In a setback to Coal India (CIL), the Kolkata bench of the National Company Law Tribunal (NCLT) has ordered commencement of the corporate insolvency resolution process against its subsidiary Eastern Coalfields (ECL).
The tribunal has admitted the insolvency petition, filed by Hinduja Group-controlled Gulf Oil Lubricants India (GOLIL), against ESL under Section 9 of the Insolvency & Bankruptcy Code (IBC), as the coal miner refused to pay the interest amount on the original debt towards goods supplied.
Although ECL had already paid the principal sum of around `84.71 lakh to GOLIL, one of its operational creditors, the former did not pay the amount of interest at the rate of 18% per annum.
The tribunal has appointed Chhedi Rajbhar of C Rajbhar & Co as the interim resolution professional (IRP) for ascertaining the particulars of creditors and convening a committee of creditors (CoC) for evolving a resolution plan for the public sector miner. As per the amended provision of the IBC, Rajbhar has to finalise the resolution plan on or before 105 days from the date of admission of the CIRP.
After hearing the arguments from the counsels for GOLIL and ECL, Justice Madan B Gosavi observed that “considering the facts and materials on record, I hold that the corporate debtor, Eastern Coalfields, is liable to pay interest to the operational creditor, that has not been paid in spite of demand. The operational creditor complied with other requirements under Section 9(3)(b) and 9(3)(c) of the IBC. This fact is also otherwise not in dispute.”
Pronouncing the order on December 19, Justice Gosavi said, “The application filed by the operation creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016 is hereby admitted for initiating the Corporate Insolvency Resolution Process in respect of Eastern Coalfields. Moratorium order is passed for a public announcement as stated in Section 13 of the IBC, 2016.”
A mail sent to the chairman-cum-managing director of Eastern Coalfields went unanswered till the time of going to press.
According to the latest annual report of ECL, lenders to the company are: State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Union Bank of India, ICICI Bank, Axis Bank, Canara Bank, Oriental Bank of Commerce, Syndicate Bank, Allahabad Bank, United Bank of India, Corporation Bank and United Commercial Bank.
On Thursday, Coal India’s scrip fell 0.34% to end the day at `251 on the BSE. Shares of Gulf Oil Lubricants India, one of the leading players in the domestic lubricants market, ended the day with gains of 4.84% at `814 a piece on the BSE.
In his submission before the tribunal, Gulf Oil Lubricants’ counsel argued that the debt included interest payable on the debt, and since the corporate debtor had refused to pay interest amount, the CIRP may be initiated against it.
Notably, the lubricants maker went through a corporate restructuring during 2014 as per the order of the Andhra Pradesh High Court.
Countering GOLIL’s claim, the counsel for ESL submitted that the order of merger passed by the High Court was subject to the condition that the resultant company would get no objection from the creditors. “There is nothing on record to show that the operation creditor has sought such no objections after approval of the schemes. Hence, the operational creditor cannot claim recovery of amount due to demerged company, Gulf Oil Corporation,” he added.
“The core controversy as appears is whether there is an agreement to pay interest on the late payment, and secondly, whether the dispute of paying interest was raised by the corporate debtor and such a dispute is pending or not,” Justice Gosavi observed.
“Section 3(11) of IBC defines debt as ‘debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt’. So, once it is found that the corporate debtor was liable to pay interest on delayed payment, it can safely be held that the amount towards interest is also the debt recoverable from the corporate debtor,” he said. The matter is listed on February 4, 2019 for filing of the progress report.