Alchemist Asset Reconstruction Company Limited vs M/s. VME Properties Private Limited

Per: ANIL KUMAR B, MEMBER (TECHNICAL)

This is an Application filed by Alchemist Asset Reconstruction Company Limited (hereinafter referred to as “the Financial Creditor”) against M/s. VME Properties Private Limited (hereinafter referred to as “the Corporate Debtor”) under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking thereof to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

From Part-I of the Application, it is seen that the Financial Creditor is a Company acting in its capacity as Trustee of Alchemist V Trust. From Part-II of the Application, it is seen that the Corporate Debtor is a Private Limited Company incorporated on 19.12.2007 bearing CIN: U45309TN2007PTC065781. The registered office address of the Corporate Debtor as per the Application is stated to be situated at 364, Pillaiyar Koil Street, Panner Nagar, Mugappair West, Chennai - 600 037. From Part-III of the Application, it is seen that the Financial Creditor has proposed the name of the Interim Resolution Professional (IRP) viz., Mr. Sapan Mohan Garg, Reg. No. IBBI/IPA/-002/IP-N00315/2017-18/10903; to act as the IRP.

From Part-IV of the Application, it is seen that the Financial Creditor has claimed a sum of Rs.88,83,68,570/- which is due and payable by the Corporate Debtor. Part V of the application describes the particulars of Financial Debt, documents, records and evidence of default as described below:

The Learned Counsel for the Financial Creditor submitted that the Corporate Debtor during the year 2008 approached UCO Bank for grant of certain credit facilities for improvement of business and thereafter availed various credit facilities in the form of Term Loan & Cash Credit totally amounting to Rs.24 Crore. Thereafter, it was submitted that in order to create security, the Corporate Debtor had deposited the title deeds in respect of the properties situated at No.124, Valla (A) Village, Sriperumpudur Taluk, Kancheepuram District vide Patta No.2345, lands admeasuring to 8 Acre and 14.25 Cents and thus created equitable mortgage in favour of the UCO Bank.

Further, it was submitted by the Learned Counsel for the Financial Creditor that on request of the Principal Borrower and the Corporate Debtor, the UCO Bank renewed and sanctioned vide their sanction letter dated 14.08.2012 in and by which the account of the borrower was restructured on the terms and conditions as mentioned herein below;

It was submitted by the Learned Counsel for the Financial Creditor that the due repayment of the loan was guaranteed by Mr. V. Manickam, Mr. M. Kannan and Mr. M. Karthik in their personal capacity by executing Agreement of Guarantee dated 29.08.2012 and by Corporate Debtor VME Properties Pvt. Ltd. by executing Agreement of Guarantee dated 29.08.2012 through its authorized signatories for the credit facilities availed by the Principal Borrower. Further it was submitted that the Principal borrower and the Corporate Debtor had also availed credit facilities of USD 4 Million from M/s Finnish Fund for Industrial Cooperation Limited (FINFUND) and as per the Inter Creditor Agreement executed on 29.03.2012, the UCO Bank and the FINFUND would hold a first charge / pari passu over the securities in respect of the facilities granted by them to the tune of Rs.42 Crore and USD 4 Million respectively as mentioned in Schedule 1 of the said Agreement.

The Learned Counsel for the Financial Creditor submitted that after availing the said credit facilities from UCO Bank, the Principal Borrower and the Guarantors including the Corporate Debtor, did not satisfactorily maintained the credit facilities extended to them by the UCO Bank and failed and neglected to regularize the account. It was submitted that the UCO Bank on various occasions, demanded repayment of the dues and also sent notice from the Bank and through counsel, all of which remained futile since the Corporate Debtor did not care to repay the amount. Hence, it was submitted that the UCO Bank had filed OA No. 115/2014 before the Debt Recovery Tribunal – II, Chennai for recovery of dues of Rs.37,10,84,132.70/- as on 27.05.2014 including the non – funded facilities.

In the meantime, it was submitted by the Learned Counsel for the Financial Creditor that the UCO Bank assigned the loan which was granted to the Principal Borrower and the Corporate Debtor in favour of Alchemist Asset Reconstruction Co. Ltd., the Financial Creditor herein vide Assignment Agreement dated 22.03.2016 under the provisions of the SARFAESI Act, 2002. Thereafter, it was submitted that the Principal Borrower, the Guarantors and the Corporate Debtor approached the Applicant herein for restructuring of the account and the Applicant approved the restructuring of the account vide its sanction letter dated 28.03.2018 on terms and conditions as mentioned therein.

Further it was submitted that in terms of the sanction letter dated 28.03.2018, a joint application was filed by the Applicant and the Principal Borrower along with Guarantors including the Corporate Debtor before DRT – II Chennai in OA No.115/2014 for obtaining a consent decree and the DRT – II, Chennai vide its order dated 24.07.2018 allowed the said Application. However, it was submitted that the Principal borrower was irregular in repayment of the instalments and was paying the instalments with delay. Also the Corporate Debtor was not making any payments since the month of September 2019 and hence it was submitted that the Financial Creditor has declared the said restructuring as failed vide its letter dated 01.01.2020. Under these circumstances, the Financial Creditor has filed the present Application under Section 7 of IBC, 2016 seeking thereof to initiate Corporate Insolvency Resolution Process against the Corporate Debtor.

The Respondent / Corporate Debtor has filed counter and the Learned Counsel for the Corporate Debtor submitted that the Corporate Debtor has no business operations for the past 4 years due to various factors such as market fluctuations and as such the Corporate Debtor are not in a position to make the payment at the moment due to global financial crisis owing to Covid – 19 pandemic and the Respondent is making efforts to settle the dues to the creditors but is in dire need of further period of time.

Heard the submissions made by the Learned Counsel for the parties. From the averments made in the counter, it is clearly seen that the Corporate Debtor has admitted its liability and has also expressed its inability to pay the outstanding amount which is due and payable to the Financial Creditor. Further, it is also seen that the ‘default’ which is arising in the present Application has happened much before the advent of Covid – 19 and the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016.

Further, on the aspect of limitation, it is seen that the Corporate Debtor has committed default in repayment of the dues as per the consent decree passed by DRT – II, Chennai on 24.07.2018 and that the Financial Creditor has issued a Loan Recall Notice on 01.01.2020 and if the said date is taken into consideration as the date of default, then the present Application filed under Section 7 of IBC, 2016 before this Tribunal on 12.04.2021 falls well within the period of limitation.

In view of the facts as stated supra and also in view of the 'financial debt' which is proved by the Financial Creditor and the 'default' being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor.

The Financial Creditor has proposed the name of MR. SAPAN MOHAN GARG, Reg. No. IBBI/IPA/-002/IP-N00315/2017-18/10903 (email id:- [email protected]) as the Interim Resolution Professional (IRP) who has also filed his consent in Form – 2 and also upon verification from the IBBI website, it is seen that the Authorization for Assignment is granted to the said IRP till 11.01.2022. The proposed IRP who is appointed shall take forward the process of Corporate Insolvency Resolution of the Corporate Debtor. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.

As a consequence of the Application being admitted in terms of Section 7 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor;

However during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;

The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;

Based on the above terms, the Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. A copy of the Order shall be communicated to the Financial Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named shall also be furnished with copy of this Order forthwith by the Registry, who will communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.