MUMBAI: The principal bench of the National Company Law Tribunal (NCLT) in New Delhi has dismissed a petition by ICICI Bank to begin insolvency proceedings against Era Infrastructure India Ltd (EIIL), on the grounds that the bank was already claiming its dues in insolvency proceedings against EIIL’s parent and corporate guarantor Era Infra Engineering Pvt. Ltd.
“Therefore, on account of duplicacy of the claims, the petition cannot be entertained," the order dated 7 May said.
Parent Era Infra is one of the 12 bad loan accounts that Reserve Bank of India had directed for reference under Insolvency and Banking Code (IBC). Proceedings started last year, with Rajiv Chakraborty as interim resolution professional. Chakraborty had rejected ICICI Bank’s claims as a financial creditor, but his decision was overturned by the NCLT in December.
Referring to a January judgement by the National Company Law Appellate Tribunal (NCLAT) in Vishnu Kumar Agarwal vs Piramal Enterprises, the tribunal said that once a claim application is admitted against one of the debtors (principal borrower or corporate guarantor), second application by the same financial creditor for the same set of claims and default cannot be admitted against the other.
An email sent to ICICI Bank remained unanswered till press time.
An insolvency professional who declined to be named said this judgement could become the basis for admitting claim disputes for large companies where loans to subsidiaries are based on corporate guarantees by the parent. “At present, many banks are filing claims on both the subsidiary and the parent company on the same loan and this order could help lenders," the insolvency professional said. It would help lenders who aren’t aware they can file only for one of the companies, either borrower or the guarantor for the same loan.
The NCLT order said ICICI Bank had lent ₹200 crore to Era Infrastructure India in 2011. Loans were also given to parent Era Infra Engineering’s related companies including Hyderabad Ring Road Project Pvt. Ltd, Apex Buildsys Ltd, Dehradun Highways Project Ltd, Gwalior Bypass Project Ltd.
According to the order, for these loans, Era Infra had furnished various securities to ICICI Bank.
ICICI Bank and Era Infra also entered into a loan purchase agreement on 5 March 2011 wherein the parent company guaranteed that it would purchase the entire outstanding amount of EIIL if it defaults.
Additionally, ICICI Bank, the parent company and IDBI Trusteeship Service Ltd (EIIL Security Trustee) entered into a non-disposal arrangement on 16 June 2011. According to the terms of the agreement, the parent company will not deal with or divest 30% equity share capital of EIIL held by it, and deposit those shares in a designated trust and retention account. After EIIL started defaulting on the loan, a joint lenders’ forum (JLF) was formed on 30 April 2014 comprising ICICI Bank and Yes Bank to restructure the loans. However, the parent company deposited 12.7% of the equity shares, instead of 30% and also failed to buy back the loans as promised earlier, following which ICICI Bank recalled its loan.
Meanwhile, the NCLAT had in a separate order in January said that it was not necessary to initiate a corporate insolvency resolution process against the principal borrower, before initiating it against corporate guarantors.
The appellate authority said this in a case between the Rural Electrification Corp. and Ferro Alloys Corp.
This story has been published from a wire agency feed without modifications to the text.