NCLT Admits CIRP Plea Against Construction Co. for Failing to Deposit NHAI’s Toll Revenue in Escrow a/c of FC

Case Details: IDBI Bank Ltd. v. Trichy-Thanjavur Expressways Ltd. - [2023] 155 taxmann.com 123 (NCLT-Hyd.)

Judiciary and Counsel Details

• • Dr Venkata Ramakrishna Badarinath Nandula, Judicial Member & Charan Singh, Technical Member
  • Trivikram Chitturu, Counsel for the Applicant.
  • Vikram Poosarla, Sr. Counsel for the Respondent.

Facts of the Case

In the instant case, the corporate debtor entered into a concession agreement with the National Highway Authority of India (NHAI) for the construction of a tollgate for the collection of toll revenues. The applicant/financial creditor financed Rs. 70 crores to the corporate debtor for the said constructions.

The applicant entered into an escrow account agreement with the corporate debtor, wherein, all the said toll revenues collected by the corporate debtor were to be deposited into an escrow account. The NHAI terminated the concession agreement on 17-3-2023 due to delayed maintenance work by the corporate debtor.

Then, the applicant issued a demand notice to the corporate debtor to repay the total outstanding dues in an escrow account. Thereafter, the applicant filed an instant application under section 7 against the corporate debtor alleging non-payment of said amount due and payable as on 4-3-2022.

The corporate debtor submitted that NHAI had replaced the role of the corporate debtor from the date of the said termination, thereby, no liability would be cast upon the corporate debtor and the applicant ought to have proceeded against the NHAI for the alleged claim.

It was noted that written submissions filed by the corporate debtor disclosed due admission of execution of the said loan agreement, which was a clear admission of financial debt in favour of the applicant and as per the concession agreement, the NHAI was not liable for liability of the corporate debtor that had fallen due for repayment one year prior to the termination date.

NCLT Held

The NCLT held that since the existence of a financial debt of a sum over rupees one crore due and payable by the corporate debtor was established by the applicant, the instant application was to be admitted.

List of Cases Reviewed

• • Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/143 SCL 625 (SC) (para 8)
  • Sunder Nagar Co-operative Housing Societies Union Ltd. v. State Bank of India [Company Appeal (AT) (Insolvency No. 1526 of 2022, dated 31-5-2023] (para 20) followed
  • Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252/173 SCL 355 (SC) (para 19) distinguished.

List of Cases Referred to

• • Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252/173 SCL 355 (SC) (para 4)
  • Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/143 SCL 625 (SC) (para 8)
  • Sunder Nagar Co-operative Housing Societies Union Ltd. v. State Bank of India [Company Appeal (AT) (Insolvency No. 1526 of 2022, dated 31-5-2023] (para 20)
  • M. Suresh Kumar Reddy v. Canara Bank [Civil Appeal No. 7121 of 2022, dated 11-5-2023] (para 21).