanction letter was submitted for the purpose of restructuring on 12.01.2017 with the intent of sanctioning additional loan. In the sanction letter it has been stated that as a revival major of the project the Financial Creditor i.e. Financial Creditor is agreeable for the following subject to Gov. Companies/lender holding majority equity in the project and receipt of similar dispensation from all lenders.

Increase in project cost from Rs. 2760 Crore to Rs. 8121 Crore which schedule CoD as December 31.2019. NOC in favour of the additional debt of Rs. 3,022 Crore be tied up for the project.

Hence from the said letter it can be seen that the letter was issued for;

Ms. Sethna then lead us through the relief sought in her intervention petition which are

Ms. Sethna submitted the proceedings u/s 241 of the Companies Act, 2013 prior to the initiation of Section 7 petition. She strenuously argued since petition under Section 241 was filed prior in time therefore Section 7 petition cannot be heard without deciding earlier petition under Section 241.

On a query raised by the Bench, whether the Financial Creditor is barred to file a section 7 petition, Ms. Sethna submitted that she relies specifically by virtue of the interpretation of Section 10 of the Code. She submits that the petitioner is wearing three hats:

Ms. Sethna submitted that the Financial Creditor itself brought in the S.7 petition and then filed the reply in the said petition. Hence it is the malicious intent of the Financial Creditor to overcome the inevitable and to reverse the findings of the NCLAT.

Ms. Sethna submitted that therefore recourse u/s.7 is not available to the petitioner.

Hence Ms. Sethna stated that power Infrastructure India instituted petition under Section 241 of the Companies Act in the view of the conduct of the Financial Creditor in the Annual General Meeting. She then submitted where a prior 241 proceeding has been initiated and a petition u/s 7 of the Code has been filed in the same NCLT and the petition under Section 241 can be road rolled by a Section 7 petition.

Ms. Sethna submitted that as a strategic investor Power Infrastructure Ltd. pumped in Rs. 200 Crore for the purposes of the project to be brought online which has been mentioned in the Section 241 petition. but the section 241 petition has not been taken up for hearing.

Ms. Sethna submitted that contrary to the covenants for the use of the money, the Financial Creditor used the money to pay its own interest. Using the principles of Vidarbha (supra) that this is a place where in investor should not be placed. Ms. Sethna submitted that this Adjudicating Authority is hearing the Section 7 petition out of turn, the petition under Section 241 of the Companies Act has not been heard but the petition under Section 7 of the Code is being heard ahead of the Section 241 petition and urged this Adjudicating Authority to take cognizance and hear her Section 241 petition. She then urged us to note the two dates one being the date in which the MoU had been entered into i.e. 22/07/2019 and the day of the NCLAT order i.e. 12.03.2018 and the Section 241 petition had been filed in November 2017. She submitted that the Power Infrastructure Limited being a strategic partner was not a party to the MoU.

The Bench put a query that why didn’t the intervenor object to the MoU but instead accepted the money, to which Ms. Sethna submitted that the Financial Creditors attempted to sanction the loan on January, 2017 and Power Infrastructure Limited sent a letter objecting to the said loan disbursal on March 2017. She then submitted that merely there is a scope for settlement does not mean that everything will be white washed. It is not an intention to raise allegations but there has been a commercial breach. Nowhere in the MoU it has been stated that the allegations would be withdrawn.

It is averred in paragraph 7 of this application, the application that seeks to obtain a right to intervene by proposed intervener, in order to oppose the present petition, filed in relation to the purported Corporate Debtor under the Insolvency and Bankruptcy Code, 2016, principally on the grounds that: the petition filed under IBC, 2016, is motivated mala fide endeavour to avert accountability of lenders, through securing declaration of moratorium in relation to Company Petition No. 11 of 2018 instituted by the proposed intervener, and also to challenge the notice of recall dated 17^th of January, 2018, the proposed applicant seeks to oppose the application under Section 7 on the various grounds mentioned in the application.

The applicant in this application seeks intervention on the events mentioned in para 10 of this application. In the prayer, it is mentioned, present application for intervention be allowed and the intervenor be allowed to object to and oppose the grant of any orders in application under Section 7. It also seeks in the alternative independent person/committee of persons be constituted in order to defend the interest of the respondent in application under Section 7 against the petitioner therein.

Further, it is mentioned in paragraph 4;

Mr. Ramji Srinivasan replied to eight points in his rejoinder. The first one being the point of limitation. Mr. Ramji Srinivasan submitted that the point of limitation does not arise and in the previous deferred order there was no question framed with respect to limitation. Mr. Srinivasan submitted the debt has been acknowledged by the Corporate Debtor in various occasions:

Mr. Ramji Srinivasan submitted that the Corporate Debtor did not bring in 600 Crores but did not object when the Financial Creditor brought in Rs.364 Crore and then vide the order of the Hon’ble NCLAT the entire pledge was wiped out. Hence how can they rely on this MoU. The Corporate Debtor and its promoters did not object when they received the amount but only objected when they had to fulfil their obligations to the MoU. One cannot take the stand of approbation and reprobation. Mr. Ramji Srinivasan relied on Bhartiya Airtel Ltd. V. Tata Teli Services Ltd. and Ors., MAMU/TD/0198/2012. On paragraph 28 wherein the judgment of Shyam Telelink v. Union of India wherein it has been held that the appellant cannot be allowed or permitted to accept what is favorable to it and reject what is not. In this Judgment the maxim qui approbate non reprobate (one who approbates cannot reprobate) has been taken into consideration.

Mr. Ramji Srinivasan stated that the judgment of Vidarbha would not apply to this case scenario.

With respect to the conflict-of-interest Mr. Ramji Srinivasan submitted that the Financial Creditor gave loan as the other lenders had also done the same.

Mr. Ramji Srinivasan concluded that the resolution of the Corporate Debtor would also help the farmers of Madhya Pradesh and public at large instead of going for a recovery which would only benefit the Financial Creditors.

The instant petition under section 7 of the Code was admittedly filed on 16.02.2018. Thereafter numerous affidavits, reply affidavits, multiple written submissions have been filed and arguments have been heard spreading over number of days before various benches and now before this bench in view of dissent amongst two Hon’ble members of NCLT on the following points.

With the above four points/questions in focus, while dealing with point (I) “Whether M/s Entegra Ltd., the original promoter and M/s Power Infrastructure India as strategic investors, have any locus to intervene in the matter on behalf of the corporate debtor”, it needs to be mentioned that Entegra Limited has filed two IAs, i.e. I.A. No 53 of 2018 (T.A. (IBC) No. 1/KB/2022) and I.A. No. 60 of 2020 (T.A. (IBC) No. 2/KB/2022). Whereas Power Infrastructure India has filed IA No 54 of 2018 2018 (T.A. (IBC) No. 3/KB/2022).

For the purpose of question no. I, this Adjudicating Authority shall first consider IA No. 53 of 2018 2018 (T.A. (IBC) No. 1/KB/2022) and IA No 54 of 2018 2018 (T.A. (IBC) No. 3/KB/2022). In IA No. 53 of 2018 2018 (T.A. (IBC) No. 1/KB/2022), it is stated at page 4 of this IA that the applicant is apprehending that the Corporate Debtor is not raising bonafide defence. Further at page 5 at para 4 it is stated applicants seeks to intervene in the present petition in order to ensure that the respondent i.e. the corporate debtor is adequately presented. In relief applicant has sought to be impleaded as the parties to these proceedings.

Emphasis supplied.

This IA is liable to be rejected on the face of it in view of law laid down by Hon’ble NCLAT in IDBI Bank Ltd. v. Odisha Slurry Pipeline Infrastructure Ltd. that except the applicant (financial creditor) and the ‘corporate debtor’, there is no requirement of hearing a third-party including Intervenor at the stage of admission.

Now coming IA No 54 of 2018 2018 (T.A. (IBC) No. 3/KB/2022), it be noted and reproduced herein, the prayer sought in the application by the applicant.

It is significant to note paragraph 11 at page 6 of this IA wherein the applicant has contended the petitioner (Financial Creditor) has abandoned ‘revival measures’ is found to be incorrect as this petition seeks to revive the Corporate Debtor through CIRP. Further, the applicant seeks to defend the Corporate Debtor as is contended paragraph 14 of this IA.

Emphasis supplied.

Again, this application and relief sought is hit by the law laid down Hon’ble NCLAT in Odisha Slurry Pipeline (supra.) as referred herein above. Also there is no bar in hearing petition under section 7 under IBC 2016 pending Company petition under Section 241 of Companies Act.

Hence, issue/point No. (I) is answered in negative holding that neither Entegra Limited nor Power Infrastructure India have any locus to intervene in the Company Petition on behalf of the corporate debtor.

While adverting to answer the question/issue no. (II) as referred above, it is relevant to refer to the three reply affidavits filed by the Corporate Debtor:

The relevant portion of the Second Reply filed on 15.04.2019 is reproduced hereunder:

It is pertinent to note that the Second Reply of the Corporate Debtor is supported by resolution passed by the board of directors in the 156^th meeting held on 22.02.2019 (Pg. No. 6 of the Reply), wherein it is recorded as under:

It is also significant to note at Pg. No. 11 of the said minutes, it is recorded that the nominee director of the strategic investor (Now seeking rejection of this petition by filling T.A. (IBC) 1/KB/2022 objected to liquidation of the Corporate Debtor. However, the issue of liquidation or otherwise was not relevant at that stage and even at this stage as the same would arise only if the CIRP does not culminate into resolution of the Corporate Debtor.

A clear picture that emerges from the above position on record is concluded as under.

The Corporate Debtor filed its third reply affidavit 28.02.2020, which is signed by its Managing Director. Thus, even if the first and second reply affidavit filed by the Corporate Debtor is not considered, in view of the specific averments as reproduced above and which is part of the 3^rd reply affidavit, this bench has no hesitation to hold the amount of default by the Corporate Debtor as contained in Part IV of the application which is up to 15^th January, 2018 is admitted.

This bench is of the view that for the purpose of filing a petition under section 7 of the Code, the debt due and in default could be calculated only till the date of filing of the application which was admittedly filed on 16.02.2018 and it contains the debt and the default up to 15.01.2018. A computation sheet of which has been annexed with the application as Annexure A5.

It is settled law that the moment the amount in default is more than Rs. 1 lakh, the petition under Section 7 of the Code needs to be admitted and the issue relating to quantum of debt is irrelevant for the purpose of admission of the Company Petition. Reliance is placed on the judgment dated 08.11.2019 of the Hon’ble NCLAT in Gouri Prasad Goenka v. Punjab National Bank and Anr. in Company Appeal (AT) (Insolvency) No. 28 of 2019, wherein the NCLAT held as under;

Besides the clear admission by Corporate Debtor of its debt and dues and also its inability to repay, as referred in preceding paragraphs/ record and documents furnished before this AA:

Debt was also acknowledged in the Annual Report/Balance Sheet of the Corporate Debtor for the FY 2013-14 signed by Sh. Mukul Kasliwal (Promoter) as one of Directors of the Corporate Debtor on 17.11.2014. The Annual Report was filed with the RoC & is part of public record. The Annual Report is also filed by Entegra Ltd. as Annexure-QQ with CP No. 175/2017.

Debt is again acknowledged in the Balance Sheet of the Corporate Debtor for FY 2016-17 signed on 28.08.2017.

The Corporate Debtor again acknowledged its liability/debt in the meeting of the Board of Directors of the Corporate Debtor held on 29.09.2015 duly attended by the Promoter Sh. Mukul Kasliwal.

Reliance has been placed on behalf of Corporate Debtor to the judgement in case of Vidarbha (supra.) but it is clear that the Corporate Debtor is not in a position to repay its debt and hence, the Corporate Debtor’s reliance on Vidarbha (supra.) is totally misplaced.

Suffice it to say for the foregoing reasons, it is held in response to Point number (II), the Financial Creditor was well within its right to issue a recall notice dated 17.01.2018 demanding the Corporate Debtor to make payment of the total outstanding amount of Rs. 2139.20 crores including outstanding interest amounts payable as on 16.01.2018 within 15 (fifteen) days of the receipt of the said notice.

While considering Issue/Point No. (III) In I.A. No. 60 of 2020 (T.A. (IBC) No. 2/KB/2022), it is quite significant to note it that Entegra filed I.A. No. 60 of 2020 (T.A. (IBC) No. 2/KB/2022) under section 65 of the Code on 17.03.2020 after Orders were reserved by the predecessor Bench on 28.02.2020 after hearing both sides . It further be noted this IA was filed after more than two years after filing of section 7 Petition. This IA filed on 17^th of March, 2020 seeking dismissal of petition under section 7 filed in 2018 and refers to the dates and events of year 2018 and even prior to that. It further seeks dismissal of petition under section 7 on the ground that it was fraudulently prosecuted by the petitioner in violation of MOU executed on 27.07.2019 between applicant and the petitioner company. When the contents of this application are seen along with the contents of the 3^rd reply affidavit filed by Corporate Debtor, it is apparent that similar contentions have been raised.

It can be seen from Clause 22 of the MoU provided “In the event of failure to implement the contents of this MoU in 12 (twelve) months from the Execution Date, this MoU shall stand automatically terminated.” Admittedly, the MoU was not implemented by Entegra/Corporate Debtor as it failed to bring in Rs. 9 crore and further failed to give a concrete settlement proposal/restructuring plan of the dues to the Lenders, much less acceptance thereof by the Lenders. Even as on 24.10.2019, the said amount had not been infused. The same is recorded in the Lenders’ meet held on the said date wherein Entegra was also a participant. The said meeting also records that the Corporate Debtor/Entegra needs to give a concrete & comprehensive proposal for settlement of dues of lenders. Relevant extract of the minutes of meeting held on 24.10.2019 (Pg. No. 44 of IA No. 9/2019 filed by Entegra):

It is correct as contended by financial creditor that MoU is not relevant for the present proceeding as the scope of the present proceeding is narrow and the NCLT is not a civil court where disputes relating to MoU can be agitated or specific performance thereof can be sought.

It is also established from record referred above by the Financial Creditor that MoU was executed in order to give an opportunity to Entegra /Corporate Debtor to settle the dues of the creditors (debt and default having been admitted). However, Entegra/Corporate Debtor failed even to come up with a concrete proposal for settlement of the dues of the lenders, much less paying/settling the same. Pertinently, the MoU stipulated that Entegra would bring in an upfront amount of Rs. 10 crore within three weeks from appointment of CMD i.e. by 27.08.2019 (the appointment having been made on 06.08.2019). Admittedly, only Rs. 1 crore that too in tranches was brought by Entegra. The balance amount of Rs. 9 crore was never brought, admittedly. Thus, the first default under the MoU was committed by Entegra on 27.08.2019 itself. Copy of correspondence exchanged between the parties in relation to the aforesaid is already on record along with Additional Affidavit filed by Financial Creditor on 31.08.2020 (55/56 Financial Creditor Affidavit 31.08.2020). Emphasis supplied.

As noted above, it may be reiterated and as the facts and events noted above, reveal the MoU of 2019 in no way waived of the debt and default of the Financial Creditor occurred till the date of filing of petition under Section 7 on 16.02.2018. It also is noticed the allegations also are baseless, merely an attempt to create a hype and are based on surmises and conjecture.

On scrutiny of the application and the facts and events noted hereinabove, this Adjudicating Authority finds that this application has not been filed for any bona fide reasons.

In view of the facts and events as noted hereinabove, while answering issue number (III), it is found that the Company Petition filed under section 7 of the Code is not at an instance of any fraud/malicious initiation of insolvency proceedings as laid down in section 65 of the Code.

In view of the above, issue/ point (IV) is, therefore, answered in negative as it is established that there is a debt and default as discussed hereinabove.

And also, Financial Creditor had a right to file this petition under section 7 of the Code as there is a clear debt due and default by the Corporate Debtor. And the same has been established on the basis of documents and admissions referred above. This debt was payable by the Corporate Debtor to the Financial Creditor and Corporate Debtor clearly failed to repay the same.

This Bench is also of the considered view that the Corporate Debtor is a separate juristic entity different shareholder as well as the Management. It is only the Corporate Debtor alone as stipulated under the Code, which is a party. In view of the debt, the default and petition having been filed within limitation, it requires admission under section 7 of the Code as held by Hon’ble Supreme Court in the case of Innoventive Industries Ltd. v. ICICI Bank and Ors. reported at (2018)1 SCC 407. The relevant paras from the said judgment are reproduced hereunder:

This Bench seeks to reiterate the order of the Hon’ble NCLAT dated 12.03.2018 wherein the Hon’ble NCLAT directed that the Government of Madhya Pradesh (GoMP) and Central Government both need to urgently consider the way forward in public interest to get the Project completed. And the way out is through resolution process for which Corporate Debtor in its earlier two replies was also agreeable.

Hon’ble NCLAT in the Order dated 12.03.2018 has held that the Promoter i.e. Entegra had a responsibility and a duty to manage the Corporate Debtor as per the Companies Act in which they have failed. The Hon’ble NCLAT further held that “the Promoter do not appear to be enthusiastic to get status quo ante restored in the Articles not inspire confidence that if we strike down these amendments made on 25.11.2005 (and subsequently) they can take charge and complete the project which attracts public interest. Promoters have not brought to our attention that at any time they opposed, or stood up to the gradual takeover.” (Para 44 of the Order). (Pg. No. 759/770 of the 3^rd Reply).

This reference is accordingly disposed of in terms of answers to all the four points referred vide 22 July 2022 to this Bench.

With utmost regard to order of dissent by Hon’ble member (T), I for the reasons stated above agree with order of rejection of I.A.’s and admission of petition u/s 7 of the Code by Hon’ble member (J ) made on 08.10.2021 along with moratorium u/s 14 of the Code and consequential directions including appointment of IRP.

Energy is a key source of economic growth. And the fortunes lie where water resource is available for generation of electricity in our country. A hydro power project of 400-megawatt capacity was conceived to be built upon river Narmada in the State of Madya Pradesh way back in the year 1993. It took off from the stage of drawing board to construction. However, before the water could fall into turbines for the shafts to move to generate electricity, it went into turbulence of multiple litigations. The ultimate consequence; deprivation of multipurpose benefits of project to citizens of the country and the State of Madya Pradesh in particular.

To conclude, it may be useful to refer and rely on as held by Hon’ble Supreme Court in the case of Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors.

Registry is hereby directed to communicate the order to the Financial Creditor, the Corporate Debtor, the I.R.P. and the jurisdictional Registrar of Companies by Speed Post as well as through email.

List the matter on 28.10.2022 for the filing of the progress report before the Original Bench at Indore.

Registry is directed to remit back the records along with this order to the Original Bench at the earliest.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.