Bank of Baroda vs Riddhi Siddhi Cotspin Pvt. Ltd.

[Per: Ms. Manorama Kumari, Member (J)]

Mr. S.K. Misra, Assistant General Manager, being authorised signatory of Bank of Baroda, filed this petition under section 7 of The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code") read with Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as "the Rules") seeking reliefs under Section 7(5)(a) and Section 13(1)(a)(b)(c) of the Code.

That the applicant/financial creditor Bank of Baroda is a body corporate constituted under the provisions of the Banking Companies (Acquisition and Transfer of Undertaking) Act 1970, having its Registered office at Dena Corporate Centre, C-10, G-Block, Bandra Kurla Complex, Bandra E, Mumbai 400 051 and branch at Dhebar Road, Rajkot 360 002, Gujarat State.

During pendency of this application, Dena Bank is merged with Bank of Baroda vide Government of India Gazette Notification dated 02.01.2019. Accordingly cause title of the instant application is amended vide order 10.07.2019.

The respondent/corporate debtor M/s. Riddhi Siddhi Cotspin Private Limited is a company incorporated under the Companies Act, 1956 on 05.04.2013, having identification No. U17115GJ2013PTC074360, having its registered office at Jagnath Plot, Rajkot, Gujarat State. That, Authorised capital and paid up capital is Rs. 6,00,40,000/-.

That, the applicant bank has submitted that through its Dhebar Road Branch, Dist. Rajkot granted various financial credit facilities to the corporate debtor and disbursement was made as per the details given below: -

Cash Credit limit was enhanced from Rs. 1250.00 lacs to Rs. 1775.00 lacs and term loan was reviewed at O/s of Rs. 214.65 lacs (as on 01.01.2015)

The financial creditor has further submitted the details of amount claimed to be in default and the date on which the default occurred as per the following table:

Date on which default occurred is 30.06.2016 and date on which the account was classified as Non-Performing Asset (NPA) on 30.09.2016.

It is stated that the financial creditor holds first and exclusive charge on hypothecated assets viz. entire current assets including stock, book-debts, receivables and all other movable assets lying in the possession of the corporate debtor, plant and machinery and stores and spares lying in the possession of the corporate debtor created under hypothecation agreement dated 25.03.2015. That, the financial creditor holds first and exclusive charge on mortgaged properties also. That, the present Insolvency Resolution Application is filed under Section 7 of the IB Code, 2016 for the purpose of initiating corporate insolvency resolution process against the corporate debtor since it has lost its substratum and is unable to repay outstanding debt. That, the corporate debtor has already committed default of its debt towards the financial creditor by non-payment of instalment and/or interest of the various financial facilities availed through its Dhebar Road Branch, Rajkot, Gujarat State.

The applicant bank has submitted copy of the following documents in support of their claim: -

Director of the respondent company filed affidavit in reply inter alia raising the following objections: -

Heard the councils for both the sides, perused the documents annexed to the application and the reply filed by the corporate debtor.

On perusal of the records it is found that from time to time the corporate debtor has made payments towards the outstanding loan and thus acknowledged the debt. That, the last payment is made by the corporate debtor on 30th June, 2016 towards interest which is reflected in the statement at page No. 418 to the application. That, the documents filed along with the application is sufficient to prove that there exists financial debt and the application is not barred by limitation.

On perusal of the records it is found that the letter of authority dated 12.09.2018 issued by General Manager of the applicant bank authorising Mr. S.K. Misra is proper and valid.

In view of the above discussions, the Adjudicating Authority is of the considered view that there is a debt due to "financial creditor" and there is default on the part of the corporate debtor. In view of the judgement of the Hon'ble Supreme Court in "Innoventive Industries Ltd. vs. ICICI Bank & Anr.(2018) 1 SCC 407" the Hon'ble Supreme Court while explaining section 7 and 8 of the IB Code, observed and held as under: -

It is also held in Mobilox Innovations (P) Ltd. vs. Kirusa Software (P) Ltd. (2018) 1 SCC 353 as under: -

That, the application is found to be complete in all respect. Hence it does not warrant any rejection or dismissal.

That, the records available shows that the applicant bank had sanctioned cash credit limit and term loans to the respondent company, to be repaid within the stipulated period as per the terms and conditions agreed between the parties. That, the applicant bank had issued notice dated 18.10.2016. Records available shows that the respondent has not cared to reply the notice issued by the applicant.

In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the financial debt to the Applicant and the respondent company has acknowledged the debt.

In the instant case, the documents produced by the Financial Creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'financial debt'.

There is no dispute in the case that the petitioner is the financial creditor. The application is also furnished in the prescribed form – 1 of the Rules and the prescribed fee has also been paid. Along with the application, the applicant proposed the name of the Resolution Professional namely Mr. Atul Mittal. The Adjudicating Authority hereby appoint Mr. Atul Mittal, 174 Balco Apartment, Plot No. 58, IP Extension, Delhi – 110 092 (Email ID [email protected]) having registration No. IBBI/IPA-001/IP-00439/2017-18/10762 to act as an interim resolution professional. Form 2 of the proposed interim resolution professional has been annexed and placed at page No. 478-479 of the application where declaration is made that no disciplinary proceeding is pending against him with the Board or Indian Institute of Insolvency Professionals of ICAI.

In the aforesaid background and as also discussed above, the application under Section 7 (2) of the IB Code is complete in all respects and there is debt due to the "financial Creditor" and there is default on the part of the "corporate debtor". Hence, there is no alternative but to admit the application in absence of any infirmity.

In view of the above, the petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted.

The petition is, therefore, admitted and the moratorium is declared for prohibiting all of the following in terms of sub-section (1) of Section 14 of the Code: -

It is further directed that the supply of goods and essential services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. The provisions of sub-section (1) shall, however, not apply to such transaction as may be notified by the Central Government in consultation with any financial sector regulator.

The order of moratorium shall have effect from the date of receipt of authenticated copy 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 or passes an order for liquidation of corporate debtor under Section 33 as the case may be.

This Petition stands disposed of accordingly with no order as to costs.

Communicate a copy of this order to the Applicant, Financial Creditor, Corporate Debtor and to the Interim Resolution Professional.