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Judgment
Per: V.P. Singh, Member (Judicial)
ORDER
This is a petition being CP 4282(IB)/MB/2018 filed by Bank of Baroda, (Earlier Dena Bank) a Bank registered under the Banking Regulation Act, 1949, the Financial Creditor or Petitioner, under section 7 of Insolvency & Bankruptcy Code, 2016 (I&B Code) against Decent Dia Jewels Private Limited, Corporate Debtor, for initiating Corporate Insolvency Resolution Process (CIRP).
The Petition is filed claiming a total default of ₹1,97,49,26,095/-(Rupees One Hundred and Ninety-Seven Crores, Forty-Nine Lakhs Twenty Six Thousand and Ninety Five only) as on 31.10.2018. The Petition is filed by Ms Madhavi Milind Kulkarni, the Chief Manager of the Petitioner.
The Respondent is engaged in manufacturing and exporting the business of diamonds, gems and jewellery.
The Respondent approached the Dena Bank Limited, Union Bank of India, Axis Bank and Syndicate Bank in July 2010, for the grant of Credit Facilities amounting to ₹105 Crores to the Respondent. The exposure of the Petitioner, i.e. Dena Bank, was ₹32 Crores. Copies of the documents so executed in respect of the grant of credit facilities are annexed to the Petition. The following documents were executed in respect of the grant of credit facilities:
Working Capital Consortium Agreement dated 24.07.2010;
Joint Deed of Hypothecation dated 24.07.2010;
Memorandum of Entry dated 24.07.2010;
Inter Se Agreement dated 24.07.2010;
Deed of Guarantee dated 24.07.2010.
It is submitted by the Petitioner that, at the request of the Respondent, the Syndicate Bank Consortium enhanced the limits from ₹105 Crores to ₹120 Crores in the year 2011. Copies of the documents executed in this regard are annexed to the Petition. The following documents were executed:
First Supplemental Working Capital Consortium Agreement dated 20.07.2011;
First Supplemental Joint Deed of Hypothecation dated 20.07.2011;
Memorandum of Extension of Equitable Mortgage dated 20.07.2011;
Declaration and Undertaking dated 20.07.2011;
Inter Se Agreement dated 24.07.2011;
Deed of Guarantees dated 20.07.2011.
It is submitted by the Petitioner that the Syndicate Bank Consortium at the request of the Respondent further enhanced the credit facilities granted to the Respondent, from ₹120 Crores to ₹170 Crores when the exposure of the Petitioner was ₹79.50 Crores in the year 2012. Copies of the documents listed below are annexed to the Petition:
Second Supplemental Working Capital Consortium Agreement dated 01.03.2012;
Second Supplemental Joint Deed of Hypothecation dated 01.03.2012;
Memorandum of Extension of Equitable Mortgage dated 01.03.2012;
Deeds of Guarantee dated 01.03.2012;
Declaration and Undertaking dated 01.03.2012;
Inter Se Agreement dated 01.03.2012.
The credit facilities extended by the Petitioner were enhanced to ₹114.50 Crores (“Dena Credit Facilities”), and copies of the documents executed in this regard are annexed to the Petition. The following documents were executed in respect of the credit facility:
Working Capital Facility Agreement dated 15.10.2012;
Deed of Hypothecation dated 15.10.2012;
Deed of Guarantee dated 15.10.2012.
The Petitioner Bank in the year 2013 became the lead Bank of the Consortium and the same is referred to as “Dena Bank Consortium”. The Axis Bank exited the consortium, and the Central Bank took over the facilities of the Axis Bank and thus became part of the consortium.
The credit facilities were further enhanced from ₹170 Crores to ₹205 Crores when the exposure for the Petitioner Bank was ₹114.50 Crores. The following documents were executed in this regard:
Third Supplemental Working Capital Consortium Agreement dated 12.06.2013;
Third Supplemental Joint Deed of Hypothecation dated 12.06.2013;
Memorandum of Entry for the extension of Equitable Mortgage dated 12.06.2013;
Declaration and Undertaking dated 12.06.2013;
Inter Se Agreement dated 12.06.2013;
Deeds of Guarantees dated 12.06.2013;
Memorandum of Entry for extension of equitable mortgage dated 12.06.2013.
The Dena Bank Consortium enhanced the credit facilities yet again at the request of the Respondent from ₹205 Crores to ₹295 Crores when the exposure for the Petitioner was ₹114.50 Crores. The following documents were executed in this regard:
Third Supplemental Working Capital Consortium Agreement dated 25.06.2014;
Third Supplemental Joint Deed of Hypothecation dated 25.06.2014;
Declaration and Undertaking dated 25.06.2014;
Inter Se Agreement dated 25.06.2014;
Deeds of Guarantee dated 25.06.2014;
Memorandum of Entry for extension of equitable mortgage dated 25.06.2014;
The Petitioner submits that the Respondent’s bank account became irregular and banks of the Dena Bank Consortium declared the account of Respondent as a Non-Performing Asset on different dates and also issued recall notices to the Respondent. The Petitioner Bank declared the account of the Respondent as Non-Performing Asset on 30.06.2016 and issued a Recall Notice to the Respondent on 12.08.2016. The NPA Certificate and the Recall Notice are annexed to the Petition.
The Petitioner initiated proceedings under the SARFAESI Act, 2002, on 15.03.2017, the Applicant has filed an Original Application bearing (lodging) No.213 of 2017 before the Debt Recovery Tribunal-I, Mumbai which is pending consideration. Copy of the Petition is annexed to the Petition.
The Dena Bank Consortium held a meeting on 08.08.2018, and it was also informed at the meeting that the competent authority of the Petitioner Bank (earlier Dena Bank)had approved for the filing of an application under the Insolvency and Bankruptcy Code, 2016. Copy of the minutes of the consortium meeting dated 08.08.2018 is annexed to the Petition.
The Petitioner submits that the Respondent issued a letter dated 01.10.2018 proposing a One Time Settlement to the Dena Bank Consortium, offering to pay a sum of ₹133.17 Crores to the Petitioner towards the settlement of dues from Petitioner. The Petitioner has filed the present petition on 09.11.2018 since the same was not honoured and the amounts are unpaid till date.
The counsel for the Respondent sought time for filing vakalatnama and Reply on 24.04.2019, and the same was granted. Under the Government notification date, 02.01.2019 notifying the merger of the Petitioner Bank with Bank of Baroda, this Bench by its order dated 24.04.2019 allowed the substitution of the Petitioner “Dena Bank” to “Bank of Baroda” and the necessary changes were carried out in the Company Petition.
The Counsel for the Respondent has filed its Reply and has contended that the Petitioner does not have authority to file the petition as the same is not as the Loan was granted to the Respondent by a consortium of Banks. However, the Petitioner has filed this Petition individually. Further, the Respondent has contended that no document has been provided to show that the Board of Directors has authorised the deponent to file the present application.
We have heard the parties and perused the records.
The Petition is filed by Ms Madhavi Milind Kulkarni, the Chief Manager of the Petitioner Bank. The Letter of Authorisation dated 01.10.2018 is annexed to the Petition.
The Petitioner claims a due amount of ₹1,97,49,26,095/- (Rupees One Hundred and Ninety-Seven Crores, Forty-Nine Lakhs Twenty Six Thousand and Ninety Five only) as on 31.10.2018. The working for computation of amount outstanding as on 31.10.2018 has been annexed to the Petition.
The Petitioner has extended credit facilities to the Respondent from the year 2010 for which several documents were executed between the parties on 24.07.2010. At the request of the Respondent, the credit facilities were enhanced several times. The final enhancement of the loan was executed on 25.06.2014 by entering into Third Supplemental Working Capital Consortium Agreement dated 25.06.2014; Third Supplemental Joint Deed of Hypothecation dated 25.06.2014; Declaration and Undertaking dated 25.06.2014; Deed of Guarantee dated 25.06.2014; Memorandum of Entry for the extension of equitable mortgage dated 25.06.2014. Copies of all the Deeds are annexed to the Petition.
The account of the Respondent maintained with the Petitioner Bank became irregular, and the Petitioner declared the account of the Respondent as a Non-Performing Asset on 30.06.2016. Copy of the NPA Certificate is annexed to the Petition.
The Petitioner issued the Recall Notice to the Respondent on 12.08.2016. Copy of the same is annexed to the Petition.
The credit facility so extended by the Petitioner to the Respondent on 24.07.2010 was enhanced on 20.07.2011, 01.03.2012, 15.10.2012, 12.06.2013 and 25.06.2014. All the deeds mentioned supra is annexed to the Petition.
The Certificate of Registration of Mortgage and of Modification of Mortgages issued by the Registrar, the Audited Balance Sheet of the Respondent for the financial year 2016-17 reflecting the Credit facilities availed from the Petitioner Bank and the receipt of Notices under Section 13(2) and 13(4) of the SARFAESI Act, 2002 are annexed to the Petition. The Statement of Accounts of the Respondent maintained by the Petitioner for the period 08.04.2010 to 31.10.2018 reflects the default in repayment of the money received. Copy of the same along with the Certificate dated 31.10.2018 issued under the Bankers Books Evidence Act, 1891 is annexed to the Petition.
The fact that the Respondent has received financial assistance has not been denied by the Respondent, and the same is reflected in the Audited Balance Sheet of the Respondent Company for the year ending 31.03.2017. The Loan-related documents, statement of accounts of the Respondent maintained by the Petitioner along with the Certificate under the Banker’s Books Evidence Act, 1891 establish the fact that the Respondent has received the loan and has failed to repay the same.
The Respondent’s account was classified as a Non-Performing Asset on 30.06.2016; the Respondent has defaulted to repay the sums received from the Petitioner. The NPA Certificate is annexed to the Petition. The Report as generated on 24.10.2018 from the Central Repository of Information on Large Credits (CRILC Report) also reflects that the Respondent has been reported as Defaulter by 4 Banks and asset has been classified as Doubtful and loss including the Petitioner Bank. Copy of the CRILC Report is annexed to the Petition.
The Respondent has further acknowledged the debt in terms of Letter of Acknowledgement of Debt dated 30.06.2013 and 31.03.2014. Copies of the Letters of Acknowledgement of Debt are annexed to the Petition. The Recall Notice dated 25.10.2016, Notice under Section 13(2) and 13(4) of the SARFAESI Act, 2002 establishes the fact that the Petitioner has demanded on several occasions the repayment of the loan amount. However, the Respondent, although having acknowledged the debt has failed to make the necessary payments to the Petitioner. The Documents mentioned above clearly establish the Debt and default of the loan amount.
The Letter of Acknowledgement of Debt by the Respondent, entries in the Audited Balance Sheet of the Respondent for the year ending 31.03.2017, the Reply Letter dated 13.12.2016 to the Recall Notice issued by the Petitioner establish the admitted liability on the part of the Respondent.
The Respondent has not submitted opposition in the given time and opportunity to do so. Subsequently, after the matter was reserved for order, the Respondent has mischievously filed an application opposing the Petition on contentions that the Petitioner being a part of the consortium, does not have the authority to file the present petition. It is untenable and holds no water, as in a petition under section 7 of I&B Code the petitioner is a financial creditor who had given loan to the Corporate Debtor and default in repayment of the said loan of the financial creditor been established, there is no bar upon the Petitioner that prevent it from file a petition under I&B Code. Further, the Petitioner has annexed the minutes of the meeting held by the consortium on 08.08.2018, by which the Dena Bank has informed the consortium members that its competent authority has decided to file proceedings under the I & B Code 2016 against the Corporate Debtor.
The Petitioner has proposed the name of Mr Kapil Dev Taneja, a registered insolvency resolution professional having Registration Number [IBBI/IPA-003/IP-N00069/2017-18/10547] as Interim Resolution Professional, to carry out the functions as mentioned under I&B Code, and given his declaration; no disciplinary proceedings are pending against him.
The Application under sub-section (2) of Section 7 of I&B Code, 2016 is complete. The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved. Accordingly, the petition filed under section 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the corporate debtor deserves to be admitted.
ORDER
This petition filed under Section 7 of I&B Code, 2016, filed by Bank of Baroda (Earlier Dena Bank), Financial Creditor / Petitioner, under section 7 of Insolvency & Bankruptcy Code, 2016 (I&B Code) against Decent Dia Jewels Private Limited, Corporate Debtor for initiating corporate insolvency resolution process is at this moment admitted. We further declare moratorium u/s 14 of I&B Code with consequential directions as mentioned below:
I. That this Bench as a result of this prohibits:
the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
the recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate debtor.
II. That the supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period.
III. That the provisions of sub-section (1) of Section 14 of I&B Code shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
IV. That the order of moratorium shall have effect from the date of this order till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 of I&B Code or passes an order for the liquidation of the corporate debtor under section 33 of I&B Code, as the case may be.
V. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of I&B Code.
VI. That this Bench at this moment appoints Mr.Kapil Dev Taneja, a registered insolvency resolution professional having Registration Number [IBBI/IPA-003/IP-N00069/2017-18/10547]as Interim Resolution Professional to carry out the functions as mentioned under I&B Code, the fee payable to IRP/RP shall comply with the IBBI Regulations/Circulars/Directions issued in this regard.
The Registry is at this moment directed to immediately communicate this order to the Financial Creditor, the Corporate Debtor and the Interim Resolution Professional even by way of email or WhatsApp. Compliance report of the order by Designated Registrar is to be submitted today.