Bharat Capital and Holdings Limited

This Application is filed under Section 10 of the Insolvency and Bankruptcy Code, 2016 (Code/IBC) read with Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (AAA Rules) by Bharat Capital and Holdings Limited (Corporate Debtor/Applicant), seeking initiation of its Corporate Insolvency Resolution Process (CIRP). It is submitted that the Application is preferred owing to the financial stress faced by the Corporate Applicant, consequent to which it is not in a position to repay the debts due to its creditors, and is in default.

The Corporate Applicant is a Company incorporated on 04.02.1991, under the provisions of the Companies Act, 1956, with Corporate Identity Number U65990MH1991PLC060092. It is engaged in the business as financier. The registered office of the Applicant is at Unit No. 102-B, Dipti Classic Premises CHS Ltd. Suren Road, Andheri (E) Mumbai- 400093, and therefore, this Bench has jurisdiction to entertain and decide the Application. It is submitted that the Corporate Applicant availed an unsecured loan of Rs.7,50,00,000/- on temporary basis from the Financial Creditor but could repay only a part payment of Rs.1,06,00,000/- and another payment of Rs.2,03,43,200/-, resulting in outstanding dues of Rs.4,40,56,800/-.

It is submitted that due to continuous financial stress and deterioration in its financial position, the Corporate Applicant has become unable to discharge its financial obligations as and when they became due. Consequently, the Corporate Applicant resolved to invoke the provisions of Section 10 of the Code for commencement of CIRP against itself.

The Corporate Applicant is in default of Rs.4,40,56,800/- (Four Crore Forty Lakh Fifty-Six Thousand Eight Hundred Rupees) to the Financial Creditor and the date of default mentioned in the Application is 31.03.2021. The particulars of the Financial Creditor together with the amount due and the supporting documents have been placed on record along with the Application. Further, the Corporate Applicant submits that it is in default of Rs.25,24,14,824/- to the Income Tax Department, as Operational Creditor. The total debt of the Corporate Applicant has been disclosed in Part III of Form 6 of the Application as Rs.29,64,71,624/-.

It is further submitted that the Operational Debt arises pursuant to the Online service of Orders vide DIN & Letter No. ITBA/COM/F/17/02/2023-24/1052542199(1) dated 02.05.2023, received from the Income Tax Department, for the Assessment Year 2017-2018, whereby a substantial demand of Rs.25,24,14,824/- (Twenty-Five Crore Twenty-Four Lakh Fourteen Thousand Eight Hundred and Twenty-Four Rupees) was raised by the Department against the Corporate Applicant as outstanding since 08.07.2022.

It is further submitted that the Corporate Applicant has filed the list of Financial Creditors, list of Operational Creditors, books of account, audited financial statements for the financial years 2020-2021; 2021-2022; 2022-2023 and 2023-2024, ledger accounts and other supporting documents evidencing the financial position of the Corporate Applicant. It is also submitted that the said documents clearly demonstrate that the Corporate Applicant has incurred substantial liabilities and is in default.

Considering the deep financial stress and its inability to pay off its liabilities in time, the board of directors of the Applicant in the Special Resolution passed in the Extra Ordinary Meeting held on 19.05.2023, resolved to move an application under Section 10 of the IBC for initiation of the CIRP of the Corporate Applicant. Therefore, the present Application is filed for the initiation of CIRP, which is to be admitted.

We have heard the Ld. Counsel for the Applicant and perused the records.

The Corporate Applicant has enclosed a copy of the Special Resolution passed by the Board of Directors at the Extra Ordinary General Meeting held on 19.05.2023 to file the application under Section 10 of the Code, which reads as under:

The Board of Directors of the Corporate Applicant in the meeting dated 22.04.2023 had also authorised Mr. Rajesh Bohra and Dr Sangeeta Bohra, Advocates of the company, to file necessary application under the Code before the Tribunal, and take necessary actions in matters connected with this Application.

Further, the Applicant has submitted copies of the Audited Financial Statements of the Corporate Applicant for the financial years, 2020-2021; 2021-2022; 2022-2023, and 2023-2024. The liability of the Corporate Applicant towards unsecured loans has been captured in the Balance Sheet as Rs.4,40,56,800/- as on 31.03.2023. Further, liability towards income-tax as on 08.07.2022 is also reflected as Rs.25,24,14,824/-, in the Online service of Orders- Letter dated 02.05.2023, raised by the Income Tax Department, taking the total default to Rs.29,64,71,624/-. Hence, we observe that the Corporate Applicant is in default beyond the threshold of One Crore Rupees in terms of Section 4 of the Code. It is also seen from the Audited Financial Statements for the year ended 2023-2024 that the Corporate Applicant has no income and is also having substantial losses.

Further, to the notice issued to the Financial Creditor, namely, Gayatri Pipes & Fittings Private Limited, they have submitted, by way of affidavit, No Objection to the admission of the present Application, which has been placed on record by the Corporate Applicant.

The Income Tax Department has also filed an Affidavit in Reply placing its stand on record. The Corporate Applicant has thereafter filed a Rejoinder controverting the averments made in the Reply and explaining the circumstances leading to the filing of the present Application. The Corporate Applicant has also filed Written Submissions and relied upon various judicial precedents, inter alia, containing the decision of the Hon'ble NCLAT, Principal Bench, New Delhi in Unigreen Global Private Limited Vs. Punjab National Bank & Ors. [(2017) ibclaw.in 05 NCLAT]. Applying the principle laid down in Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Company Appeal (AT) (Insolvency) No. 1 & 2 of 2017], the Hon’ble NCLAT held that Section 10 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information as required to be submitted in Form 6 of the AAA Rules. If all the information is provided by an applicant and if the corporate applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground.

It is noted that the authorised director of the Corporate Applicant, Mr. Vinay Rajaram Chavan has placed on record an Affidavit on behalf of the Corporate Applicant. This Application is filed as per Rule 7 of the AAA Rules, in Form 6. All required information is also furnished therein. The financial statement placed on record acknowledges the existence of debt and default by the Applicant. As per Part III of the Application, the date of default by the Corporate Applicant is 31.03.2021. However, it is seen that the default of Rs.4,40,56,800/- due to the Financial Creditor is reflected in the Balance Sheet as on 31.03.2022 and on 31.03.2023. The Online service of Orders No. DIN & Letter No. ITBA/COM/F/17/02/2023-24/1052542199(1) dated 02.05.2023 by the Income Tax Department, for a demand of Rs.25,24,14,824/- for the Assessment Year 2017-2018 is also on record. There is nothing to show that the debt fell due to be paid and became payable was paid to the Financial Creditor and the Income Tax Department, and hence the Corporate Applicant has defaulted. This Application is filed on 21.08.2023, and the same falls within the period of limitation.

Section 10 of the IBC provides for a corporate applicant to file application for initiating the insolvency resolution process if it is in default. The same default amount of One Crore Rupees, specified under Section 4 of the Code, is applicable to a corporate applicant under Section 10 also. In view of the above, we conclude that the present Corporate Applicant has committed default of more than the specified amount under the IBC.

The Corporate Applicant has suggested the name of Mrs. Anjali Nirav Choksi, having Registration no. IBBI/IPA-001/IP-P00820/2017-2018/11382 for appointment as the Interim Resolution Professional (IRP). The proposed IRP has also submitted his Consent in Form 2, confirming eligibility and that there are no disciplinary proceedings pending against her. She possesses valid AFA up to 31.12.2026 as per records available on the website of the Insolvency and Bankruptcy Board of India (IBBI).

After hearing the submissions and upon perusing the supporting documents, we are of the considered view that the Application made by the Corporate Applicant is complete in all respects as required by law. Hence, the present Application deserves to be admitted.

In the result, C.P. (IB) No. 747 of 2023 filed under Section 10 of the IBC by Bharat Capital and Holdings Limited, the Corporate Applicant for initiating Corporate Insolvency Resolution Process (CIRP) is hereby admitted.

We further declare moratorium under Section 14 of the IBC with consequential directions as mentioned below:

VIII.The Registry is directed to communicate this Order to the Corporate Applicant and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.