On the basis of demand notices issued by Axis Bank and HDFC Bank, GuarantCo had paid $10,842,267.16 and $11,221,084.9 to the banks, respectively.
The Guwahati Bench of the National Company Law Tribunal (NCLT) has given its approval to start insolvency proceedings against Calcom Cement India, a subsidiary of Dalmia Cement (Bharat), admitting an insolvency petition filed by Mauritius-based GuarantCo. Dalmia Cement said it would move the National Company Law Appellate Tribunal (NCLAT) against this judgment.
GuarantCo, a financial creditor to Calcom Cement, had filed the insolvency petition last year at the NCLT against the company under Section 7 of the Insolvency and Bankruptcy Code. According to the petition, there was a total “default” of around Rs 100 crore by the cement manufacturing firm as on September last year.
gThe petition filed by the financial creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 is hereby admitted for initiating the Corporate Insolvency Resolution Process in respect of Calcom Cement India,” Justice Hari Venkata Subba Rao of the NCLT said while pronouncing the order on January 29.
In its petition, GuarantCo had said, “In and around 2007, Calcom Cement India approached the financial creditor to stand as guarantor for the loan facility(ies) it had availed from various Indian banks. The financial creditor agreed to execute guarantee(s) in favour of the Indian banks w.r.t loan facilities availed by the corporate debtor from the Indian banks (Axis Bank and HDFC Bank).”
On the basis of demand notices issued by Axis Bank and HDFC Bank, GuarantCo had paid $10,842,267.16 and $11,221,084.9 to the banks, respectively. “Thereafter, the financial creditor demanded the payment be made to Axis Bank and HDFC Bank pursuant to their invocation of guarantee from the corporate debtor in terms of the amended and restated recourse agreement. However, the corporate debtor failed to honour its commitment in terms of the amended and restated recourse agreement,” according to the petition.
In July 2012, the Mauritius-based company had entered into an MoU with Calcom Cement, wherein apart from other conditions, the former had agreed to the request of the corporate debtor to settle and restructure its dues under the amended and restated recourse agreement into long-tenor loans subject to certain conditions. According to the petition, one of the important terms of the MoU was, “Calcom agrees to fully cooperate with GuarantCo and use its best endeavours to obtain all regulatory approvals, including approaching the RBI, MoF or other authorities for restructuring the total liability into the GuarantCo USD loan”.
Notably, the RBI had rejected the application for restructuring of the total liability in 2014. However, in 2017, the RBI had given its approval, directing that the “total outflow from beginning should not exceed principal amount of Rs 112 crore + 8.5% interest per annum after invocation of guarantee amount + 2% guarantee fee per annum before invocation of the guarantee amount”, according to GuarantCo’s petition.
In their submission before the tribunal, GuarantCo’s counsels Manoj K Singh and Nilava Bandyopadhyay contended that Calcom had failed to honour the terms of the MoU as well as the RBI approval, especially with respect to payment of interest. In their reply, the counsels representing Calcom said the words “should not exceed” mentioned in the RBI letter dated July 21, 2017, applied to the principal amount as well as the payable rate of interest and guarantee fee, respectively.
However, in its order, the NCLT said, “The entire argument of the corporate debtor in regard to the payable rate of interest was only an afterthought to reduce its liability and is liable to be rejected.”
When contacted, a Dalmia Cement spokesperson said it will challenge the NCLT order at the NCLAT. “We are surprised that GuarantCo application has been admitted by the NCLT, Guwahati Bench, whereas we had prayed for dismissal of the same.”
He claimed that the company was guided by the RBI norms and directions, and there stood a strong legal ground for quashing of the tribunal’s order. “It has regularly been paying the principal repayment amount as per the agreed schedule against the total original outstanding of Rs 112 crore,” Dalmia Cement said in a statement.