State Bank Of India vs Athena Energy Ventures Private Limited

Per: K. Anantha Padmanabha Swamy, Member Judicial.

The present Application is filed by 'State Bank of India' (hereinafter referred to as 'Petitioner/Financial Creditor') under section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as IB Code, 2016) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 against M/s. Athena Energy Ventures Private Limited (hereinafter referred to as 'Respondent/Corporate Debtor' (being Corporate Guarantor in the case of M/s. Athena Chhattisgarh Power Limited)).

Brief facts as averred in the present Petition are as under:

That the Financial Creditor has filed the instant Application to initiate corporate Insolvency Resolution Process against the Respondent (Corporate Guarantor) in view of the default committed by the Principal Borrower to whom Financial Creditor had forwarded finances under various heads and for which transactions, the Respondents herein had given Corporate Guarantee with respect to the debt granted by the Financial Creditor.

That, "Athena Chhattisgarh Power Limited" (Principal Borrower) is a Joint Venture Company which is promoted by "Athena Energy Ventures Private Limited".

That, originally Principal Borrower pursuant to its Board of Directors meeting had decided to avail financial assistances from the financial institutions and Financial Creditor in the year 2011 with a request to provide financial assistance to it, and the Financial Creditor had provided financial assistance.

That, thereafter the Principal Borrower had approached the Financial Creditor and also several other Banks and basing upon discussions, a Consortium comprising of various banks including Financial Creditor herein continued to provide financial assistance to the Principal Borrower, basing upon the documents that have been executed by the Principal Borrower in favour of the Financial Creditor and other consortium banks.

That during this stage, since the financial assistance that was being sought by the Principal Borrower had increased, at the requests and behest of the Consortium of Banks which also included Financial Creditor, the Corporate Debtor herein who is also a promoter of Principal Borrower and also which is a Joint Venture under which the Principal Borrower was floated, came forward and had executed Corporate Guarantee documents in favour of the Financial Creditor and other Consortium of Banks, thus giving guarantee to the amounts that were provided by the Financial Creditor to the Principal Borrower. 2.6. That by virtue of such Corporate Guarantee, the Corporate Debtor was also under an obligation to see that the amounts availed under finance from the Financial Creditor was repaid by the Principal Borrower. 2.7. That, in total, the Financial Creditor has Sanctioned an amount of Rs.3069,68,00,000/- (Rupees Three Thousand Sixty Nine Crores Sixty Eight Lakhs Only) to the Principal Borrower and had in fact disbursed an amount of Rs.2769,19,05,767/- (Rupees Two Thousand Seven Hundred and Sixty Nine Crores Nineteen Lakhs Five Thousand Seven Hundred and Sixty Seven Only) to the Principal Borrower. 2.8. That the Principal Borrower had committed default and the Account of the Principal Borrower was declared as Non-Performing Asset (NPA) on 21-12-2015 by the Financial Creditor.

That the Financial Creditor had filed an Application under Section 7 of Insolvency & Bankruptcy Code, 2016 against the Principal Borrower before the National Company Law Tribunal, Hyderabad bench seeking initiation of Corporate Insolvency Resolution Process, as the Principal Borrower had committed default and the outstanding amounts payable were to the tune of Rs.2944,57,70,156.22/- (Rupees Two Thousand Nine Hundred and Forty Four Crores Fifty Seven Lakhs Seventy Thousand One Hundred and Fifty Six and Twenty Two Paise Only). The said application was numbered as CP(IB) No.616/07/HDB/2018 and the same was thereafter admitted by National Company Law Tribunal, Hyderabad bench vide orders dated 15-05-2019.

That the Financial Creditor had also filed instant Application under section 7 of Insolvency & Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process against the Corporate Guarantor/Respondent herein. Since, the earlier proceedings against Principal Borrower were filed before this Adjudicating Authority, the instant Petition was also filed before this Adjudicating Authority only even though the registered office of the Corporate Guarantor was situated at New Delhi by virtue of provisions of the Code contained in Section 60(2) of the Insolvency & Bankruptcy Code, 2016.

Counsel for the Respondent filed counter inter-alia stating as under:

That the Financial Creditor has earlier filed an Application under section 7 of the I&B Code, 2016 against the Principal Debtor before this Adjudicating Authority vide CP(IB)No.616/7/HDB/2018 and this Adjudicating Authority admitted the above said Company Petition. The present Company Petition is arising out of the very same transaction and the very same Common Loan Agreement dated 30.03.2011 as amended by a First Amendment Agreement dated 31.03.2015 followed by Second Amendment Agreement dated 01.09.2016 and as such, the very claim made under the present Company Petition is nothing but duplication of the claim, which is not permissible under IBC code.

That there is no dispute about legal position that the Financial Creditor can initiate proceedings under IBC simultaneously against the Principal Debtor as well as the Guarantor and further there is no dispute about the fact that the Financial Creditor even without exhausting Rights against the Principal Debtor can initiate Proceedings against the Guarantor. However, where an application U/s.7 filed against the Principal Debtor or Corporate Guarantor is admitted and CIRP initiated, the Financial Creditor is debarred from initiating another proceedings U/s.7 against the Corporate Guarantor on the basis of same set of claims and default. 3.3. It is stated that Hon'ble NCLAT in the case of "Vishnu Kumar Agarwal Vs Piramal Enterprises Limited vide CA (AT) (Insolvency) No.347 of 2018 dt.8^th January, 2019" categorically held that once a Petition under Section 7 of IBC is filed by Financial Creditor against the Principal Debtor/Co-Guarantor and CIRP is initiated, the Financial Creditor cannot file another Application on the very same set of claim, which is prohibited under the Provisions of IBC. 3.4. That the present Company Petition is not maintainable in terms of Section 7 of the I&B Code, 2016, since the Financial Creditor and other Consortium of Banks themselves are holding Controlling Interest and Shareholding to the tune of (51%) in the Principal Debtor Company and as such, the Financial Creditor and other Consortium of Banks have no locus standi to file the present Company Petition.

Counsel for the Applicant filed its Rejoinder and written submissions inter-alia stating as under:-

That the Corporate Guarantor/Corporate Debtor herein denied the allegations made by the Financial Creditor in the Application and prayed to dismiss the Application on two grounds. The contentions of the Corporate Guarantor are as under: 4.2. That already an Application filed by the Financial Creditor against the Principal Borrower under Section 7 of I & B Code, 2016 is admitted and further that, once an application is admitted, a similar application with similar claim against the Corporate Guarantor cannot be admitted and that the same is upheld by Hon'ble National Company Law Appellate Tribunal, at New Delhi in the matter of "Dr. Vishnu Kumar Agarwal Vs. M/s Piramal Enterprises Ltd dated 08-01-2019". 4.3. The other contention of the Corporate Debtor herein is that the Financial Creditor is a major shareholder in the Principal Debtor Company and as such cannot invoke provisions of Insolvency & Bankruptcy Code, 2016 against the Corporate Guarantor. 4.4. It is stated on behalf of the Applicant herein that, it is true and admitted fact that, the amounts as mentioned in the application filed under Section 7 of I & B Code, 2016 against the Principal Borrower vide CP (IB) No.616/07/HDB/2018 and the amounts mentioned in the application filed under the Section 7 of I&B Code, 2016 i.e., the present application are one and the same and also arise out of the same transaction and it is also an admitted fact that the Hon'ble National Company Law Appellate Tribunal had passed a Judgment that similar applications cannot be filed against Principal Borrower and Corporate Guarantor for the same amounts. However, upon perusal of the Judgment passed by the Hon'ble NCLAT, New Delhi, in the matter of "Dr. Vishnu Kumar Agarwal Vs. M/s Piramal Enterprises Ltd dated 08-01-2019, it is seen that Hon'ble NCLAT had made the below mentioned observations:

By virtue of the above observations, the Hon'ble NCLAT, had made it clear that, even though applications cannot be filed against two Principal Borrowers in normal circumstances, the same can be done, if it is demonstrated that both the Principal Borrowers (i.e., one Principal Borrower & Corporate Guarantor) are Joint Venture Companies.

It is stated further that since there are sufficient documents to prove that the Principal Borrower is a Joint Venture entity of Corporate Guarantor, the Judgment passed by the Hon'ble NCLAT, in the matter of "Dr. Vishnu Kumar Agarwal Vs. M/s Piramal Enterprises Ltd dated 08-01-2019 shall not be a bar for admission of the present Application by this Adjudicating Authority. At the most, the request of the Financial Creditor to appoint another Interim Resolution Professional cannot be considered and the same Interim Resolution Professional who was appointed in the matter of CP (IB) No. 616/07/HDB/2018 shall be appointed if the present application is also admitted.

As regards the contention of the Respondent's herein that, the Financial Creditor is a major stake holder in the Principal Debtor Company and as such cannot invoke provisions of Insolvency & Bankruptcy Code, 2016 against the Corporate Guarantor, it is submitted that the Corporate Guarantor had summarized its defense as if the present application is filed against the Principal Borrower and not against the Corporate Guarantor. It is submitted that, when the application against the Principal Borrower had already been admitted and when there is no stay passed by the Appellate Authority/Tribunal against the admission orders passed by this Adjudicating Authority in CP (IB) No.616/07/HDB/2018, and when the Corporate Guarantor which is a promoter of the Principal Borrower had no objection for the said application getting admitted nor had it taken any steps to get its Joint Venture Company to be taken out from such admission orders, the Corporate Guarantor now coming before this Adjudicating Authority and taking defense about Financial Creditor being major stake holder in Principal Borrower, is not a bar on this Adjudicating Authority from entertaining the present Application.

That, in an application under Section 7 of I & B Code, 2016 what a Financial Creditor has to satisfy the Adjudicating Authority is whether or not there was debt & whether the said amount is exceeding Rupees One Lakh and Secondly, whether a default was committed by the Principal Borrower? That apart, when a Section 7 application has been filed by the Financial Creditor against the Corporate Guarantor, what the Financial Creditor has to demonstrate is that a Corporate Guarantee has been given by the Corporate Guarantor to the loan transaction of the Principal Borrower.

That a perusal of the entire documents filed by the Financial Creditor would amply and clinchingly establish that it had forwarded amounts exceeding Two Thousand Seven Hundred Crores and that Principal Borrower had committed default in making the payments. Further the said documentation also demonstrates that the Corporate Guarantor had executed Corporate Guarantee Documents in favour of the Financial Creditor for the financial transactions of Principal Borrower and is as such jointly & severally liable for the acts of the Principal Borrower. That apart, in the entire counter of the Corporate Guarantor, it had not taken any specific stand that there was no debt and that it had not given any Corporate Guarantee to the transactions of the Principal Borrower and thus had in fact admitted the same.

That in view of the fact that the Financial Creditor had satisfied all the ingredients that are required for admission of an application under Section 7 of I & B Code, 2016, the present application needs to be admitted by discarding the defenses as put forth by the Corporate Guarantor.

Heard both sides and perused the record as well as written submissions.

It is a matter of fact and record that the Petitioner herein had earlier filed an application U/s. 7 of the IBC, 2016 against M/s. Athena (Chhattisgarh) Power Limited, the 'Principal Borrower' vide CP(IB)No.616/7/HDB/2018 and the same stood admitted vide this Adjudicating Authority's order dated 15.05.2019 and CIRP is in progress.

It is also admitted by the Petitioner herein that the instant application U/s.7 of the Code has been filed against the Respondents herein namely M/s. Athena Energy Ventures Private Limited being the Corporate Guarantor in respect of the same set of facts, claim and default upon which the CP(IB)No.616/7/HDB/2018 was filed and admitted.

The main question, therefore, to be determined by the Adjudicating Authority in this matter is:

It is pertinent to note here that under the provisions of IBC 2016, there is no bar against filing an application u/s.7 either against the Principal Borrower or the Corporate Guarantor. It is also not necessary that an application U/s.7 must be filed by the Financial Creditor against the Principal Borrower first, and an application u/s.7 against the Corporate Guarantor must be filed after exhausting the rights against the Principal Borrower, as the Financial Creditor is also the Financial Creditor qua the Corporate Guarantor.

However, Hon'ble NCLAT have categorically laid down in the case of Dr.Vishnu Kumar Agarwal Vs. M/s. Piramal Enterprises Limited CA (AT) (Insolvency) No.347 of 2018 that since a Financial Creditor cannot make a claim for the same set of debt in two separate CIRP processes, he cannot be allowed to pursue two separate Sec.7 applications for the same claim. If the CIRP is initiated against one of the Corporate Debtors, after such initiation the Financial Creditor cannot trigger CIRP against the other Corporate Debtor/Corporate Guarantor for the same claim amount. In para 32 of their Judgement (supra) the Hon'ble NLCAT observed as under:

If we apply the above ruling of NCLAT to the facts of the present case, there is no doubt that the question framed in para 8 above has to be answered in the negative.

The Applicant has contended that the above ruling does not apply in the instant case as Hon'ble NCLAT have allowed initiation of CIRP in the case of Joint Venture Company. As regard this contention, it is observed that Hon'ble NCLAT have categorically laid down that no application can be filed by the Financial Creditor against two or more Corporate Debtors on the ground of joint liability, unless it is shown that the Corporate Debtors combinedly are a Joint Venture Company. A joint Venture Company is formed when two or more independent companies agree to pool their resources and incorporate a Joint Venture under the Companies Act 2013, for running a common business. Such a Joint Venture has a separate Memorandum of Association/Articles of Association. In the instant case both the Principal Borrower and the Corporate Guarantors are independent Companies in their own rights having independent Memorandum of Association/Articles of Association and cannot be combinedly called a Joint Venture Company. It is also pertinent to note here that the Principal Debtor i.e., M/s. Athena Chhattisgarh Power Limited has independently obtained all requisite Permissions and Sanctions to establish a 1200 MW Thermal Power Project at Village Singhitari, Tehsil Dhabra, District Janjgir-Champa, Chhattisgarh and accordingly approached the Financial Creditor and Consortium of Banks for raising requisite Funds to establish the Subject Project. It is only after the financial needs of the Principal Borrower increased, that the Respondents herein stepped in as a Corporate Guarantor. Thus, the Principal Borrower and the Respondents herein cannot be combinedly called Joint Venture Company.

In view of the aforesaid discussion and the guidance available in Hon'ble NCLAT's Judgement in Piramal Enterprises (supra), this Adjudicating Authority is not inclined to admit the instant application, which is filed on the same set of facts, claim and default in respect of which a CIRP is already under progress in CP(IB)No.616/7/HDB/2018 and wherein the claim of the applicant herein is already admitted.

Accordingly, the instant application bearing CP(IB)No.466/07/HDB/2019 is hereby rejected.