The Ahmedabad bench of the National Company Law Tribunal (NCLT) has directed Punjab National Bank (PNB) to approach the Mumbai bench against Essar Shipping as the lender has already initiated insolvency proceedings against the principal borrower Essar Oilfield Services there.
The bank has so far claimed over Rs 253 crore against Essar Oilfield, also known as OGD Services.
The state-owned lender had approached the Ahmedabad NCLT against Essar Shipping, for the default committed by Essar Oilfield (now known as OGD Services), in making payment of stand by letter of credit (SBLC) facility of $27 million, where Essar Shipping was a guarantor.As per the plea, filed by the lender, it had extended a non-fund based SBLC of $27 million restricted to around Rs.160 crore credit facility in March 2014. Now, the bank is seeking to recover dues that include facility, interest, liquidation damages and commission on the bank guarantee and cost which stands around Rs 253 crore.
“The Essar Oilfield Services defaulted in payment of the availed facility and inspite of repeated request and notices, the said principal borrower failed to pay the amount due…,” argued the bank in its plea.
“Since, the corporate guarantor had extended its guarantee, a recall notice was issued on May 29, 2018, recalling an amount of Rs 190 crore as on April 30, 2018, plus applicable interest at 17.5% from May 1, 2018, under the facility. The company had defaulted on July 4, 2016.”
While countering this argument, the company had argued that the insolvency petition is not maintainable since there is no specific power of attorney granted by the applicant (PNB Bank) for initiation of the insolvency process against the guarantor.
Also, the Essar Group Company argued that the insolvency application against the principal borrower (Essar Oilfield) is initiated in the Mumbai bench of NCLT and it is currently pending, therefore, the bank won’t have any authority to initiation of the insolvency process against the guarantor.
Also, the Essar Group Company argued that the insolvency application against the principal borrower (Essar Oilfield) is initiated in the Mumbai bench of NCLT and it is currently pending, therefore, the bank won’t have any authority to initiate corporate insolvency resolution process (CIRP) against the guarantor (Essar Shipping).
As per the company’s website, OGD Services (formerly Essar Oilfield Services) is a contract drilling services provider for the oil, shale gas & Coal Bed Methane (CBM). The company owns and operates a diversified fleet of 15 Land Rigs with capacities ranging from 250 HP to 2000 HP.
Since the claim of the applicant (PNB) against the borrower (Essar Oilfield) is pending for adjudication, therefore till the time it is not proved that there is a default by the borrower, any adjudication of the claim of the applicant against guarantor (Essar Shipping) shall amount to parallel adjudication and such parallel adjudication is barred…” argued Essar group owned company.