NCLT dismisses bankruptcy proceedings against GTL Infra and GTL Ltd

NCLT dismisses bankruptcy proceedings against GTL Infra and GTL Ltd

Rules that the petitioner, Canara Bank, could not go against the majority view of the stakeholders

The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed the bankruptcy proceedings against GTL Infrastructure, a telecom tower firm, and its associate company GTL Limited. It stated that the companies were financially viable, having enough cash flow to repay their debt.

In the two orders, NCLT said GTL Infrastructure had repaid Rs.16,915 crore to its lenders between 2011-2018. It showed the company was reasonably sound and had the capacity to repay its sustainable debt. The company generated a monthly revenue of Rs.120 crore.

The bench added that several companies owed a substantial amount to GTL Infrastructure, as it had made a claim of Rs.13,393 crores against Aircel and others.

The court stated, "The company has been directed to pay Rs.900 crore to the corporate debtor. It has to recover Rs.49.84 crore from Tata Teleservices; Rs.20.38 crore from ATC, and Rs.351 crore from BSNL in pending arbitration proceedings. The amount received would be sufficient to repay the debt to Canara Bank, the petitioner."

After the 2021 Supreme Court judgement cancelling 2G-based telecom licences, several telecom companies did not pay their tower rentals to GTL Infrastructure, which led to financial stress on the company. Currently, it provides services to Reliance Jio, Vodafone Idea, and Bharti Airtel.

Reiterating the company's business was sustainable and not a viable concern under the current management, BCLT said it could not be admitted under bankruptcy.

Dismissing Canara Bank's petition, the tribunal held, "The adjudicated and unadjudicated claims of GTL Infrastructure are far more than the debt claimed in the petition. Therefore, initiation of bankruptcy proceedings would be counter-productive."

Citing the judgment of the Supreme Court judgement, the tribunal ruled that it could be concluded that the existence of debt and default was not the only criteria in deciding an application under the Insolvency and Bankruptcy Code (IBC). Also, the tribunal had the discretion to reject an application.

However, it held that such discretion had to be exercised taking into account the viability of the company under the present management, the feasibility of bankruptcy initiation, and the overall financial health of the company. If the bankruptcy was initiated, all existing contracts with clients would be terminated, and the company would lose its cash flow - a loss for all stakeholders.

While rejecting bankruptcy proceedings against its flagship company, GTL, the tribunal said that more than 91 percent of lenders had agreed to initiate the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002, route to recover their loans. They approved the one-time settlement. Since its debt was restructured, GTL repaid an additional Rs.2,700 crores to the lenders against its bank loans of Rs.3,300 crores.

NCLT cited the June 2019 circular of the Reserve Bank of India in which clear guidelines were laid down on stressed assets. The regulator had explained that any step by the lenders would be deemed as collective action.

Thus, the bench stated that in GTL's case, the lenders with more than 90 percent voting share had already decided to proceed with SARFAESI Act. Therefore, Canara Bank, with a mere 4.7 percent share in secured interest, could not go against the majority view.