Rajani Associates has recently acted for, and advised, Tensile Steel Limited (“Corporate Debtor”), in relation to the proceedings filed by IFCI Limited (“Financial Creditor”) against Corporate Debtor under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”).

Case details:

A petition was filed by the Financial Creditor against the Corporate Debtor before the NCLT, Mumbai Bench to initiate Corporate Insolvency Resolution Process (“CIRP”) against Corporate Debtor. The petition was filed on the ground that the Corporate Debtor, in its capacity as a corporate guarantor, defaulted in repayment of a loan availed by the principal borrower, Uttam Galva Metallics Limited (“UGML”) from the Financial Creditor, UGML being the principal borrower in this case. UGML had failed to repay the loan availed from various financial creditors and proceedings under Section 7 of the Code had already commenced by SBI against UGML and accordingly, the CIRP began against UGML. In the proceedings against UGML, IFCI had voted in favour of the plan which was approved by the Committee of Creditors. In the meanwhile, as stated above, a petition came to be filed by the Financial Creditor before NCLT, Mumbai against the Corporate Debtor who was the corporate guarantor of the loan.

The thrust of the argument from the Corporate Debtors’ end was that the subject petition filed by the Financial Creditor against the Corporate Debtor/Guarantor was not maintainable as the Financial Creditor had already participated and voted in the CIRP of UGML. Reliance upon  the NCLAT order in the matter of Dr. Vishnu Kumar Agarwal v/s. Piramal Enterprises Ltd. was placed before NCLT, wherein, NCLAT held that once for same set of claim application under Section 7 filed by any financial creditor is admitted against one of the corporate debtor (principal borrower or corporate guarantor), second application by the same financial creditor for same set of claim and default cannot be admitted. Therefore, the petition of the Financial Creditor was dismissed as the Financial Creditor had already participated in the CIRP of UGML.

Transaction Team: Aradhana Bhansali, partner, Dikshat Mehra, Principal Associate and Manasi Padwalkar, Associate.

Status: Given the law laid down by Hon’ble NCLAT in Piramal’s case supra, the Tribunal was pleased to reject the Petition at the very threshold.