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Judgment
[Per: Mr. Prasanta Kumar Mohanty, Member (T)]
The present I.B. Petition is filed by the Financial Creditor Bank of Maharashtra under Section 7 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as a “Code”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP” in Short) against the Corporate-Debtor-Company namely, Shrimati Jwellery House Private Limited for the default committed by the Corporate Debtor in making repayment of the Term Loans/CC facility availed from the Bank. The Applicant (FC), Bank of Maharashtra incorporated under the provisions of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. The application has been filed by the duly authorised Executive, Shri. Rajesh Kumar Gupta, Zonal Manager, Bank of Maharashtra, Bhopal Zonal Office, 1/14, Arera Hills, Administrative Zone, Bhopal, M.P. 462011.
The Respondent Corporate Debtor (CD) Company, namely, Shrimati Jwellery House Pvt. Ltd. was incorporated on 17/06/2011 with CIN: U27205MP2011PTC026200.
The nominal share capital of the Respondent (CD) Company is Rs.7,00,00,000/- (Rupees Seven Crores only) and the paid-up capital of the company is Rs.6,00,00,000/- (Rupees Six Crores Only). The Registered Office of the Corporate Debtor Company is situated at: E-5/17, Vitthal Market, Arera Colony, Bhopal-462012 Madhya Pradesh, (India). Present Address: 70, AmarnathColony, Kolar Road, TahsilHuzur, District Bhopal, Madhya Pradesh-462042 (India).
It is submitted that the Respondent Company initially applied for various loan facilities and the same were originally sanctioned on 30.03.2013 by the Petitioner Bank for total aggregate facilities of Rs.5.0 Crores for purchase of commercial building for running proposed unit against the equitable mortgage of immovable properties. The Corporate Debtor availed the Loans executing various documents and some documents executed by the mortgagors/guarantors in favour of the Bank binding themselves as liable to pay the loan facilities availed by the Corporate Debtor. The said limits were further renewed on 31.10.2013 & 07.10.2014. Various loans/credit facilities granted by the applicant Bank are narrated as under:
| Nature of Facility | Date of Sanction | Date of disbursement | Sanctioned Amount | Total Amount [Rs.] |
|---|---|---|---|---|
| Term Loan - I A/c. No. 60129122245 | 30.03.2013 | 31.03.2013 | 5,00,00,000/- | 5,00,00,000/- |
| Term Loan-II A/c. No. 60144713409 | 31.10.2013 | 05.09.2013 | 90,00,000/- | 2,00,00,000/- |
| 20.09.2013 | 60,00,000/- | |||
| 28.09.2013 | 50,00,000/- | |||
| Term Loan-III A/c. No. 60210288515 | 07.10.2014 | 04.04.2015 | 5,00,00,000/- | 5,00,00,000/- |
| CC A/c. No. 60151621927 | 07.10.2014 | 01.11.2013 | 4,35,00,000/- | 8,00,00,000/- |
| 07.04.2015 | 3,65,00,000/- |
| Total Amount | 20,00,00,000/- | 20,00,00,000/- |
Thus, total aggregate limit of Rs.20.00 Crores was sanctioned by the Applicant Bank vide sanction letter dated 30.03.2013, 31.10.2013 & 07.10.2014 with the terms and conditions as mentioned in the respective sanction letters including hypothecation of plant and machineries and mortgage of immovable properties which was duly accepted /acknowledged by the Corporate Debtor (page no. 164-189 of the paper book). The Hypothecation deed is executed on 05.09.2013 and subsequently, on 20.11.2014, 04.04.2015 respectively for the enhancement of facilities granted to the Corporate Debtor. Charge with RoC in Form No. CHG-1 has been modified on 22.07.2015, initially created on 25.11.2014 for an amount of Rs.20.00 crores, which is annexed at Annexure A/19 at page no 247 to 242 of paper book. Mortgage of the properties has been created on 30.11.2013 & 22.07.2015 (page no. 193 to 246 of the paper book) by deposit of title deeds.
Thereafter, the Corporate Debtor continued the operations in their various accounts with the Financial Creditor and ultimately, Corporate Debtor failed to repay the secured debts in all the credit facilities of restructured debts and Corporate Debtor stopped its accounting operation in its various restructured debts/credit facilities with the Financial Creditor, Bank of Maharashtra.
However, as the Corporate Debtor failed to adhere to the terms and conditions of the said restructuring of various credit facilities and as per RBI policies and directives and guidelines applicable to classification of accounts as NPA, in case of restructured facilities, the accounts of the Corporate Debtor came to be classified as NPA with effect from 28.06.2015 as per such applicable guidelines and directives of RBI. Subsequently, the Applicant recalled the loan vide recall notice dtd 25.01.2016 and invoked the guarantees and initiated measures under RDDBFI Act and SARFAESI Act.
Applicant has filed an Original Application No.407/2018 on 03.04.2018 in DRT, Jabalpur against the Corporate Debtor for recovery of INR 27,93,74,791.00
The Corporate Debtor filed a Securitisation Application No.219 of 2015 before the DRT, Jabalpur, against which, Applicant Bank has filed reply and mater was argued partly by both parties. Subsequently, DRT granted stay against the Applicant Bank and afterwards, bank filed reply for vacating the stay and matter was argued and finally by virtue of orders dated 26.04.2017, DRT Jabalpur vacated the stay in the matter and fixed on 24.08.2018 for final arguments.
Mrs.Aarti Agarwal, Intervener/objector/debtor filed a SA no.9 of 2019 before DRT, Jabalpur, wherein bank filed reply and matter was argued partly by both parties and fixed on 24.10.2018 for final arguments.
Further, in terms of short reply given by the Applicant in the matter of M/s. Arti Agrawal & others v. Authorised Officer, Bank of Maharashtra & ors. in S.A. No.9 of 2017 before the Debts Recovery Tribunal, Jabalpur, it was submitted that - "4. That on perusal of sale deed dated 26.06.2013 marked as Annexure A/4, it will be evident that out of sale proceeds of Rs.6.75 crores, the applicants had already received a sum of Rs.1.75 crores and a sum of Rs.5 crores by cheque no.659865 dated 31.03.2013 and dishonour of 5 cheques amounting to Rs.1.75 crores. That in the title deed dated 26.06.2013, it is nowhere mentioned that the sum of Rs.1.75 crores was received by cheque. That the cheque no. would have been mentioned in connection with amount of Rs.1.75 crores in title deed when the cheque no. is mentioned in respect of the amount of Rs.5 crores. Further, in respect of the sale transaction of 26.06.2013, five alleged cheques in respect of payment of Rs.1.75 crores cannot be dated 01.09.2015, 10.09.2015, 25.09.2015, 07.10.2015 & 25.10.2015. That it confirms that the applicants have connived with Respondent no.2 & 7 to procrastinate the recovery proceeding initiated under the provisions of the SARFAESI Act & Rules, 2002. 5. That on perusal of the sale deed dated 27.05.2015 marked as Annexure A/5, it will be evident that the property was sold to Respondent no.2. That it is very surprising that when the Respondent no.2 & 7 allegedly could not pay a sum of Rs.1.75 crores in respect of sale deed dated 26.06.2013, the applicant had again sold another property to Respondent no.2 against a sale consideration of Rs.7.25 crores. That it has been alleged regarding dishonour of cheque no.000019 for Rs.1,67,75,000/-. That on perusal of the cheque no.000019, it will be evident that the cheque was issued by Respondent no.5 from his personal account although it should have been from the account of Respondent no.2 since the property was sold to Respondent no.2. That the action gives reason to believe that the applicants are in connivance with Respondent no.2 to 7 to linger the recovery proceedings initiated against Respondent no.2 & 7 under the provisions of SARFAESI Act & Rules, 2002.
Thereafter, order dtd 05.11.2016 was passed by the Collector & Dist. Magistrate, Bhopal(MP) for delivery of possession of mortgaged immovable properties under Section 14 of the SARFAESI Act, 2002.
Due to non-compliance of the order dtd 05.11.2016 passed by the Dist.Magistrate, Bhopal, Financial Creditor sought directions from Hon'ble High Court of Jabalpur in W.P. No.23234/2017 and the Division Bench of the Hon'ble High Court finally decided the matter on 10.05.2018 with a direction to Dist. Magistrate, Bhopal to hand over the physical possession to the Applicant Bank within two weeks.
Further, the Hon'ble High Court of Madhya Pradesh, Jabalpur, in the matter of Bank of Maharashtra & Another V/s. The District Magistrate & Others in Writ Petition No.23234/2017, has held that -
"4.The petitioners have filed an application for taking additional documents on record. Such documents are primarily; a review petition filed by the owners including the registered sale-deed executed on 26.06.2013 in favour of W.P.No.23234/2017 borrowers i.e. respondents No.4 to 8 in a total sum of Rs.6.75 Crore. The entire sale consideration is stated to have been paid before the execution of the sale deed. The petitioners have produced another sale-deed executed by the owners on 27.05.2015 whereby additional property was sold to the borrowers for a sum of Rs.7.25 Crore. The entire amount was said to have been paid. The owners have filed a suit for cancellation of the two sale-deeds bearing Civil Suit No.1096-A/2015 on the plea that a memorandum of understanding (MOU) was executed before the execution of the sale-deed wherein, the owners alleged that certain payments was made vide post-dated cheques, and that the said cheques have not been honoured. Therefore, the owners have filed a suit claiming cancellation of the sale-deeds. On the basis of such suit filed, a decree was granted on the basis of compromise by Lok Adalat on 27.02.2016 wherein the borrowers agreed to pay amount specified in the compromise deed and that if the amount is not paid within six months, the property shall be old by the process of Court. Such Award of the Lok Adalat was modified by this Court in W.P.No.5820/2016 (Dinesh Leelwani and another vs. M/s. Arti Agrawal and Others) decided on 23.06.2016 in respect of a property of Smt. Simran Leelwani as she claimed that she was not a Director of Shrimati Jewellery House Pvt. Ltd. The owners have also filed almost same set of documents.
5.The argument of the petitioners is that the decree obtained by consent is a fraud so as to defeat the right of Bank who has advanced loan on the basis of security of property purchased by the borrowers. The decree by the Lok Adalat is a consent decree, therefore, such decree which has been passed at the back W.P.No.23234/2017 of the petitioners affecting the rights of the public sector Bank is nothing but a crude way to defeat the rights of the Bank to recover the due amount from the borrowers. It is contended that in the sale-deed, there is no assertion that any amount of sale consideration remains unpaid. Therefore, on the basis of memorandum of understanding, the sale-deed cannot be nullified. Reliance is placed upon the Supreme Court judgment reported as (2009) 4 SCC 193 (Kaliaperumal vs. Rajagopal and Another).
6.We have heard learned counsel for the parties and find that the act of the owners to file a suit for declaring the sale-deeds dated 26.06.2013 and 27.05.2015 as void and ineffective qua the rights of the Bank and is in fact a fraud committed to delay or frustrate the rights of Bank to recover the amount due as a secured creditor under the Act. In the said suit, the parties entered into a settlement to pay a specified amount within six months and in case the amount is not paid, the subject property can be sold through Court for realization of the said amount.
7.A perusal of the sale-deeds on record does not show that any part of the sale consideration was left unpaid. The first sale-deed dated 26.06.2013 clearly mentions that amount of Rs.6.75 Crore stands paid (Rs.1.75 Crore by other means and Rs.5 Crore by cheque No.659865 dated 31.03.2013) whereas in respect of second sale-deed amount of Rs.7.25 Crore have been said to be paid (Rs.50 Lac in cash on 01.08.2014; Rs.1,67,75,000/- through cheque No.000019, cheque No.418721 dated 04.04.2015 of Rs.5 Crore and Rs.7.25 lac as TDS). There is no recital in both the sale-deeds that any amount remains unpaid. Though the stand of the owners in the return filed is that Cheque for W.P.No.23234/2017 Rs.1.75 Crores bearing 25.9.2015;1.9.2015;7.10.2015 and 25.10.2015 in the first sale deed dated 26.3.2013 were dishonored on presentation whereas, the cheque No.000019 for Rs.1,67,75,000/- dated 1.11.2015 was dishonored paid as part of sale consideration of the sale deed dated 27.5.2017.
8.As per section 54 of the Transfer of Property Act, 1882, 'sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The Supreme Court in a judgment reported as Vidhyadhar Vs. Manikrao and another, (1999) 3 SCC 573, held that in order to constitute a sale, there must be transfer of ownership from one person to another i.e. transfer of all rights and interest in the property which are possessed by that person are transferred by him to another person. The words 'price paid or promised or promised or part-paid and part-promised' indicates the actual payment of whole of the price at the time of the execution of the sale deed is not a sine qua non for completion of the sale. Relevant extracts read as under:-
"35.Even if the findings recorded by the High Court that the plaintiff had paid only Rs. 500 to defendant No. 2 as sale consideration and the remaining amount of Rs. 4,500 which was shown to have been paid before the execution of the deed was, in fact, not paid, the sale deed would not, for that reason, become invalid on account of the provisions contained in Section 54 of the Transfer of Property Act which provide as under:
54."Sale" is a transfer of ownership in exchange for a price paid or promised or part- paid and part-promised. Such a transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. W.P.No.23234/2017 In the case of tangible immoveable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs; in possession of the property. A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.
36.The definition indicates that in order to constitute a sale, there must be a transfer of ownership from one person to another, i.e., transfer of all rights and interests in the properties which are possessed by that person are transferred by him to another person. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. The definition further says that the transfer of ownership has to be for a "price paid or promised or part- paid and part-promised". Price thus constitutes an essential ingredient of the transaction of sale. The words "price paid or promised or part-paid and part- promised" indicate that actual payment of whole of the price at the time of the execution of sale deed is not sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs. 100/-, the sale would be complete.
37.There is a catena of decisions of various High Courts in which it has been held that even if the whole of the price is not paid, the transaction of sale will take effect and the title would pass under that transaction. To cite only a few, in Gyatri Prasad v. Board of Revenue and Ors. (1973) Allahabad Law Journal 412, it was held that non-payment of a portion of the sale price would not effect validity of sale. It was observed that part payment of consideration by vendee itself proved the intention to pay the remaining amount of sale price. To the same effect is the decision of the Madhya Pradesh High Court in Sukaloo and another v. Punau, AIR 1961 MP 176.
38.The real test is the intention of the parties. In order to constitute a "sale", the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in presenti or in future. The W.P.No.23234/2017 intention is to be gathered from the recital in the sale deed, conduct of the parties and the evidence on record.
xxx xxx xxx
48.The Proviso to this clause was added by Section 19 of the Transfer of Property (Amendment) Act, 1929 (XX of 1929). The Proviso was introduced in this clause only to set at rest the controversy about the nature of the document; whether the transaction would be a sale or a mortgage. It has been specifically provided by the Amendment that the document would not be treated as a mortgage unless the condition of repurchase was contained in the same document."
9.The Supreme Court in the case of Kaliaperumal (supra) has held that the registration of sale deed is prima facie proof of an intention to transfer the property. If payment of consideration is a condition precedent for passing of title, held, title would not pass until full consideration is paid to seller. It was held that whether the parties intended that transfer of the ownership should be merely by execution and registration of the deed or whether they intended the transfer of the property to take place, only after receipt of the entire consideration, would depend on the intention of the parties. Such intention is primarily to be gathered and determined from the recitals of the sale deed. However, in the present case, there is no condition of any unpaid sale consideration or that property will be transferred on a future date."
"15.We have recoded finding above that the sale deeds transfer unequivocal right in property to the borrower free from all encumbrances. The Award/ decree passed by the Lok Adalat do not declare the sale deeds as null and void. The legal consequence of the Award of the Lok Adalat is that the owner is an unsecured creditor (Decree Holder) to recover the sum of Rs. 11 Crores from the borrower. In view of the said fact, the Bank as secured creditor has a priority charge over the property and only after satisfying the claim of the Bank, the unsecured creditor can execute the decree, therefore, decree in W.P.No.23234/2017 favour of the owners alternatively is subject to the rights of the Bank as a secured creditor against the property mortgaged by the borrowers.
16.The Bank is secured Creditor over a decree holder was never in doubt, but even in respect of crown debts, the Recovery of Debts and Bankruptcy Act, 1993 has been amended on 1-9-2016 by Central Act 44 of 2016 when Section 33-A has been inserted. The said section reads as under:-
"31-B. Priority to secured creditors.-- Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.
Explanation-- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code."
17.In view thereof, we hold that the decree dated 27.02.2016 granted by Lok Adalat as modified by the High Court on 23.06.2016 in W.P.No.5820/2016 will not affect any of the rights of the Bank as a secured creditor on the basis of mortgage of the property comprised in two sale deeds in favour of the Bank. The Bank as a secured creditor has a right to realize its dues by sale of such property in accordance with law.
18.Consequently, we direct the District Magistrate to immediately hand- over the possession of the property mortgaged in favour of secured creditors W.P.No.23234/2017 within two weeks. In case of any failure on the part of the District Magistrate or its Subordinate Officers, liberty is given to the petitioners to file a contempt petition before this Court. Petition is disposed of."
Being aggrieved, Intervener Mrs.Aarti Agarwal filed a Special Leave to Appeal(Civil) 14735/2018 before the Hon'ble Supreme Court of India on 28.05.2018. Accordingly, the Hon'ble Apex Court has passed an ex-parte order on 29.05.2018 with a direction "to maintain status-quo regarding possession of the property."
The Corporate-Debtor has defaulted payment and the date of default is 28.06.2015 as stated by the Petitioner Bank (page no. 3 of paper book). CIBIL Report (page no. 281 to 294 of the paper book) has been filed by the Bank which confirms that the Account is in default.
The Applicant Bank has filed statements of accounts with regard to the respective loan accounts of the Corporate debtor. (Page no. 295-303 of paper book). The Petitioner Bank has claimed their dues of Rs.28,81,59,044/- (Rupees: Twenty Eight Crores Eighty One Lakhs Fifty Nine Thousand Forty Four Only) as on 20.06.2018 as computed in the page no. 3 of the paper book, details of which is given below:
| Nature of Loan& Amount | Ledger Balance (Rs.) | Unpaid Interest + Penalty | Total Amount claimed to be in Default as on 20.06.2018 |
| Term Loan [Rs. 5.00 Crores] | 3,57,51,695/- | 2,32,86,686/- | Rs. 5,90,38,381/- |
| Term Loan [Rs.2.00 Crore] | 1,58,49,416/- | 1,03,60,056/- | Rs.2,62,09,472/- |
| Term Loan [Rs.5.00 Crores] | 5,00,00,000/- | 3,16,45,981/- | Rs.8,16,45,981/- |
| Cash Credit [Rs.8.00 Crores] | 7,68,39,186/- | 4,44,26,024/- | Rs.12,12,65,210/- |
| TOTAL CLAIMED AMT. | Rs.28,81,59,044/- |
The Petitioner Bank, in support of its contentions has annexed the details of Financial Debt, Records and evidences of default including copies of all the sanction letters, the workings showing the amount claimed to be in default and its calculation in tabular form as on 20.06.2018 along with ROC search report and Valuation reports.
The present application has been filed 18.07.2018 by the Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy before this Adjudicating Authority to initiate the Corporate Insolvency Resolution Process.
The Financial Creditor, to substantiate their claim, has enclosed following documents: -
Copy of various sanctions of credit facilities dated 30.03.2013, 31.10.2013 and 07.10.2014 (page no. 19 to 22, 23 to 30 and 31 to 41 of paper book) ii. Copy of Term Loan dated 31.03.2013 for Rs.5.00 Crores (page no. 42 of paper book.) iii. Copy of composite deed of Hypothecation dated 05.09.2013 for Rs.2.00 Crores (page no. 56 to 74 of paper book) iv. Copy of composite deed of Hypothecation dated 01.11.2013 for Rs.4.35 Crores (page no. 76 to 112 of paper book) v. Copy of composite deed of Hypothecation dated 20.11.2014 for Rs.8.00 Crores (page no. 114 to 149 of paper book) vi. Copy of composite deed of hypothecation dated 04.04.2015 for Rs.5.00 Crores (page no. 164 to 189 of paper book) vii. Copy of Loan/Cash credit agreement dated 04.04.2015 for Rs.5.00 Crores (page no. 151 to 163 of paper book) viii. Copy of Memorandum of record of deposit of title deeds by the borrowers dated 30.11.2013 and 22.07.2015 (page no. 193 to 246 of paper book) ix. Copy of Form No.CHG-1 regarding creation/ modification of chare filed with RoC on 10.11.2015 (page No.247 - 252 of paper book) x. Copy of valuation report dated 11.04.2018 regarding charged immovable property (page no. 253 to 267 of paper book) xi. Copy of CIBIL Report dated 27.06.2018 in respect of corporate debtor issued by TransUnion (page no. 281 to 294 of paper book)
In the present matter, this Tribunal, vide its order dated 27.07.2018 had directed the Petitioner Bank to serve the notice of date of hearing to the Corporate Debtor and file the proof of service of notice before this Tribunal. The Learned Lawyer for the Applicant has filed compliance for notice of hearing on 31.08.2018. Thereafter, vide orders dtd 29.07.2019, the Petitioner was directed to serve the notice by substitute mode of service, accordingly the Petitioner filed compliance for notice of hearing through paper publication on 29.08.2019. Thereafter, the Respondent, Corporate Debtor appeared before this Tribunal on 29.08.2018 and sought time to file objections within two weeks. It is observed that the Corporate Debtor or Counsel representing them, inspite of repeated adjournments, did not file any reply/objection to the present I.B. Petition. Accordingly, the right to file reply by the Corporate Debtor was closed vide orders dtd:30.09.2019. It is stated by the Learned Lawyer of Financial Creditor that it may be inferred that the Corporate Debtor has not denied its loan liability nor has disputed the debts which is of more than of rupees one lakh.
Financial Creditor filed this application under Section 7 of Insolvency and Bankruptcy Code, 2016 on 18.07.2018 and the matter was adjourned to 31.08.2018, 23.10.2018, 13.12.2018, 30.01.2019, 08.03.2019, 02.05.2019, 29.07.2019, 29.08.2019, 30.09.2019 & 08.11.2019. Arguments made by the Learned Lawyer representing the Financial Creditor, Shri Mahendra P. Parmar was heard on 22.11.2019. The Learned Lawyer for the Financial Creditor argued that the pendency of ay SARFAESI proceedings or other disputes, petition do not prevent Financial Creditor to trigger the CIRP and the Learned Lawyer pressed for admitting the application.
The matter was listed on 17.01.2020 for certain clarifications and accordingly, the Applicant Bank filed its clarification on 22.01.2020, wherein it is submitted that the credit facilities extended to the Corporate Debtor were secured by way of charge of hypothecation of stocks and book debts and by registered equitable mortgage of immovable property belonging to the Corporate Debtor, which is also recorded with RoC. The said properties are also described in the notice issued under Section 13(2) of the SARFAESI Act on 12.08.2015.
Further, it is also submitted that the Hon’ble Supreme Court in SLP No.14735 of 2018 passed the following order on 29.05.2018 –
“UPON hearing the counsel the Court made the following –
ORDER
Issue notice.
In the meanwhile, status quo, as of today, regarding possession shall be maintained by the parties.” On 16.10.2019, following order was passed –
“UPON hearing the counsel the Court made the following –
ORDER
Ld. Counsel for the petitioner has taken fresh steps in respect of Respondent Nos. 4 and 6. Registry to issue notice urgently.
Despite grant of last opportunity, Ld. Counsel for the petitioner has not taken requisite steps and also failed to furnish fresh particulars for effecting service upon respondents Nos. 7, 9 to 13. Matter be, therefore, processed for listing before the Hon’ble Judge in Chambers for further orders.”
It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is "Remedy in Rem" in respect of the CD.
The Petitioner Bank has suggested the name of Insolvency Professional to be appointed, if this petition is allowed and the proposed I.R.P. has also given his affirmation/consent in writing, which is annexed with the present I.B. Petition.
OBSERVATIONS
It is found that the Petitioner Bank has submitted the documents duly executed by the Corporate Debtor along with the statement of accounts in respect of the respective loan accounts showing dues, in support of their IB Petition for initiation of C.I.R.P.
The Cash Credit/Term loan were sanctioned and released by the Petitioner Bank and the same were availed by CD, Shrimati Jwellery House Pvt. Ltd. The charges have been registered by the CD with the ROC in favour of the Petitioner Bank on 10.11.2015 for Rs.20.00 Crores vide charge ID No.10442191, which is yet to be satisfied.
The CD has defaulted in making repayment of loan/credit facilities to the Petitioner Bank and the date of default is 28.06.2015. The statement of accounts as on 20.06.2018 in respective Loan Account under Banker's Book Evidence Certificate annexed at Page no.295 to 303 confirms the amount in default as on 20.06.2018. Further, it is observed from Company Master Data available on MCA Portal that there is a charge of Rs.20.00 Crores existing on the company as on 26.06.2013, which was modified on 22.07.2015 and the charge is still open and not satisfied.
The Petitioner Bank has filed the petition within the period of limitation, as the payment of Rs.2,10,000.00 has been made into the loan account by Corporate Debtor on 09.11.2015, whereas this petition under Section 7 has been filed on 18.07.2018, which is within 3 years. Moreover, the Dist. Magistrate has allowed the application moved by the Applicant Bank on 05.11.2016 and the Applicant has taken measures under SARFAESI Act by taking the possession of the property on 16.11.2015 and further, recall notice was issued by the Applicant on 25.01.2016. Further, the charge created with the RoC on 26.06.2013 was modified on 22.07.2015 by executing a memorandum of deposit of title deeds by the Corporate Debtor and the application has been filed on 18.07.2018.
The Corporate Debtor has defaulted in making repayment of Cash Credit/Term Loan to the Petitioner Bank and the date of default is 28.06.2015. The Statement of accounts and the CIBIL Reports (Page no.281-303 of paper book) submitted by the applicant Bank confirm the default committed by the Corporate Debtor.
The entire credit facilities of Rs.20.00 crores have been secured by way of charge of hypothecation of stocks, book debts and two properties vide sale deeds dated 26.06.2013 and 27.05.2015. It is reported that the said immovable properties are (i) Half portion south side of land and building of Shop cum residence lease hold plot situated at E-5/17, Arera Colony, Tah Huzur Dist. Bhopal & (ii) Half portion south side of land and building of Shop cum residence lease hold plot situated at E-5/17, Arera Colony, Tah Huzur Dist. Bhopal, which is also described in the demand notice date 12.08.2015 issued under Section 13(2) of the SARFAESI Act. It is reported that the Respondent/Corporate Debtor is having its registered office on the address of mortgaged property i.e. E-5/17, Vithal Market, Arera Colony, Bhopal, which is also registered with RoC, Gwalior as the registered address of the company.
It is held by the Hon'ble High Court of Jabalpur in the matter of Bank of Maharastra & Another V/s. The District Magistrate & Others in Writ Petition No.23234/2017, that -
'15. We have recoded finding above that the sale deeds transfer unequivocal right in property to the borrower free from all encumbrances. The Award/ decree passed by the Lok Adalat do not declare the sale deeds as null and void. The legal consequence of the Award of the Lok Adalat is that the owner is an unsecured creditor (Decree Holder) to recover the sum of Rs. 11 Crores from the borrower. In view of the said fact, the Bank as secured creditor has a priority charge over the property and only after satisfying the claim of the Bank, the unsecured creditor can execute the decree, therefore, decree in W.P.No.23234/2017 favour of the owners alternatively is subject to the rights of the Bank as a secured creditor against the property mortgaged by the borrowers.
16.The Bank is secured Creditor over a decree holder was never in doubt, but even in respect of crown debts, the Recovery of Debts and Bankruptcy Act, 1993 has been amended on 1-9-2016 by Central Act 44 of 2016 when Section 33-A has been inserted."
17.In view thereof, we hold that the decree dated 27.02.2016 granted by Lok Adalat as modified by the High Court on 23.06.2016 in W.P.No.5820/2016 will not affect any of the rights of the Bank as a secured creditor on the basis of mortgage of the property comprised in two sale deeds in favour of the Bank. The Bank as a secured creditor has a right to realize its dues by sale of such property in accordance with law.
18.Consequently, we direct the District Magistrate to immediately hand-over the possession of the property mortgaged in favour of secured creditors W.P.No.23234/2017 within two weeks. In case of any failure on the part of the District Magistrate or its Subordinate Officers, liberty is given to the petitioners to file a contempt petition before this Court.
Being aggrieved, Intervener Mrs.Aarti Agarwal had filed a Special Leave to Appeal(Civil) 14735/2018 before the Hon'ble Supreme Court of India on 28.05.2018. However, the Hon'ble Supreme Court in SLP No.14735 of 2018 passed the following order on 29.05.2018 –
"UPON hearing the counsel the Court made the following –
ORDER
Issue notice.
In the meanwhile, status quo, as of today, regarding possession shall be maintained by the parties." On 16.10.2019, following order was passed –
"UPON hearing the counsel the Court made the following –
ORDER
Ld. Counsel for the petitioner has taken fresh steps in respect of Respondent Nos. 4 and 6. Registry to issue notice urgently.
Despite grant of last opportunity, Ld. Counsel for the petitioner has not taken requisite steps and also failed to furnish fresh particulars for effecting service upon respondents Nos. 7, 9 to 13. Matter be, therefore, processed for listing before the Hon'ble Judge in Chambers for further orders." Hence, it is evident that there is no stay on any proceedings from the Hon'ble Supreme Court.
It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is "Remedy in Rem" in respect of the CD.
The present I.B. Petition is filed by the duly authorised official of the Applicant Bank in a prescribed format under Section 7 of the I.B. Code, annexing copies of loan documents, confirming the existence of debt due and default and proposed a name of Resolution Professional to act as an Interim Resolution Professional (IRP).
ORDER
Considering the material papers filed by the Petitioner Bank and the facts mentioned in the Para No.27, 28, 29, 30, 31, 32, 33, 34, 35 & 36, this Adjudicating Authority is satisfied that,
The Corporate Debtor availed the loan /credit facilities from the Financial Creditor Bank(Bank of Maharashtra);
Existence of debt is above Rs. One Lac;
Debt is due;
Default has occurred on 28.06.2015;
Petition had been filed within the limitation period, as payment of Rs.2,10,000/- was made by the Corporate Debtor on 09.11.2015, into the loan account, whereas this petition under Section 7 has been filed on 18.07.2018; which is within the limitation period of three years.
The entire matter was entangled in the Court cases, from the date case was filed before DRT, Jabalpur on 03.04.2018 which is still continuing. Further, the modification of charge with RoC for availing the renewed facilities is a continuing liability by the Corporate Debtor.
Corporate Debtor is having its own legal existence and it has defaulted in repaying the loan. Default might have been on account of many reasons i.e. mismanagement of the affairs of Corporate Debtor, Diversion of fund, Policy change of the Government, Non-implementation of upgradation of the Machineries, Technology etc. IBC has come into existence in 2016 and admission of the petition under Section 7 of IBC does not necessarily lead into liquidation and on the other hand, the company, during the process of CIRF, must not lose the opportunity of having a new Expert Management, Fresh Investment, New Technology for its revival. The Corporate Debtor which is under stress may now have a chance to revive even with or without any haircut of its liability in the present Falling Interest Rate Regime, Changes in Companies Act, Competitive Market etc. Hence, these above points also strengthen the need of admission of the petition in the interest of the revival of the Corporate Debtor.
Copy of the Application filed before the Tribunal has been sent to the Corporate Debtor and the application filed by the Petitioner Bank Under Section 7 of IBC is found to be complete for the purpose of initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.
Hence, the present IB Petition is admitted with the following Directions/observations. The date of admission of this petition is 20.02.2020.
As per the provisions of Section 13 and 14 of the I.B. Code on the date of commencement of insolvency, this Adjudicating Authority declares moratorium with effect from today for prohibiting all of the following, namely: -
I. (a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);
The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
II. The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period.
III. The provisions of sub-section (1) shall not apply to
such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
IV. The order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process.
This Adjudicating Authority hereby appoints, as proposed, Mr. Amresh Shukla, having Insolvency Professional Registration No.IBBI/IPA-001/IP-P00120/2017-18/10255, Email ID: [email protected], Address: F-05, Jaideep Complex, 112, Zone-II, M.P.Nagar, Bhopal, Madhya Pradesh, India as an Interim-Resolution Professional. The Interim Resolution Professional is further directed to make public announcement of moratorium in respect of Corporate Debtor soon after receipt of an authenticated copy of this order and to act further as per the order/direction issued by this Adjudicating-Authority and to follow the provisions Under Section 13 and 14 and other relevant provisions of the Insolvency and Bankruptcy Code.
The Interim Resolution Professional/Resolution Professional and CoC are hereby directed not to transfer, encumber, alienate or dispose of the two properties vide sale deed dated 26.06.2013 and 27.05.2015, where the Hon'ble Supreme Court in Special Leave to Appeal(Civil) 14735/2018 ordered status quo as of 29.05.2018. The IRP is also directed to appear on behalf of the Corporate Debtor before the Hon'ble Supreme Court, if required /called for, in this matter.
IRP/RP is also directed to come before this Adjudicating Authority, once Special Leave to Appeal(Civil) 14735/2018 is disposed of by the Hon'ble Supreme Court, for further instructions/directions.
The IRP/RP/CoC must comply the above instructions mentioned in para no.40 & 41 during the process of Corporate Insolvency Resolution Process without fail.
The IRP is hereby advised to adhere the time limit as stipulated for completion of the Corporate Insolvency Resolution Process ("CIRP" in short) and perform the duties as specified Under Section 17, 18, 20 and 21 of I.B Code. The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, in 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 personnels connected with the Corporate Debtor, its promoters or any other persons 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, 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 IRP will be at liberty to proceed against all secured assets being movable or immovable properties of the Corporate Debtor Company, except the properties against which the Hon'ble Supreme Court has granted "status quo" in Special Leave to Appeal(Civil) 14735/2018 on 29.05.2018. IRP shall approach this Adjudicating Authority subsequent to the final adjudication of the above matter by the Hon'ble Apex Court for further directions.
It is also observed that the Petitioner Bank has claimed total dues of INR 288159044.00 as on 20.06.2018, which is inclusive of undebated interest and penalty of INR 10,97,18,747.00 One of the prime objective of the Insolvency and Bankruptcy Code, 2016 is to quickly find out a viable Insolvency Resolution Plan for the Corporate Debtor and in order to have a Resolution Plan Viable, feasible and implementation successful, in the era of Minimum Cost of Funds-Based Lending Rate ("MCLR" in short)/Repo Linked Interest Rate/Interest Rate Falling Regime and Competitive market condition, Committee Of Creditor(s) (COC) may explore, while finalizing the Resolution Plan for the Corporate Debtor, the possibility of loading maximum interest at the Applicant Bank's Base Rate (BR) +1% from the date of default to the date of implementation of MCLR and further from the date of implementation of MCLR till the date of approval of the Resolution Plan at the rate of Petitioner Bank's One Year MCLR or One Year MCLR + 1% without any penal /overdue interest.
The Registry is hereby directed to communicate the authenticated copy of this order to the Financial Creditor, Corporate Debtor Company, the I.R.P and also to the Registrar of Companies, Gujarat immediately through speed post / registered post.
The commencement of Corporate Insolvency Resolution Process shall be effective from the date of this order.
Thus the present I.B petition filed under Section 7 of the IBC stands admitted on 20.02.2020 with the above Observation and Directions.