NCLAT clears way for Coastal Energen’s creditors to meet

The Company of Creditors (CoC) constituted in debt resolution of Coastal Energen will recommence meetings after the National Company Appellate Law Tribunal (NCLAT) on Friday vacated its own interim order staying further proceedings of the CoC.

The case relates to State Bank of India initiating Corporate Insolvency Resolution Process before the National Company Law Tribunal, Chennai, against Coastal Energen (Corporate debtor), to declare moratorium, and appoint an Interim Resolution Professional (IRP).

The company owes ₹1,458 crore to SBI. It had availed itself of the financial facilities from a consortium of 15 banks and financial institutions — including the SBI — for setting up ṭ a coal-based thermal power plant with 1,200 MW capacity at Tuticorin in Tamil Nadu.

On February 4, 2022, the National Company Law Tribunal, Chennai, admitted the application filed by the bank against Coastal Energen — the power generating flagship company of the Dubai-based Coal and Oil Group — to initiate CIRP.

The original cost of the project was estimated to be ₹4,297 crore (with debt of ₹3,323 crore and equity of ₹859 crore). However, due to over-run, the project cost was revised to ₹7,870 crore (with debt of ₹6,296 crore and equity of ₹1,574 crore).

The bench consisting of R Sucharitha, Member (Judicial), and Sameer Kakar, Member (Technical), in its order said that the financial creditor has proposed Radhakrishnan Dharmajarajan as IRP. The IRP will take forward the process of CIRP of the corporate debtor.

The CoC was constituted on February 27, 2022 and the First Meeting of the CoC was held on March 4, 2022. However, on March 11, 2022, the National Company Law Appellate Tribution at Chennai, stayed further proceedings of the CoC.

Meanwhile, the SBI filed a petition in the Supreme Court condoning the delay by NCLAT in passing the order.

On November 14, 2022, the Apex Court condoning the delay requested NCLAT to take up the appeal itself for consideration on the next date of hearing of the matter (December 9, 2022).

The NCLAT comprising Justice M Venugopal, Member (Judicial) and Naresh Salecha, Member (Technical), in its order on Friday said that one cannot remain in oblivion as to the vital fact that the `Promoters’, had not paid any sum, as per One Time Settlement (OTS), but, they had arranged a sum of ₹150 Crore from three different companies/persons, and it is kept in a `No Lien Account’, with the bank. In reality, the said sum, was not appropriated or disbursed by the lenders.

OTS is a clear cut admission of the Corporate Debtor, and is an acknowledgement of debt, the Tribunal said in its order.

NCLAT said there is an abundance of materials to prove the existence of debt, due and payable, in fact and in law. The default was committed by the Corporate debtor, and the default took place well before the `Covid-19 Pandemic. The application, filed by the bank, is complete in all respects.

Looking at from any point of view, the `impugned order’ exercising its `subjective judicial discretion’, in `admitting’ the application financial creditor with moratorium, is free from any legal Infirmities.

“The interim order, granted by this Tribunal, on March 11, 2022, shall stand vacated,” the NCLAT said in its order.

Meanwhile, the IRP, R Dharmarajan, is keeping the company as a going concern.