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Judgment
Per: Mr V.P. Singh, Member (J)
ORDER
The Petitioner/Applicant viz. ‘Bank of India (hereinafter as Financial Creditor) has furnished Form No. 1 under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter as Rules) in the capacity of “Financial Creditor” on 29.08.2018 by invoking the provisions of Section 7 of the Insolvency and Bankruptcy Code (hereinafter as Code) against ‘Scorodite Stainless (India) Pvt. Ltd.’ (from now on as ‘Corporate Debtor’). The registered address of the Corporate Debtor is stated to be 203-204, 2nd Floor, Omkar Tower, 3rdKhetwadi Lane, Off SVP Road, Mumbai.
In the requisite Form, under the head “Particulars of Financial Debt” the total amount of Debt granted is stated to be ₹43.81 Crores, and the amount claimed to be in default is ₹34,60,22,079/- as on 29.08.2018. The loan account of the Corporate Debtor was declared as NPA on 30.06.2017. The date of default is also 30.06.2017.
This Petition is filed by Mr Harshad Parmar having the authority to file this petition vide Power of Attorney dated 20.10.2016.
The financial Creditor had granted various financial facilities to the Corporate Debtor to the tune of ₹43.81 Crores vide Term Loan Agreement dated 15.04.2014 and Credit Facility Agreement dated 15.04.2014. The loan has been duly disbursed and sanctioned as per the Sanction Letter dated 11.04.2014 having Reference No. NP/CR/SA/13-14/ as annexed in the Petition. A brief description of the loan facilities is given herein below:
| Facilities | Amount in Rs. (In Crores) |
|---|---|
| A. Fund Based Loan | |
| Term Loan – II | 1.07 |
| Term Loan – III | 2.14 |
| Term Loan | 5.50 |
| Term Loan – I | 0.10 |
| Working Capital CC – Stocks | 13 |
| Book debts 90 days limit (90 days) | 10 |
| B. Non-fund based Limits | |
| Bank Guarantee | 2 |
| L/C | 10 |
| Total | 43.81 |
The loan facilities are secured by Deed of Guarantee dated 15.04.2014 whereby the guarantees are given to the tune of ₹10,00,00,000/-. A Supplemental Deed of Loan & Hypothecation dated 15.04.2014 has been executed, where by all tangible movable property, plant, stocks, raw material, finished and semi-finished goods, all the present and future book debts, outstanding, and money receivables are hypothecated with the Financial Creditor. About the mortgaged properties, the Registrar of Companies has issued a Certificate of Registration Charge dated 12.06.2014, duly annexed in the petition.
The Applicant issued a demand notice dated 23rd May 2018 to the Corporate Debtor recalling a number of Rs.33,90,87,996 (Rupees Thirty-Three Crores Ninety Lakhs Eighty-Seven Thousand Nine Hundred and Ninety-Six Only) plus interest at the rate of 13.75% p.a with effect from 25th October, 2017 with monthly rests with regard to the cash credit and term loans facilities. Nothing fructified. The Financial Creditor was then compelled to initiate SARFAESI proceedings against the Corporate Debtor. The possession of the mortgaged properties has already been taken under the provisions of the said act.
The Financial Creditor has produced on record acknowledgements given by the Corporate Debtor, of the Debt for loan and Cash Credit Facilities. The last acknowledgement is dated 15.10.2016 for an amount of ₹28,80,81,619/-. The acknowledgements, totalling to the amount claimed in this petition, are duly perused by this Bench. A Demand Promissory Note dated 15.04.2014, amounting to ₹5,00,00,000/- has also been executed by the Corporate Debtor.
It is submitted by the Petitioner that the petition is complete in all respects and all the procedural formalities have been complied with. Hence, this Petition/Application may be Admitted for the initiation of the CIRP.
The counsel for the Corporate Debtor has filed an affidavit in reply to this petition. It is stated that the talks of settlement (OTS offer) are going on with the Corporate Debtor to the tune of Rs. Twenty-two crores for which exchange of correspondences is already on with the Bank.
The Corporate Debtor challenges the maintainability of this petition on the ground that Mr Harshad Parmar is not entitled to file this petition based on a general power of attorney. There is no document on record whereby the Financial Creditor has specifically authorized the said Mr Harshad Parmar to file the present application. It is further contended that Letter of Authorization dated 02.05.2019 annexed in the rejoinder filed by the Financial Creditor holds no validity as it is procured much after filing this petition. Hence, it is contended that this petition ought to be rejected at the outset.
We have gone through the submissions made and documents produced on record. At the outset, it is clarified that the authority of Mr Harshad Parmar to file this petition cannot be challenged given the judgement of the Hon’ble NCLAT in Palogix Infrastructure Private Limited V. ICICI Bank Ltd. [Company Appeal (AT) (Insolvency) No. 30 of 2017], the judgement is crystal clear in terms of the authority to file the insolvency petition. It says:
“38.This apart, if an officer, such as Senior Manager of a Bank has been authorised to grant loan, for recovery of loan or to initiate a proceeding for 'Corporate Insolvency Resolution Process' against the person who have taken loan, in such case the 'Corporate Debtor' cannot plead that the officer has the power to sanction loan, but such officer has no power to recover the loan amount or to initiate 'Corporate Insolvency Resolution Process', in spite of default of debt.
39.If a plea is taken by the authorised officer that he was authorised to sanction the loan and had done so, the application under section 7 cannot be rejected on the ground that no separate specific authorization letter has been issued by the 'Financial Creditor' in favour of such officer designate.
40.Given reasons as recorded above, while we hold that a 'Power of Attorney Holder' is not empowered to file application under section 7 of the 'I&B Code', we further hold that an authorised person has power to do so.”
Therefore, on a plain reading of this decision, it is at this moment held that Mr Harshad Parmar has the proper authority to file the present petition, and the objection raised by the Counsel for the Corporate Debtor is merely incongruous, and therefore, holds no water. Moreover, express authority is given by the General Manager of the Financial Creditor to Mr Harshad Parmar vide Letter of Authorization dated 02.05.2019 to file insolvency petition. It is noted that Mr Harshad Parmar had in its favour a General Power of Attorney dated 20.10.2016 to represent the Financial Creditor. If this petition is filed within the scope of the General Power of Attorney, though without a special provision of filing this petition, belated ratification of an act (vide Letter of authorization dated 02.05.2019), holds equally good in law as if it was a power granted to Mr Harshad Parmar before filing this petition. Hence, the technical objection raised on the ground of maintainability is raised only for the sake of objecting and hence stands rejected.
It is worth to note that on the one hand, the Corporate Debtor is questioning the legality and correctness of the amount claimed by the Financial Creditor, while on the other hand, the Corporate Debtor also talks of settlement (OTS offer) with the Corporate Debtor to the tune of Rs. 22 crores. It is believed that Corporate Debtor cannot blow hot and cold at the same time. An endeavour to enter into settlement terms answers the question of whether the default has been committed or not. Once it is established that debt has been granted to the Corporate Debtor and default has been done to repay the debt, we are bound to admit the petition.
This Bench is of the view that the liability in the present case in hand is almost a liability admitted by the Corporate Debtor. The documents produced on record prove the disbursement of various loan facilities granted by the Financial Creditor.
There are multiple acknowledgements of the Corporate Debtor for admission of its liability on record. The Promissory Note also affirms the liability of the Corporate Debtor. The mention of a settlement proposal in reply is further affirmative of the fact that the liability is acknowledged and admitted.
The Petitioner’s claim of the existence of debt and default has been corroborated with ample evidence and is enough to hold that there was a ‘Debt’ and admittedly, there was existence ‘Default’.
The Corporate Debtor committed default in repayment of the loan amount to the original lender, and hence it’s Loan account was declared as NPA. SARFAESI proceedings were also initiated by the Financial Creditor in respect to the same debt, and they are pending till date. In the light of above facts and circumstances, the existence of debt and default is reasonably established by the Financial Creditor as a major constituent for admission of a petition under section 7 of the I&B Code.
The Petitioner has proposed the name of Mr Chandra Prakash Jain, a registered insolvency resolution professional having Registration Number [IBBI/IPA-001/IP-P00147/2017-18/10311] 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, against the 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 Chandra Prakash Jain, a registered insolvency resolution professional having Registration Number [IBBI/IPA-001/IP-P00147/2017-18/10311] as Interim Resolution Professional to carry out the functions as mentioned under I&B Code, 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.