Canara Bank vs Rajdeep Buildcon Private Limited

The case is fixed for pronouncement of the order. The order is pronounced in the open court vide separate order. In the result, the above C.P. (IB)/121(MB)2025 is admitted. Detailed order is being uploaded on the NCLT portal today.

[PER: CORAM]

This C.P. (IB) No.121/MB/2025 (Application) was filed on 14.06.2024 by Canara Bank, the Financial Creditor (FC) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Rajdeep Buildcon Private Limited, the Corporate Debtor (CD), for alleged default of financial debt amounting to Rs.8,74,08,242.85/- (Eight Crores Seventy-Four Lakhs Eight Thousand Two Hundred Forty Two Rupees and Eighty Five Paise) as on 17.03.2023. In addition to the above, various Bank Guarantees (BGs) issued by the Applicant Bank on behalf of the CD amounting to Rs.17,85,70,393/- (Rupees Seventeen Crores Eighty Five Lakhs Seventy Thousand Three Hundred Ninety Three) were outstanding as on 17.03.2023, which shall also be included in the default amount in case of invocation of the said BGs. The NPA date is stated as 17.05.2022 in Part-IV.

The present Application was originally pending before Court-V of this Tribunal. It was later transferred to this Court and listed for the first time on 11.03.2025.

The CD is the Principal Borrower engaged in the construction of roads and bridges, flyovers, railway overbridges, highways, and various types of industrial and factory buildings.

The Applicant herein, upon a written request of the CD, sanctioned the following credit facilities: -

The above credit facilities were reviewed (enhanced/reduced/renewed) from time to time as per the table below: -

In 2017, a consortium was formed and Axis Bank was appointed as the leader of the consortium consisting of Axis Bank, ICICI Bank, PNB, Canara Bank, and RBL Bank. Pursuant to this, Interse Agreements and Consortium Agreements were entered into, and thereafter, Joint Loan documentation was executed by the Consortium with the CD.

The Applicant, in order to secure its financial facilities granted to the CD created, by way of Hypothecation and registered mortgage, charge over the following properties of the CD:

A. Immovable properties

a. Indenture of Mortgage dated 11.02.2010 which is duly registered with the office of the Sub Registrar Haveli No.8 at serial No. 1591/2010 in respect of the following property: (Note: The following properties are the secured properties duly secured in favour of the Financial Creditor belonging to the Corporate Debtor. There are other secured properties which are not Included in the present Company Petition since the same belongs to individual mortgagers.)

HOTA KD TRIPATHI

All that price and parcel of the property land and building bearing Survey No. 9/1A, Plot No. 24 admeasuring about 279 sq. mtrs, along with structure standing thereon constructed in load bearing type situated at Savedi, Taluka Ahmednagar Dist-Ahmednagar and bounded as under: On or towards East: By open Space On or towards West: By Layout road On or towards North: By Plot No. 25 On or towards South: By Plot No. 23 Together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth, both present and future.

All the price and parcel of the property Bungalow No. 2 consisting of ground plus first floor total admeasuring about 2276 sq. ft. i.e. 211.52 sq. mtrs (ground floor 1138 sq.ft and first floor 1138 sq. ft. i.e. 105.52 sq. mtr each) constructed on the land and ground bearing Plot No.3 admeasuring about 355.14 sq.mtrs (as per Sale Deed 306,69 sq.mtr) out of sanctioned layout ofland bearing final plot no. 323 (part) S.No. 31/1A+31I1B Hissa No.3 situated at village Ghorpadi, Koregaon Park, Pune, Taluka Haveli, Dist-Pune and within the limits of Pune Municipal Corporation and bounded as under:

All that piece and parcel of the property plot no. 6 admeasuring 3000 sq.ft along with Bungalow No. 4 admeasuring 2400 sq.ft. constructed on land and ground bearing Final Plot No. 323 (part). S.No. 31/1A+3l/1B Hissa No. 3 situated at village Ghorpadi, Koregaon Park, Pune Taluka Haveli Dist Pune and within the limits of Pune Municipal Corporation and bounded as under: East: By 6-meter-wide existing road South: By narrow cui de sac and beyond that sub plot no. 4 North: By sub Plot No.8 West: By sub Plot No. 5

Copy of certificate of registration of charge issued by the Registrar of Companies is attached herewith as Annexure-D.

B. Hypothecation

Hypothecated entire current asset of the company entire stock in trade Book debts.

AND

A) First pari passu charge on all tangible movable machinery, Plant Machinery, Fixtures, Fittings, other Installation, cranes, furniture, computers and other accessories vehicles together with spares tools and accessories, both present and future and all other articles lying on the premises or in the godowns of the borrower or in the custody of any person who are mercantile agents of the Borrower or in the course of transit which may hereinafter be brought stored or be lying orupon the said premises of the borrower excluding those assets which are exclusively charged for project specific limits of the Borrower;

B) First Pari Passu charge on the whole of the Borrower's movables goods and assets both present and future and including but without prejudice to generality of the foregoing words all stocks of raw material work in progress semi- finished goods and finished goods, packing materials, consumable stores and spares etc. Whatsoever situate and or transit whether now belonging to or that may at any time during the continuance of this security belong to the borrower or that may be held by any party anywhere to the order and disposition of the borrower excluding those specific assets which are exclusively charged for existing project specific limits availed by the borrowers;

C) First PariPassu charge on all the present and future book-debts, outstanding monies, receivables, claims bills, contracts, engagements and securities which are now due and owing or which may at any time hereafter during the continuance of this security become due and owing to the borrower in the course of its business by any person firm company or body corporate or by the Government or Indian Railways or any Government Department or office or any Municipal or local or public or Semi-Government body or authority whatsoever Including those relating to the assets leased out and/or given on hire purchase basis excluding those which are exclusively charged for the existing project specific limits availed by the borrower; and

D) Second pari pasu charge on all current assets on all current assets pertaining MSEDCL projects of the company financed by other said Banks until the project specific limits are closed by respective bankers.

Certified copies of registration of charge issued by the Registrar of Companies are annexed and marked as Annexure "D" to the Application.

The Applicant also considered the CD’s request to defer interest on working capital, converting it into a FITL loan of Rs. 68,25,472/-. This was sanctioned vide Sanction Letter dated 01.09.2020.

The Applicant, through its letter dated 17.05.2022 (referring to emails dated 15.03.2022, 23.03.2022, 28.03.2022, 31.03.2022, 04.04,2022, 08.04,2022 & 04.05.2022) has informed the CD about the classification of their accounts as NPA.

Further, the Applicant has submitted the Banker’s Books of Evidence Act, 1891 Certificate dated 06.06.2024 along with the statements of accounts of the CD in the books of the Applicant Bank, which is appended as Annexure JJJJ at Page 766-892 of the Application. The account of the Borrower (CD) was classified as NPA on 17.05.2022. To further corroborate its claim, the Applicant has annexed NeSL Form – D at Page 57-83 to the Application, which states the status of verification of default as “authenticated”.

The Applicant filed an original application, being OA No. 518 of 2023, before the Hon'ble Debt Recovery Tribunal at Pune, which is pending.

Reply was filed by the CD through an Affidavit dated 18.03.2025, affirmed by one Mr. Rajesh Mannalal Katariya, who is stated to be a Director of the CD.

The CD contends that while the Application alleges default concerning OCC and TL facilities, it fails to specify the breached terms of the Sanction Letters, rendering the Applicant’s assertion of non-payment baseless.

The CD argues that the intentional omission of the default date in Form 1, coupled with the reference to the NPA declaration date and inconsistent potential default dates (including one falling within the Section 10A period), warrants dismissal. The CD asserts that the matter squarely falls under Section 10A of the IBC, which suspended CIRP initiation for defaults during the COVID-19 pandemic. Communication dated 15.06.2021 indicates the default occurred during the period covered by Section 10A of the IBC. Vide the said letter, the Applicant has communicated to the Respondent that the OCC Account and term loan account of the CD were overdue by Rs. 2.31 crore and Rs. 0.12 crore since 24.03.2021 and 03.04.2021 respectively and requested for regularisation of the said accounts. Further, the letter also stated that overdue was on account of invocation of bank guarantee amounting to Rs. 1.96 crore on 24.03.2021, interests charge for the months of March, April and May, 2021 and other charges. Without prejudice, even assuming a default date of 17.05.2022, the CD highlights the Applicant’s letter dated 17.05.2022, indicating an overdue amount of merely Rs. 0.45 Crores (Rs. 0.34 crores in the OCC Account and Rs. 0.11 crores in the TL Account), which is alleged to be below the statutory threshold of Rs.1 Crore.

The CD further states that as per part V of form-1, the alleged date of default seems to be prior to 29.03.2021 wherein the Applicant has by referring to an NeSL Report states that the amount due and payable by CD as on 29.03.2021 amounted to Rs. 10.57 crore and 0.30 crore in OD/OCC and term loan accounts respectively.

The CD further argues that the NPA classification date (17.05.2022) precludes any subsequent default date. The CD further points to the non-filing of the Demand Notice dated 05.12.2023 issued by the Applicant to the Guarantors along with the Company Petition.

Additionally, the CD submits that timely payments were made to the lead bank of the consortium i.e. Axis Bank, as it availed financial assistance from a consortium of banks, and any failure in pari passu distribution should not hold the CD liable, a position allegedly supported by the Applicant’s own communication vide its letter dated 28.07.2022.

The CD also raises concerns about a conflict of interest with the proposed IRP, Mr. Prashant Jain, as both he and the Applicant’s Advocates are listed as "recovery agents" on the Applicant’s official website. The CD also challenges the validity of the Application’s execution due to a generic authority letter. The CD also states that the acknowledgment of debt attached with the Application are outside the period of limitation and are time barred.

Rejoinder was filed by the Applicant through an Affidavit dated 02.04.2025, affirmed by one Mr. Alok Prakash, who is stated to be an Authorized officer of the Applicant.

The Applicant states that the Sanction Letter for the Overdraft Cash Credit Account (OCC Account No.: 2551261005277) and TL Account (No.: 2551773010259) explicitly outlines the repayment obligations and financial covenants. It asserts that the CD defaulted on these agreed terms, leading to an overdue liability and a default under Section 3(12) of the IBC. The Applicant explicitly informed the CD about overdue payments through various communications, including a recall notice, despite which, the CD failed to make payments.

Further, the Applicant cited the judgment of Hon’ble NCLAT in the case of Milind Kashiram Jadhav v. State Bank of India & Ors. [Company Appeal (AT) (Insolvency) No. 1589 of 2023], where it was upheld that the date of classification of NPA can be considered as the date of default for the purpose of proceedings under Section 7 of IBC.

Additionally, the NeSL record, which indicates default dates of 28.02.2022 and 03.03.2022, is for separate facilities.

Annexure – E of the Application, as referred to by the CD, relies upon the date of default of 28.02.2022 and 03.03.2022. Neither of these dates fall under the Section 10A period and thus, the Application cannot be dismissed on this ground.

The CD’s claim that the overdue amount is less than the threshold limit is false and unacceptable, as in the Legal Notice to the CD and its Guarantors dated 28.02.2023 (Annexure-HHHH to the Petition), the Applicant had explicitly demanded repayment, clarifying that the default amount exceeds the required threshold, which is further corroborated by NeSL records.

Regarding the CD’s claim that there is a conflict of interest with the proposed IRP, the Applicant states that the Insolvency Professional is independent of the CD and can be appointed as the IRP/RP according to the IBC, and its regulations. As clearly stated in Regulation 3(1) of the IBBI (Insolvency Regulation Process for Corporate Persons) Regulations, 2016, an insolvency professional is eligible to act as an IRP/RP if he, along with all partners and directors of the insolvency professional entity (IPE) he is associated with, remains independent of the CD.

We have perused the documents available on record and heard both the Ld. Counsel for the Applicant and the CD.

It is a settled law that the Adjudicating Authority is required to examine the existence of financial debt, the disbursement of such debt, and the occurrence of default in repayment thereof. On perusal of Part – IV of the Application it is observed that the total outstanding amount claimed by the Applicant as on 17.03.2023 is Rs.8,74,08,242.85/-, which comprised of due amounts from the OCC facility amounting to Rs.8,43,03,523.24/- and dues of Rs.26,58,077/- in TL facility along with interest of Rs.4,46,642.61/-calculated at the rate of 13.20% from default till 03.03.2023. The said outstanding is in addition to the Bank Guarantees issued by the Applicant on behalf of the CD amounting to Rs. 17,85,70,393/- outstanding as on 17.03.2023 and that the above referred outstanding shall stand increased in case of invocation of bank guarantees by the parties to whom the same have been issued.

It is observed that to establish the financial debt, the Applicant has relied on the abovementioned Sanction Letters, Renewal Letters, Bank Statements, Acknowledgments of Debts and Bankers Book Evidence Act Certificate. On perusal of the said records, it is evident that the Applicant had initially disbursed Rs. 9,91,00,000/- vide Sanction Letter dated 18.11.2009 towards the OCC and BG facility, which was kept on renewing by the Applicant on the request of the CD. The Applicant also sanctioned the TL facility of Rs.1,56,00,000/- vide Sanction Letter dated 04.07.2011. The record reveals that the last Renewal letter in respect of the OCC facility, along with the Sanction letter, was issued on 21.02.2022. The disbursement of the financial debt is also substantiated from the Audited Balance Sheet of the CD for the financial year as on 31.03.2021 (as attached by the CD as annexure-10 to its reply), where the CD has itself acknowledged the said OCC facility under ‘Short-term Borrowings’ availed from the Applicant. Thus, the disbursement and the financial debt have been adequately proven. Hence, this Tribunal is of the opinion that the debt advanced by the Applicant to the CD falls within the definition of "Financial Debt" under Section 5(8) of the IBC, as it involves money borrowed against payment of interest.

Regarding the issue of default of financial debt, the Tribunal notes that the Applicant has placed on record various letters of acknowledgment (dated 21.10.2010, 03.10.2011, 07.03.2013, 17.03.2017, 27.03.2017, 16.03.2020 and 09.09.2020) which reveal that the CD has information of its obligation to pay the Applicant. Further, the CD has acknowledged that the financial debt is more than the threshold limit of Rs.1 Crore as prescribed under the IBC in its Balance Sheet for the financial year as on 31.03.2021 (which was signed by the statutory auditor and the directors of the CD on behalf of its Board of Directors on 22.11.2021) as it is a well-settled law that acknowledgement of a debt by the CD in its books of accounts can be considered as a valid acknowledgment of liability.

The Applicant has attached a Recall Notice dated 28.02.2023 as Annexure HHHH at Page 743 of the Petition calling the CD and its Guarantors to pay an amount of Rs.29,71,75,584.79/- within 10 days from the receipt of the notice. The existence of the Recall Notice is not denied by the CD. As the loan amount has been recalled by the Applicant, which has not been repaid by the CD, the entire loan amount has been considered as the amount in default. The CD had made certain payments against the dues in respect of TL on 16.02.2022 and there were credits in the OCC facility on account of redemption of FD, the last credit being on 15.03.2023. However, no payments were received thereafter. Consequently, the Applicant issued another notice dated 18.03.2023, to CD for the payment of the outstanding loan amount, but the CD neither replied to the same nor made any payment. In view of the fact that consequent upon default of the CD in making payment of the complete outstanding amount as demanded by the Applicant vide recall notice dated 28.02.2023, the entire outstanding becomes the defaulted amount, which is more than the threshold of Rs. 1 crore, the contention of the CD that as on the NPA date defaulted amount was less than the threshold is not tenable.

We have seen that total outstanding in the OCC Account and term Loan Account as on 14.06.2021 (as per letter dated 15.06.2021 referred to by the CD in its reply) amounted to Rs. 12.31 crore and Rs. 0.65 crore respectively and that the defaults in the said two accounts are mentioned as Rs 2.31 crore and Rs. 0.12 crore respectively as on the said date of 14.06.2021. The referred letter states that the OCC Account was overdue since 24.03.2021 and TL Account was overdue since 03.04.2021. The Applicant has however in its Application claimed principal outstanding of Rs. 8.43 crore in the OCC Account and Rs. 0.27 crore in the term loan account, besides unpaid interest of Rs. 0.04 crore, as on 17.03.2023. As such, at the time the Applicant filed the Application, there was substantial reduction in the outstanding in both the accounts due to the payments made by the CD and on accounts of redemption of FDs and therefore, the claim of the CD that the matter falls under Section 10A of IBC is not tenable. Moreover, after the CD has defaulted in making payment of the dues as demanded by the Applicant vide letter dated 28.02.2023, the entire outstanding in the above two accounts became due and even if the default amount as on 15.06.2021 is excluded, the remaining default amount remains more than the threshold.

It is also observed from the records placed before us that the CD’s account was classified as NPA on 17.05.2022. However, it is the contention of the CD that the Application is defective due to non-mentioning of the date of default by the Applicant. By relying on the judgment cited by the Applicant in its Rejoinder being Milind Kashiram Jadhav v. State Bank of India & Ors. (supra) we find merit in the submission of the Applicant that the NPA date can be taken as the date of default.

As regards date of NPA, the applicant has placed its record as referred to above reflecting the date of default and we have no hesitation to hold that this Tribunal is not the forum/authority to adjudicate the date of NPA.

Further, the default on the part of the CD is also evident from the NeSL records placed by the Applicant, as it is duly authenticated and undisputed.

At this juncture, we would like to refer to the judgement of the Hon’ble Supreme Court in the case of Innoventive Industries Limited v. ICICI Bank Limited, [(Civil Appeal Nos. 8337-8338 of 2017) (2017) 8SCR 33] which discussed extensively the scope of the powers of the Adjudicating Authority under Section 7 of the IBC and has held that the same is limited to assessing the records provided by the financial creditor to satisfy itself that the default has occurred. The relevant portion of the said Judgment is reproduced below:

The CD objects to the appointment of the proposed IRP, Mr. Prashant Jain, on the ground that he and the Applicant’s Advocates are listed as “recovery agents” on the Applicant’s website, alleging a conflict of interest. We are of the considered view that while mere listing as a recovery agent does not ipso facto disqualify the IRP, the commercial nature of such a role may impair the neutrality essential for an IRP under IBC. Therefore, a prima facie conflict of interest cannot be ignored. Accordingly, the appointment of such an IRP/Advocate is held to be impermissible. Thus, the Proposed IRP in this matter is being replaced forthwith by an independent professional to ensure fairness and transparency in the resolution process.

The contention of the CD that timely payments were made to the lead bank of the consortium i.e. Axis Bank and any failure in pari passu distribution should not hold the CD liable is also not acceptable for the reason that the Respondent has failed to bring any document on record to demonstrate the action taken by it against Axis Bank for non-distribution of the payment made by the CD proportionately to the Applicant, if at all the CD has suffered due to non-distribution of the amount paid by the Axis Bank. In any case, the issue raised by the CD is not relevant as if the debt and default as per IBC are established, the Bench is not required, and does not have the jurisdiction to go into the reasons for the same or to rectify the same.

It is also observed from the Reply of the CD that it has raised various other contentions regarding the conflict of interest of the proposed IRP, non-attachment of demand notice dated 05.12.2023 issued by the Applicant to the guarantors and breached terms of the Sanction Letters, which are of no consequence as CD has already acknowledged its debt in its Balance Sheet and has failed to bring on record any evidence that it had paid the financial debt or there is no default on the part of the CD. In the present matter, the essential ingredients required to initiate the CIRP against the CD, such as "Financial Debt" as defined under Section 5(8) and "Default" as defined under Section 3(12) of the IBC, have been proven by the Applicant beyond reasonable doubt.

In view of the facts as stated supra and also in view of the ‘financial debt’ which is proved by the Applicant and the ‘default’ being committed on the part of the CD, this Tribunal is left with no other option than to proceed with the present case and initiate the CIRP in relation to the CD. We are, therefore, of the considered view that the present Application filed by the Applicant is complete in terms of Section 7 of the IBC and deserves to be admitted.

In view of the aforesaid findings, this Application bearing C.P. (IB) 121/MB/2025 filed under Section 7 of IBC, 2016 by Canara Bank, the Applicant (FC) for initiating CIRP in respect of Rajdeep Buildcon Private Limited, the CD, is admitted. We further declare a moratorium under Section 14 of IBC, 2016 with consequential directions as mentioned below:

I. We prohibit:

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 order of moratorium shall have effect from the date of this order till the completion of the CIRP or until this Tribunal approves the resolution plan under Section 31(1) of the IBC or passes an order for the liquidation of the Corporate Debtor under Section 33 thereof, as the case may be.

IV. That the public announcement of the CIRP shall be made immediately as specified under Section 13 of the IBC read with Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and other Rules and Regulations made thereunder.

V. That this Bench hereby appoints Mr. Vikas Gopichand Khiyani, a registered Insolvency Professional having Registration Number IBBI/IPA-001/IPP-02738/2022-2023/14194 and e-mail address cavikas.khiyani@gmail.com, having valid Authorisation for Assignment up to 31.12.2025 as the IRP to carry out the functions under the IBC.

VI. That the fee payable to IRP/RP shall be in accordance with such Regulations/Circulars/ Directions as may be issued by the IBBI.

VII. That during the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of Section 17 or Section 25, as the case may be, of the IBC. The officers and managers of the Corporate Debtor are directed to provide all assistance to the IRP as and when he takes charge of the assets and management of the Corporate Debtor. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP/RP within a period of one week from the date of receipt of this Order and shall not commit any offence punishable under Chapter VII of Part II of the IBC. Required steps will follow against them under the provisions of the IBC read with Rule 11 of the NCLT Rules for any violation of law.

VIII. That the IRP/IP shall submit to this Tribunal periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor.

IX. In exercise of the powers under Rule 11 of the NCLT Rules, 2016, the Financial Creditor is directed to deposit a sum of Rs.3,00,000/- (Three Lakh Rupees) with the IRP to meet the initial CIRP cost arising out of issuing public notice and inviting claims, etc. The amount so deposited shall be interim finance and paid back to the Financial Creditor on priority upon the funds becoming available with IRP/RP from the Committee of Creditors (CoC). The expenses incurred by IRP out of this fund are subject to approval by the CoC.

X. A copy of this Order be sent to the Registrar of Companies, Maharashtra, Mumbai for updating the Master Data of the Corporate Debtor.

XI. A copy of the Order shall also be forwarded to the IBBI for record and dissemination on their website.

XII. The Registry is directed to immediately communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by way of Speed Post, e-mail and WhatsApp.

XIII. Compliance report of the order by Designated Registrar is to be submitted today.