NCLT Mumbai Initiated CIRP Against Sterling Oil Resources for Defaults of More than Rs. 1655 Crores

NCLT Mumbai Initiated CIRP Against Sterling Oil Resources for Defaults of More than Rs. 1655 Crores

The National Company Law Tribunal (NCLT) Mumbai bench comprising of Kishore Vemulapalli (Judicial Member) and Prabhat Kumar (Technical Member) has admitted a petition under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) against Sterling Oil Resources Limited (Corporate Debtor) and has initiated Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor.

The State Bank of India (Financial Creditor) had granted loan to Sterling Global Oil Resources Private Limited (SGORPL) as part of a Consortium of Banks by way of Standby Letter of Credits Facilities (SBLC) which were to be discharged on various dated when invoked by the beneficiaries/discounting banks.

These SLBC facilities were secured by securities and undertakings provided by the Sterling Oil as holding company of SGORPL.

The SBLCs were discounted through Sterling Exploration & Energy Production Company Limited, BVI (SEEPCO BVI) (Sterling BVI) one of the group companies from Offshore Foreign Currency Lenders. In or around February 2016, the group company of the Corporate Debtor, Sterling BVI failed to meet its periodical debt obligations to Foreign Currency Lenders.

Consequently, the Foreign Currency Lenders invoked the SBLCs and the SBLC Lenders honoured their obligation under the said SBLC. On 19 March, 2016, a demand was raised upon SGORPL to immediately reimburse the amounts paid by the Financial Creditor to the Foreign Currency Lenders.

However, SGORPL defaulted in repaying the demanded amount and its account was declared as a Non-Performing Asset on 19 June, 2019. Due to failure in repaying of the outstanding amount by SGORPL and Sterling Oil even after repeated assurances, a Recall Notice dated 22 October, 2019 was issued to repay the outstanding amount.

The Corporate Debtor argued that the Promoters had entered into a One Time Settlement (OTS) of Rs. 6457 crores (Rs. 3826 crores towards the Group’s Indian Companies and Rs. 2631 crores towards the Group’s Foreign Companies) with the banks. However, the One Time Settlement for the Indian Companies was scuttled even though the Promotes had already Rs. 614 crores towards the OTS amount.

The bench on perusal of the Debt Recovery Tribunal (DRT) Order, noted that on 31 January, 2022, a decree was issued for a sum of 1217.60 crores in favor of the Financial Creditor. This amount had not been paid even though some amount had been paid under the One Time Settlement.

The bench observed, “as the decree has attained finality; and there exists a decretal debt which remains undischarged; and the Corporate Debtor is under obligation to discharge the debt thereunder. In the present proceedings, this Bench is not concerned whether the principal debt was availed or benefited the corporate debtor in any manner, as the definition of Financial Debt also includes guarantee.”

In view of foregoing discussion, the bench was of the considered view that a financial debt of more than Rs. 1.00 crores exists and no stay had been imposed on the enforcement of decree and that the debt under decree is in the nature of a financial debt

Since there was a default in the payment of a Financial Debt, the Application was admitted.