Bank Of India vs Pallishree Limited

Labh Singh, Member (Judicial)

The Bank of India, the Financial Creditor has filed the instant application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter to be referred as “the IBC Code”) read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity ‘the Rules’) with a prayer to trigger Corporate Insolvency Resolution Process in respect of respondent Company, Pallishree Limited Holding (hereinafter referred as “Corporate Debtor”).

It is appropriate to mention that the applicant Bank is a Financial Creditor constituted under the Banking Companies(Acquisition and Transfer of Undertaking) Act, 1970 having its head office at Star House 15.09.2024, C-5, G Block, Bandra Kurla Complex,, Bandra East, Mumbai, Maharashtra 400051 and carrying on its Banking business inter-alia from its Kolkata Asset Recovery Branch at Star House, 5 BTM SARANI, Kolkata-700001. The present application has been filed through Sh. Sanjeev Shivdas Bagul, Assistant General Manager forinitiation of insolvency resolution process against the respondent under the IBC Code. A copy of Board Resolution dated 18.07.2019 with Letter Annexture “A” has been placed on record.

The Corporate Debtor against whom initiation of Corporate Insolvency Resolution Process has been prayed for, was incorporated on 09.04.1948 having its registered office situated at Holding No. 408, O.B Road, Ward No. 6, Pallishree, Arambagh Hooghly-712601. Since the registered office of the respondent Corporate Debtor is situated at Hooghly, this Tribunal having territorial jurisdiction over the State of West Bengal is the Adjudicating Authority in relation to the prayer for initiation of Corporate Insolvency Resolution Process(CIRP) in respect of respondent Corporate Debtor under sub-section (1) of Section 60 of the Code.

Briefly stated the facts of the case are thatthe Corporate Debtor availed credit facilities from the Financial Creditor, and on 29.05.2021, the Financial Creditor issued a sanction letter for the revised credit facilities. In terms of the said revised sanction letter, the existing term loan of Rs. 0.81 crores was extinguished; the Fund based working capital was renewed at a limit of Rs. 71.33 crores and the non fund based limits were renewed at Rs.0.40 crores, and thus an aggregate sum of Rs. 71.73 crores was granted to the Corporate Debtor.

Pursuant to such revised credit facilities being sanctioned and since credit facilities were sanctioned by Punjab National Bankand also, there was a consortium of landers, the Corporate Debtor executed several loan and security documentson 28.01.2022 which includes a Working capital consortium agreement, an Interse Agreement between the Bankers, and a Deed of Hypothecation. Additionally, a Personal Guarantee of Baibhav Kumar Roy dated 28.01.2022, affidavit of Director, Memorandum of Entry and a Letter of Undertaking were executed to secure the credit facilities.

Thereafter, the Corporate Debtor started defaulting in the repayment of the credit facilities and accordingly, the Financial Creditor classified the account of the Corporate Debtor as Non-Performing Assets (NPA) on 18.06.2023. The date of default is 18.06.2023. The total amount of debt is Rs.74,23,22,131.25/- as on 14.09.2023, out of which the principal outstanding is Rs. 71.73 croresand the total default as calculated is Rs. 72.40 crores.

The Financial Creditor issued a loan recall notice dated 19.06.2023 to the Corporate Debtor and directed the Corporate Debtor to repay a sum of Rs. 72.40 crores inclusive of interest within 15 days. Subsequently, the Financial Creditor issued demand notice dated 14.09.2023 under Section 13(2) of the SARFAESI Act, 2002 to the Corporate Debtor and its directors claiming an amount of Rs. 74,23,22,131.25/-with interest @ 9.75% p.a.

Therefore, as per part IV of the application, it is claimed that as on 18.06.2023 a sum of Rs. 72.40 crores which includes principal amount of Rs. 71.73 crores is due and payable by the respondent company and the date of default is 18.06.2023.

The applicant has also placed on record a copy of record of default filed with NeSL (information utility) in respect of default on the part of the Corporate Debtor in its repayment owed to the Financial Creditor. The said record shows that the claim of applicant is deemed authenticated for default amount of Rs. 25,26,67,841.85 with date of default as 18.06.2023 as no objection has been recorded by corporate debtor.

Sub-section (3)(b) of Section 7 mandates the financial creditor to furnish the name of an Interim Resolution Professional. In compliance thereof the applicant has proposed the name of Sh. Neeraj Jain, for appointment as Interim Resolution Professional having registration number IBBI/IPA-001 IP-P01067/2017-2018/11758 resident of Chatterjee International Centre, Unit 1, Floor 14, 332, Jawaharlal Nehru Road, Kolkata-700071 with email id [email protected]. Mr. Neeraj Jain has agreed to accept the appointment as the interim resolution professional and has signed a communication in Form 2 in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or elsewhere. In addition, further necessary disclosures have been made by Mr. Neeraj Jain -as per the requirement of the IBBI Regulations. Accordingly, it is seen that the requirement of Section 7(3)(b) of the Code has been satisfied.

Respondent appeared in pursuance of notice issued by this Tribunal and filed its reply stating therein that the present application is baseless, vexatious, and filed in gross abuse of process of law, and is not maintainable in law or on facts. The Corporate Debtor is a healthy, commercially solvent, and profitable companythat has been functioning since the year 1948 and currently employs over 250 persons. It is settled law that this Tribunal, in exercise of its powers under Section 7 of IBC, is not a debt collection forum, and since IBC proceedings cannot be used as a tool for recovery of money, and hence, the present application deserves to be dismissed.

It is submitted that the applicant has not approached this Tribunal with clean hands as it suppressed the fact that it had instituted a suit being O.A.No.148 of 2024 before the Debt Recovery Tribunal (DRT)-I, Kolkata on 29.12.2023 for recovery of its alleged dues. The applicant is guilty of forum shopping and has maliciously created a multiplicity of proceedings which are extremely prejudicial to the Corporate Debtor.

It is further submitted that, the collateral/security interest created by the Corporate Debtor is higher than the amount of the purported debt, being valued at Rs. 115.40 Crores against a purported financial debt of approximately Rs. 74.23 Crores. Since the security interest created is of greater value than the purported debt and hence, there can be no question of default by the Corporate Debtor. Therefore, the present application is baseless, malicious and is a pressure tactic.

The application suffers from material defects as the date of Non-Performing Assets (NPA) cannot automatically be the date of default, and therefore, the date of default appearing in the application is incorrect, erroneous, and misconceived. The application is vague and cryptic inasmuch as it fails to annex any sanction letter or disbursement in respect of the credit facility, starting only from the "Renewal of Credit Facilities" dated 29.05.2021. The Applicant suppressed the fact that the credit facility was from a consortium of bankers where the Inter-se Agreement is required that all decisions of the consortium should be unanimous and in mutual consultation.

The Petitioner bank has suppressed an order dated 08.07.2024, passed by the Learned DRT-1, Kolkata which restrained the defendants from dealing with or disposing of specific assets. The Petitioner is taking coercive steps by issuing letters to other banks for closure of the Respondent's accounts, which jeopardizes critical payments including statutory obligations, staff salaries, and wages.

The Petitioner bank was all along aware of the existence and operation of the said ancillary account and has falsely accused the Respondent of opening it without intimation. None of the purported notices, including the loan recall notice issued under Section 13(2) of SARFAESI Act, 2002, were received by or served upon the Respondent. No sums are actually due and payable by the corporate debtor, and the Financial Creditor has failed to prove any default. The petition deserves to be dismissed in limine with exemplary costs and the initiation of proceedings under Section 65 of the IBC, 2016.

Applicant submitted a rejoinder in pursuance of the reply affidavit dated 24^th October 2024 filed by the Corporate debtor reiterating the facts pleaded in the petition and hence, the same are not be reproduced here in entirety for sake of brevity.

It is submitted that nowhere in the Reply Affidavit has the Corporate Debtor raised any dispute on the dues outstanding and payable to the Bank or any dispute on the issue of Default, and accordingly, the Corporate Debtor has in fact admitted its liability to the Bank. It is submitted that the Corporate Debtor is not a viable company as it stopped making payment when the dues were being demanded and stopped making payment of the scheduled instalments, which led to the account being classified as NPA. The applicant further states it is a settled principle that there is no bar from holding the date of NPA as the date of default.

It is submitted that the Section 7 application is maintainable in law and in facts and denies that it is baseless, vexatious, or filed in gross abuse of the process of court. It is submitted that the institution of the DRT proceedings was clearly stated and that the filing or pendency of proceedings before the DRT is no bar to filing proceedings under the IBC, nor does it constitute "forum shopping". The applicant asserts that the Bank chose the avenue of IBC to keep all assets and securities intact so that the resolution and revival of the Corporate Debtor is possible.

It is submitted that there is no bar under the law for any banker out of a consortium to file proceedings under the IBC and the approval or consent of PNB is not required as the petitioner has filed on the basis of default to it specifically. Finally, the applicant submitted that the interest has been calculated as per the terms of sanction and signed banking agreements.

Based on pleading of the parties and after hearing Ld. Counsels for both the parties, the following issues have arisen for determination:

We have gone through the case file carefully and perused the pleadings of the parties and documents placed on record by the parties and heard the arguments put forth by learned Counsels for the parties; and after hearing the learned counsels for the parties, we shall now proceed to consider the present petition on its merits, specifically within the ambit of points involved in the instant application.

The respondent/Corporate Debtor has taken a plea that the present application has been filed by the Financial Creditor without prior approval or consent of the PNB, the Consortium Member. The Financial Creditor has filed the present application for debt and default pertaining to its own account. There is no such agreement between the Consortium Members that each of the member of Consortium to take prior permission or consent of other Consortium Member for debt and default pertaining to its own separate account.

Each Member of the Consortium/Financial Creditors can independently file an application under Section 7 of the IBC Code 2016 for initiating the Corporate Insolvency Resolution Process (CIRP) based on its own debt and default, independent of other consortium members. The right of the applicant Bank/Financial Creditor to initiate insolvency process is not restricted by consortium agreement entered Consortium Members. Therefore, this plea of the applicant that present application is not maintainable at law without consent of other Member of the Consortium is devoid of merits.

It is well settled proposition of law that an application under Section 7 of the IBC Code 2016 is acceptable so long as the debt is proved to be due and there has been occurrence or existence of default. What is material is that the default is for at least Rs. 1,00,00,000/-. In view of the Section 4 of the Code, the moment default is of rupees one crore or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable.

In the facts, it is seen that the applicant clearly comes within the definition of Financial Creditor. The material placed on record further confirms that the corporate debtor has not disputed availing loan facility from the applicant/Financial Creditor. The applicant/Financial Creditor vide Sanction Letter dated 29.05.2021, extinguished the then existing term loan of Rs. 0.81 crores; and renewed Fund based Working Capital Limit of Rs. 71.33 crores and non-fund based limits to Rs.0.40 crores.Thus, an aggregate sum of Rs. 71.73 crores was granted to the Corporate Debtor

That as on18.06.2023, a sum of Rs. 72,40,00,000/-(Rupees Seventy Two Forty Crores Only) which includes an amount of Rs. 45.67 crores outstanding in Cash Credit-Kolkata LCB Account No.404430100030163,an amount of Rs. 25.42 crores outstanding in Cash Credit-Kolkata LCB-Account No. 404430100030164, an amount of Rs. 1 crore outstanding in Cash Credit-Saltlake BranchAccount No. 424930100300020,an amount of Rs. 0.25 crore outstanding in Cash Credit-Saltlake BranchAccount No. 426030100000177 and Non Fund Based limit of Rs. 0.06 crores and thus, total outstanding amount payable as on 18.06.2023 the date of default is Rs. 72.40 crores is due and payable by the respondent/Corporate Debtor. Therefore, as per part IV of the application, it is claimed that as on 18.06.2023, a sum of Rs. 72,40,00,000/-(Rupees Seventy Two Forty Crores Only)is due and payable by the respondent company.

Learned Counsel appearing for the respondent vehemently argued that date of NPA cannot be date of default. However, there is no bar for treating the date of classification of account as date of default for purpose of initiating proceeding under Section 7 of IBC Code 2016. On this aspect, we may refer to the judgment of the Hon’ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India & Anr.- (2021) 8 SCC 481 where Hon’ble Supreme Court has held that ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the Financial Creditor to initiate action under Section 7 of the Code. Section 7 application requires only proof of debt and default and NPA classification is not the requirement of the IBC. Hon’ble Apex Court in para no. 43 of Laxmi Pat Surana(Supra) observed that:

Hon’ble NCLAT in case of Jagdish Prasad Sarda Vs Allahabad Bank 2020 SCC OnLine NCLAT 621, after relying on judgment passed by Hon’ble Apex Court in case of B.K. Educational Services Pvt. Ltd Vs. Parag Gupta &Associates 2018 SCC OnLine SC 1921and case of Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr. 2020 15 SCC1held that:

Hon’ble NCLAT in case of Rahul Kumawat Versus Bank of India & Anr. 2025 ibclaw.in 687 NCLAT, after relying judgment passed by Hon’ble Apex Court in case of Laxmi Pat Surana(Supra) held that:

In the instant case, it is specific case of the applicant/Financial Creditor that the date of default is 18.06.2023 which is date of classification of account as non-performing asset. The date of default has been proved on record which is 18.06.2023 and the default has been authenticated in the record of Information Utility i.e NeSL which is Annexure-O filed with the present application. There is no dispute raised with information utility about the default recorded therein.

Insofar as pendency of Original Application before Debts Recovery Tribunal Kolkata is concerned, it has no impact on continuation of proceeding under IBC Code 2016. Hon’ble NCLAT in case of M/s. Unigreen Global Private Limited v. Punjab National Bank & Anr.2017 SCC Online NCLAT 566held that:

Therefore, in view of the above, the plea of the respondent that theapplicant is guilty of forum shopping and has maliciously created a multiplicity of proceedings is not tenable at law.

On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed Interim Resolution Professional.

We are satisfied that the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt.

As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application deserves to be admitted and hence, the same is hereby admitted.

Mr. Neeraj Jain, Resolution Professional having registration number IBBI/IPA-001 IP-P01067/2017-2018/11758 resident of Chatterjee International Centre, Unit 1, Floor 14, 332, Jawaharlal Nehru Road, Kolkata-700071 email id [email protected] is appointed as an Interim Resolution Professional for the Corporate Debtor.

In pursuance of Section 13(2) of the Code, We direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by Explanation to Regulation 6(1) of the IBBI Regulations, 2016) with regard to admission of this application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

We direct the applicant Financial Creditor to deposit a sum of Rs. 2,50,000/- with the Interim Resolution Professional namely Mr. Neeraj Jain to meet out the expenses to perform the functions/duties assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Financial Creditor. The said amount however be subject to adjustment towards Resolution Process cost as per applicable rules.

The moratorium is declared in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14(1)(a), (b), (c) & (d) of the Code. Thus, the following prohibitions are imposed:

It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract of guarantee to the corporate debtor in terms of Section 14(3)(b) of the Code.

The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the Code, Rules and Regulations. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day to day affairs of the ‘Corporate Debtor’. In case there is any violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the ‘Corporate Debtor’ as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code, Rules and Regulations.

The Registry is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, West Bengal, Kolkata at the earliest possible but not later than three days from today.

Pending IA No. 1305/KB/2025 and IA(I.B.C)/312(KB)2025 stands disposed of.