Bank of Baroda vs Shree Khodal Cot-Gin Pvt. Ltd

None appeared on behalf of the parties.

The Order is pronounced in the open court vide separate sheet.

CHOCKALINGAM THIRUNAVUKKARASU MEMBER TECHNICAL

Dated this the 1st day of January, 2020

MANORAMA KUMARI MEMBER JUDICIAL

C.P. No.(IB) 572/7/NCLT/AHM/2018

In the matter of:

Bank of Baroda 10-C, "G" Block, Bandra Kurla Complex Bandra (East) MUMBAI 400 051

Having Branch at Dhebar Road Rajkot 360 002 Gujarat State

:

Petitioner [Financial Creditor]

Versus

M/s. Shree Khodal Cot-Gin Private Limited

Survey No. 1/2/1 Hadmatiya Road Chanol Fatepar Bypass Fatepar Taluka Paddhari Dist. Rajkot 360 110 Gujarat State

:

Respondents [Corporate Debtor]

Order delivered on 1st January, 2020

Coram: Hon'ble Ms. Manorama Kumari, Member (J) Hon'ble Mr. Chockalingam Thirunavukkarasu, Member (T)

Appearance:

Advocate Mr. Dhruvkumar Chauhan & Advocate Mr. S.S. Panesar for petitioner. Advocate Ms. Archana Raval & Advocate Ms. Jigisha Raval for respondent.

[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 15.04.2019.

The respondent/corporate debtor M/s. Shree Khodal Cot-Gin Private Limited is a company incorporated under the Companies Act, 1956 on 22.10.2012, having identification No. U17200GJ2012PTC072418, having its registered office at Taluka Paddhari, Dist. Rajkot, Gujarat State. That, Authorised share capital of the respondent company is Rs. 3,50,00,000/- and paid up share capital is Rs. 3,25,00,000/-

That, the applicant bank has submitted that through its Dhebar Road Branch, Dist. Rajkot granted various financial credit facilities to the corporate debtor as per the details given below and disbursement of the said facilities were made from 27.12.2014 onwards:

The financial creditor has further stated that the corporate debtor is in default of Rs. 8,78,45,010.73 (Rupees eight crores seventy-eight lacs forty-five thousand ten and paise seventy-three only) as on 29.10.2018 together with further interest at contractual rates till the date of realisation of all the outstanding dues and the date of default is 31.03.2017.

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 20.12.2014. 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: -

Respondent appeared and filed affidavit in reply accompanied by certain documents. Respondent has denied the averments made in the application filed by the applicant.

It is further stated by the respondent that the bank has charged excess interest in the account of respondent No. 1 of Rs. 11,56,696.83 and, therefore, the applicant bank advised the corporate debtor to pay the rest of the overdue amount in cash credit and term loan and regularise the account immediately.

Apart from the above objections, respondent has not made any objection against the application so made by the petitioner. However, the corporate debtor has submitted that the bank has initiated proceedings under SARFAESI Act and served notice u/s. 13 (2) on 28.03.2018.

At the time of last hearing also only proxy lawyer remained present on behalf of the respondent. On perusal of the records it is found that the matter is pending since long for hearing. Heard learned lawyer appearing for the financial creditor.

On perusal of the records it is also found that no dispute has been raised by the corporate debtor. That, the application is filed on 29th October, 2018. 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 application filed by the financial creditor is well within limitation. That, the

Bhoochaght.

documents filed along with the application is sufficient to prove that there exists financial debt.

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: -

The scheme of the Code is to ensure that when a default takes place, in the sense that a 'debt' becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3 (12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount.

For the meaning of "debt", we have to go to Section 3 (11) which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of claim, we have to go back to Section 3 (6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined

under Section 5 (7) as a person to whom a financial debt is owned and a financial debt is defined in Section 5 (8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5 (21) means a claim in respect of provision of goods or services.

When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7 (1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor. It need not be a debt owed to the applicant financial creditor. Under Section 7 (2), an application is to be made under Sub-Section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in part I, particulars of the corporate debtor in part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4 (3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or sped post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7 (5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt" which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is complete, in which case it may give notice to the applicant to rectify the defect within seven days of receipt of a notice from the adjudicating authority. Under Sub-section (7), the

©hockahege adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within seven days of admission or rejection of such application, as the case may be.

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 27.09.2018. 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. Prawin Charan Dwary. The Adjudicating Authority hereby appoint Mr. Prawin Charan Dwary, 407, Akchhat Tower, Pakwan Cross Road, S.G. Highway, Bodakdev, Ahmedabad 380 054 (Email ID [email protected]) having registration No. IBBI/IPA-002/IP-N00331/2017-18/10937 to act as an interim resolution professional. Form 2 of the proposed interim resolution professional has been annexed and placed at page No. 14-15 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 subsection (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.