The National Company Law Tribunal (NCLT) has ordered corporate insolvency resolution process for IDEB Projects, an engineering and constructionfirm that worked as a sub-contractor to metro rail projects in Bengaluru and Delhi, for defaulting on loans.
Based on a petition filed by Oriental Bank of Commerce (OBC) under the Insolvency and Bankruptcy Code, the Tribunal on Friday appointed Valayudham Jayavel as the interim resolution professional to carry out the proceedings.
Bengaluru-headquartered IDEB Projects is into offering engineering construction services in the areas of road projects, bridges, buildings, steel plants and treatment plants, apart from building metro rail projects.
A consortium of lenders had lent Rs 380 crore to IDEB Projects as working capital. OBC told the tribunal that the company failed to pay it Rs 36.2 crore.
The consortium includes State Bank of India and its associate banks State Bank of Hyderabad, State Bank of Patiala, State Bank of Travancore that have now merged with SBI, apart from OBC and private sector ICICI Bank. The company had availed of a working capital credit of Rs 38 crore from OBC in July 2007.
OBC told the tribunal that IDEB Projects had utilised the entire loan amount and did not pay the dues despite repeated reminders and legal notices. The Debt Recovery Tribunal had ordered IDEB Projects to pay Rs 36.18 crore and issued a demand notice in April 2016.
In its response on February 2, the company questioned the maintainability of the petition, arguing before the tribunal’s Bengaluru bench that only the lead banker, SBI, could take action against it as an irrevocable letter of authority was executed by OBC in favour of the lead banker. Stating that there was a dispute between the debtor and lenders before the DRT, it said the claim of financial creditors was also time-barred.
Further, IDEB Projects argued that it had paid Rs 298.86 crore to the consortium and entered into an agreement in October 2017 where the banks had agreed not to initiate any further recovery proceedings.
Filing an implead petition before the tribunal, lead lender SBI said the compromise agreement stated that in case the debtor failed to pay any or all the financial creditors any of the instalments, then the financial creditors would have the right to initiate recovery proceedings against the debtor for the release of the entire certificate amount along with interest.
Setting aside the objections of IDEB Projects, the tribunal viewed the Insolvency and Bankruptcy Code permitted the financial creditor to file an application for insolvency resolution proceedings either on its own on jointly with other financial creditors in the consortium if a corporate debtor defaulted.
On the dispute over the outstanding amount, the tribunal said the amount claimed by the creditor in the petition “can provisionally found to be correct subject to further verification” by the resolution professional based on the records to be produced by the bank and the company.
On the part amounts that IDEB Projects claimed to have paid to the lenders, the bench consisting of judicial member Rajeswara Rao Vittanala and technical member Ashok Kumar Mishra observed that it “would not absolve the corporate debtor from its responsibility to pay the outstanding amount in full”.
Source: Economic Times, April 2, 2019