BMM Ispat Limited vs Capiqal Consultancy Services Private Limited

This is an Application bearing C.P. (IB) No.137/MB/2025 filed on 30.10.2024 by BMM Ispat Limited, the Applicant (Financial Creditor) 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 AAA Rules”) through Mr. Silas Nerella, Associate Vice President - PR of the Applicant vide Board Resolution dated 24.10.2024 for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of Capiqal Consultancy Services Private Limited, the Corporate Debtor (CD).

The Applicant and the CD are registered under the Companies Act, 1956. The CD informed the Applicant vide an undated letter (attached on Page No.70 Exhibit-O of the Application) that the CD has changed its name from ‘Laxmipati Management Services Private Limited’ to ‘Capiqal Consultancy Services Private Limited’. The Applicant had granted Inter Corporate Deposit (ICD) of Rs.20 Crore to the CD under the ICD Agreement dated 29.01.2021.

The total amount claimed to be in default by the Applicant against the CD in Part-IV of the Application is Rs.16,91,72,520/- (Sixteen Crore Ninety-One Lakh Seventy-Two Thousand Five Hundred and Twenty Rupees) due as on 27.09.2024 inclusive of principal amount of Rs.11,00,00,000/- (Eleven Crore Rupees) and interest amount of Rs.3,58,10,328/- (Three Crore Fifty-Eight Lakh Ten Thousand Three Hundred and Twenty-Eight Rupees) and penal interest of Rs.2,33,62,192/- (Two Crore Thirty-Three Lakh Sixty-Two Thousand One Hundred and Ninety-Two Rupees).

The Applicant has relied on the following documents:

The Applicant issued a Letter on 06.11.2021 to the CD seeking refund of the ICD loan amount. Again, Legal Notice dated 06.12.2021 was issued through the Applicant’s advocates to the CD for termination of the ICD Agreement dated 29.01.2021 and calling upon the CD to pay the total amount of Rs. 11.26 crore outstanding as on 30.11.2021. Another Legal Notice dated 26.09.2022 was issued by the Applicant to the CD demanding the dues amounting to Rs. 12.85 crores as on 19.09.2022. The Letter dated 06.11.2021 is annexed at Exhibit-G, Legal Notice dated 06.12.2021 at Exhibit-H and Legal Notice dated 26.09.2022 at Exhibit-I.

Perusal of record of default attached as Exhibit-J at Pg no.39 of the Application reveals that the date of default is 31.10.2021, the amount in default is Rs. 16,91,72,520/- and the status of authentication of default is “deemed to be authenticated”.

Hence, the instant Application under Section 7 of the Code was filed by the Applicant seeking for initiation of CIRP against the CD.

The Applicant had disbursed Rs. 20,00,00,000/- to the CD, under the ICD Agreement dated 29.01.2021. The copy of the ICD Agreement dated 29.01.2021 is attached at Annexure-K.

The CD had repaid the part payment of Rs. 5,00,00,000/- on 30.01.2021 and Rs. 4,00,00,000/- on 24.02.2021. Copy of bank statement indicating receipt of payment is annexed at Exhibit- L and M.

The Applicant has attached an email dated 31.05.2021 received by the Applicant from the CD, annexed as Exhibit-E, vide which the CD requested for extension of the repayment period till June end i.e. till 03.06.2021. The CD repaid Rs. 1,00,00,000/- on 28.10.2021, which was adjusted towards TDS. Copy of the bank statement of Rs.1 Crore payment is annexed at Exhibit-N.

Further, the last date for extension for full repayment of the total outstanding debt was extended till 31.10.2021 by the Applicant vide its email dated 01.09.2021 read with email of the CD dated 10.08.2021. A copy of the email dated 10.08.2021 is annexed at Exhibit-F.

The Applicant has attached the Balance Confirmation of total outstanding debt including accrued interest and penal interest acknowledged by the CD dated 04.04.2022, 05.04.2023 and 01.04.2024. The balance confirmations are annexed at Exhibit- P, Q and R.

The Applicant issued a reminder Notice dated 30.09.2024 which is annexed at Exhibit-T.

The Applicant has relied upon the following judgment of Hon’ble NCLAT, New Delhi in Vivek Kumar Kathotia v. Emami Realty Limited and Ors, Company Appeal (AT) (insolvency) No. 1597 of 2023 (2024 SCC OnLine NCLAT 141).

The CD has filed Affidavit-in-Reply on 29.04.2025. The same was affirmed by Mrs. Archana Maheshwari – Director and Authorised Signatory of the CD vide Board Resolution dated 06.09.2024.

In the reply, the CD submits that the Application is ex-facie barred under Section 10A of the Code and is liable to be dismissed at the threshold. As per Clause 2.2 of the ICD Agreement dated 29.01.2021, the date of default is 15.03.2021 which falls within the statutory bar imposed under Section 10A of the Code. The Applicant has shifted the date of default to 31.10.2021 which is a deliberate and misconceived effort to circumvent the statutory bar under Section 10A of the Code. The CD has relied on the judgment of the Hon’ble Supreme Court in Ramesh Kymal v. Siemens Gamesa Renewable Power (P) Ltd., (2021) 3 SCC 224, having categorically held that applications in respect of defaults during the suspension window are barred forever. It has also relied on the judgment by Hon'ble NCLAT in Connecting People of India v. GSP Power Systems (P) ltd., 2023 SCC Online NCLAT 1966, where in it was held that mere fact that proceedings were initiated after the expiry of the suspension window will not cure the bar under Section 10A.

The CD states that the Applicant has wrongly and falsely asserted the date of default as 31.10.2021 in the Application despite being aware that as per the ICD Agreement dated 29.01.2021, the default date was 15.03.2021. This misrepresentation amounts to an abuse of the process of law and is a calculated attempt to mislead the Tribunal by passing the statutory bar under Section 10A of the Code.

The Applicant has incorrectly stated in the Application that a copy of the Record of Default with the Information Utility has been annexed as Exhibit J. However, no such document has been annexed to the Application. This omission is material, as existence of a default is a jurisdictional fact under the Code and failure to place on record such document renders the Application procedurally defective and liable to be dismissed.

The CD denies the amount of Rs.16,91,72,520/- is outstanding and the calculations relied by the Applicant in Exhibit-W.

The Applicant filed the rejoinder on 05.05.2025. It has denied all the statements and averments made by the CD in its reply. It is submitted by the Applicant that the Record of Default is duly annexed to the Application as Exhibit-J and the defect free and soft copy of the Application was served on the CD’s email id i.e. 'company.world05@gmail.com', vide email dated 17.03.2025.

The Record of Default states the date of default as 31.10.2021 for the amount claimed in default, i.e., Rs.16,91,72,520/- and reflects the status of authentication of default as 'Deemed to be Authenticated'. Further, the supporting documents submitted with the Application were also provided as supporting documents for the Record of Default. The Information Utility duly considered the same, and the CD did not dispute it, pursuant to which the Record of Default was generated and issued.

It is stated that as per Clause 2.2 of the ICD Agreement dated 29.01.2021, the Applicant was to be repaid on or before 15.03.2021. However, two subsequent extensions of ICD Agreement were sought by the CD to repay the facility amount along with interest. The CD sought the first extension on 31.05.2021, extending the repayment period till 30.06.2021. Thereafter, the CD sought a second extension on 10.08.2021, extending the repayment to be made on or before 31.10.2021. Thus, the repayment of ICD Agreement stood extended until 31.10.2021.

The CD in its reply has at no point denied the fact of seeking extension and/or the date of repayment being extended. The email dated 01.09.2021, addressed by the Applicant, that the Applicant agreed to and requested repayment as per the extended timeline of 31.10.2021. Accordingly, the date of default i.e. 31.10.2021, which clearly falls outside the purview of the period specified and notified under Section 10A of the Code.

The Legal Notice dated 06.12.2021, issued by the Advocates on behalf of the Applicant, states that the Applicant had agreed to both first and second extensions of the repayment period. Despite the grant of these two extensions, the CD failed to make repayment on or before 31.10.2021, leading to the issuance of the said Legal Notice. Furthermore, it is submitted that the Applicant was at its liberty and discretion to grant a cure period to the CD to remedy any default, in accordance with Clause 2.4 of the ICD Agreement.

The Applicant has brought on record an email dated 01.09.2021, which is response to the email of the CD dated 10.08.2021, vide which the CD requested for extension of the ICD till October end. Vide the email dated 01.09.2021 the Applicant has requested the CD to make payment as committed in its email dated 10.08.2021.

We have heard both the Ld. Counsels and have perused the records as placed before us. Our findings in the matter are as under: -

The Applicant at the request of the CD agreed to grant an ICD facility for an amount of Rs. 20,00,00,000/- upon the agreed terms and conditions between the parties. In relation to the above facility, the parties executed an ICD Agreement dated 29.01.2021.

The Applicant disbursed the amount of Rs. 20,00,00,000/- to the CD. The same can be confirmed from the bank account statement of the Applicant dated 30.01.2021 bearing Current Account No. 107305006303 which shows that the said amount is disbursed to the CD on 29.01.2021. Therefore, it is clear that there arose a financial transaction between the parties and a disbursement is made from the Applicant to the CD.

The CD had made part payments of Rs. 5 Crore on 30.01.2021 and Rs. 4 Crore on 24.02.2021. These part payments are reflected in the statement of account of the Applicant as mentioned on the above dates bearing Current Account No. 107305006303 for a period of 29.01.2021 to 24.02.2021. The Applicant has also attached Certificate from ICICI Bank dated 19.10.2024 confirming the above transactions in the bank account of the Applicant.

The ICD Agreement dated 29.01.2021 has interest clause which was payable by the CD as follows:

Further, on perusal of the ICD Agreement dated 29.01.2024, particularly Clause 2.2 and Clause 2.4, the repayment and default terms state as follows:

The repayment date as per the ICD Agreement as referred above was on 15.03.2021. The CD did not pay the due amount on this date and requested for an extension for payment of the outstanding due vide email dated 31.05.2021 for extension of the repayment period. Further, the CD could not pay the due amount and asked another extension vide an email dated 10.08.2021. The same was extended by the Applicant until 31.10.2021. The Applicant has annexed an email dated 10.08.2021 where the CD requested for extension of repayment of the outstanding amount as follows:

Even after the above extension, the CD failed to repay the due amount and the Applicant sent a Legal Notice dated 06.12.2021 for the repayment of the amount due and payable by the CD. The Applicant sent a reminder notice to the above letter to the CD on 26.09.2022. But no amount was paid by the CD except for Rs. 1 Crore on 28.10.2021, which was adjusted towards the TDS. This amount is reflected in the SBI bank account of the Applicant bearing Account No. 39589871526.

Therefore, due to the extensions given by the Applicant the date of default is taken as 31.10.2021 as the CD failed to make payment on the said date. The Applicant has relied on judgment of Hon’ble NCLAT, New Delhi in Vivek Kumar Kathotia v. Emami Realty Limited and Ors, Company Appeal (AT) (insolvency) No. 1597 of 2023 (2024 SCC OnLine NCLAT 141) where it was held that,

The CD has acknowledged balance confirmation of total outstanding debt including accrued interest and penal interest on 04.04.2022, 05.04.2023 and 01.04.2024. Therefore, the CD is admitting that he has committed default in payment of the outstanding dues.

The CD has raised the objection that the date of default taken by the Applicant i.e. 31.10.2021 is incorrect. The actual date of default as per the ICD Agreement is on 15.03.2021, which falls under Section 10A of the Code. The CD had requested for extension of time to pay the outstanding debt amount and the same was granted by the Applicant. It was also not denied by the CD that he was granted extension to pay the outstanding due of the Applicant. Thus, the extension granted by the Applicant changes the event of default and therefore, 31.10.2021 will be the correct date of default as per the request made by the CD. The CD has relied on the judgment of Hon’ble Supreme Court in Ramesh Kymal v. Siemens Gamesa Renewable Power (P) Ltd., (2021) 3 SCC 224. This is a case where the Hon’ble Supreme Court held that an Application under the Code cannot be filed during the suspension period under Section 10A. In the present case considering the date of default to be 31.10.2021, we are of the view that in the present matter Section 10A is not applicable.

The CD contested that the NeSL record of default is not attached by the Applicant. But on perusal of the Application we see that the record of default is attached and the status of authentication of default is shown as “Deemed to be Authenticated”.

It is well-established that for the purpose of admission of Section 7 Application, what is paramount is the occurrence of default. As held by the Hon’ble Apex Court in Innoventive Industries Ltd. Vs. ICICI Bank (2018) 1 SCC 407, the moment the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted. It is of no matter that the debt is disputed so long as the debt is due and payable unless interdicted by some law. In view of this legal position, it is clear that the Applicant has placed on record necessary evidences and materials to demonstrate the existence of the financial debt exceeding the minimum threshold of Rs.1 Crore prescribed under Section 4 of the Code due and payable by the Corporate Debtor as well as the default in repayment thereof by the CD.

The Applicant has proposed Interim Resolution Professional (IRP) in compliance with Section 7(3)(b) of the Code. It has proposed the name of Mr. Gonugunta Murali, a registered Insolvency Professional as the Interim Resolution Professional (IRP) to carry out the functions as mentioned under the Code. The Applicant has provided his valid AFA in Form B valid till 31.12.2025 and has also given his consent and also the declaration in Form 2, inter alia, stating that no disciplinary proceeding is pending against him.

We find that the Applicant has provided all the required information in the Application and has attached all the required documents and therefore, the Application filed by the Applicant is complete.

We find that all pre-requisites of Section 7(5)(a) of the Code are fulfilled and, accordingly, we are satisfied that the instant Application is fit for admission under Section 7 of the Code.

In view of the aforesaid findings, Application bearing C.P.(IB) No. 137/MB/2025 filed under Section 7 of the Code by BMM Ispat Limited, the Financial Creditor, for initiating CIRP in respect of Capiqal Consultancy Services Pvt. Ltd, the Corporate Debtor is hereby admitted.

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