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Judgment
[Per: Shri Harihar Prakash Chaturvedi, Member (Judicial)]
The present I.B. Petition is preferred by the Petitioner/ Financial-Creditor M/s. Central Bank of India 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) in respect of the Corporate-Debtor-Company namely, M/s. Sunlight Extrusion Pvt. Ltd. The Petitioner/Financial-Creditor, M/s. Central Bank of India is a Bank, having its main Corporate Office at: Chander Mukhi, Nariman Point, Mumbai – 400021 and it is having its Branch Office at: Nizampura Branch, Lakulesh Avenue, 1st Floor, Delux Char Rasta, Nizampura, Vadodara – 390002.
The Petitioner/Financial Creditor has prayed for the following reliefs as mentioned in the relief clause:
(a)to admit the Corporate Insolvency Resolution Process against the Respondent/Corporate Debtor Company, i.e. M/s. Sunlight Extrusion Pvt. Ltd.
(b)to declare a moratorium against the Respondent Company in accordance with Sub Section 1 of Section 13 read with Section 14 of the I.B. Code.
(c)to cause public announcement of the initiation of the Corporate Insolvency Resolution Process against the Respondent Company and to call for submission of claim in accordance with Sub Section 1 of Section 13 read with Section 15 of the Insolvency and Bankruptcy Code, 2016.
(d)To appoint an Interim Resolution Professional (IRP) in accordance with law and in the manner laid down in Sub Section 1 of Section 13 read with Section 16 of the I.B. Code.
It is stated that the Respondent/Corporate-Debtor Company, namely M/s. Sunlight Extrusion Pvt. Ltd. is a company incorporated under the Companies Act, 1956 on 10.01.2002 with the CIN: U27201GJ2002PTC040352. The Respondent Company is engaged in the business activity of manufacturing of copper tubes, flat rod, section etc.
The Respondent/ Corporate-Debtor-Company is having authorised share capital of Rs.75,00,000/- (Rupees Seventy-Five Lakh only) and the paid-up share capital is Rs.75,00,000/- (Rupees Seventy Five Lakh only). The registered office of the Corporate Debtor Company is situated at: 501(1), 502(1), 513, 514, GIDC Estate, Waghodia, Vadodara - 391760.
The Petitioner contends that the Corporate Debtor Company had approached the Petitioner bank during the year 2011 for grant of loan facility under cash credit cum ODBD limit to meet the working capital requirements. Therefore, the Petitioner Bank sanctioned above stated cash credit (hypo.) limit of Rs.3,00,00,000=00 (Rupees Three Crore only) and the letter of Credit Limit of Rs.2,00,00,000=00 (Rupees Two Crore) vide sanction letter dated 27.06.2011 on agreed terms and conditions. In order to secure the above stated loan facility, the Corporate Debtor executed various loan agreement documents which are annexed as Annexure A8 to A22 of the present I.B. Petition.
It is stated that the Respondent Company again approached to the Petitioner Bank seeking further enhancement of the credit facilities. The Petitioner Bank further sanctioned the same as described as under:
Cash Credit ODBD limit of Rs.9,70,00,000=00.
Issued a fresh term loan of Rs.3,00,00,000=00 for purchasing plant and machinery for manufacturing activities at a mentioned address.
Inland /import LC cum Buyers Credit of Rs.1,38,00,000=00 vide section letter dated 12.04.2013 against extension of hypothecation of Assets and Book-Debts, the said hypothecation is registered with the Registrar of Companies at Registration number U27201GJ2002PTC040352.
It is stated that the Respondent Company made further approach to the Petitioner Bank and sought for enhancement of existing credit facilities which was also sanctioned by the Bank considering the securities and guarantees offered by the Respondent. Thus, the Bank has sanctioned with (1) Cash-credit cum OBDT limit of Rs.9,70,00,000=00 to Rs.11,70,00,000=00, the Term Loan facilities were further reviewed in three parts on the basis of outstanding amount Term Loan (i) Rs.1,24,40,000=00, Term Loan (ii) Rs.24,73,000=00, Term Loan (iii) Rs.3,30,000=00. The Petitioner Bank reviewed buyer's credit limit of Rs.1,38,88,000=00 within the Term Loan facility and bank guarantee of Rs.1,00,00,000=00 and LC limit of Rs.2,00,00,000=00 within the cash credit cum OBDT facility, aggregating to Rs.14,61,51,000=00 vide sanction letter dated 08.01.2015 against extension of hypothecation of Assets and Book Debts. It is stated in the petition that,
"All plant and machinery (as described in Annexure attached to Hypothecation Agreements) stock-in-trade lying in the factory premises at Plot No. 50115021513 & 514, GIDC Waghodia, Post Waghodia, Dist. Vadodara-391760 or godown etc. of respondent or at any other place or godown and all the tangible movables properties and assets of respondent including movable machinery, tools and accessories, stores and spares, furniture, articles, packing materials used for manufacturing and things, both movable properties capable of passing by delivery both present and future whether installed or not and whether now lying loose or in cases and not being or any time brought into or upon or any time in the course of transit to the premises, factories or godowns of respondent and book debts of Respondent Company."
The above stated loan facilities were secured by the guarantees and by way of the hypothecation of movables and Book-Debts and extension of mortgage of immovable properties.
As per the Petitioner Bank, the Respondent Company opened a bank account as Cash Credit Cum ODBD A/c No.3130028131 and the drawing power in the said account was enhanced from time to time according to the enhancement of limits as per sanction. It is said that on 12.04.2013, the drawing power in this account was enhanced to Rs.9.70 Crore. As per the loan agreement documents executed by the Respondent Company on 26.03.2015. The cash credit facility was repayable on demand.
It is also informed that at the request of the Respondent Company, the Petitioner Bank opened a Term Loan Account for Rs.3.0 Crore and as per agreed terms and conditions, such loan was repayable in equal monthly instalments commencing from April 2014 with further interest as may be.
It is further contended that Petitioner Bank also gave Guarantees in favour of the Respondent Company at its request for availing various benefits.
The Respondent Company, in order to secure the above stated loan facilities, has deposited all the title deeds, documents and certificates with the Petitioner Bank. The Respondent also executed the memorandum of deposit of title deeds dated 04.07.2011 which has been registered with Registrar S.R.O. Vaghodia at entry no. 1877 on the same day. The said memorandum of entry (extension of mortgage) was executed on 27.09.2013 and registered with sub registrar S.R.O. Vaghodia on the same day vide entry no.1785 in respect of their respective properties of:
Revenue Survey No.1335/1 paiki and 1362/2 paiki, plot no.501/1 and 502/1 of Waghodia Industrial Estate, GIDC, Waghodia, Vadodara admeasuring 1520 sq. meters, belonging to the Respondent Company.
Revenue Survey No.1330 paiki and 1334 paiki and 1335 paiki. Plot No.513 and 514 of Waghodia Industrial Estate, GIDC, Waghodia, Vadodara, admeasuring 5841.88 Sq. Meters belonging to the Respondent Company.
It is, however, contended that the Respondent Company although availed aforesaid credit facilities from the Petitioner Bank but failed in complying with the stipulated terms and conditions contained in sanction letter as well as failed to pay agreed interest at the applicable rate. The Corporate Debtor further failed to operate its loan accounts satisfactorily as per the agreed terms of sanction, which resulted to become a 'Non Performing Asset' ("NPA"). It is also alleged that the Respondent failed to provide liquidity for payment of Buyer's Credit. Therefore, the Respondent Company is liable to pay the amount due.
It is further stated that the Respondent Company has failed to operate cash credit account and to pay the dues under letter of credit account term loan account, the said account, its loan account were irregular. Hence, its cash credit and term loan accounts were classified as NPA on 29.03.2016 as per the RBI prudential accounting norms and the interest ceased to be charged to the account in terms of said guidelines with effect from 01.04.2016. However, the Petitioner bank is entitled to recover the un-debited interest from 01.01.2016 till the realization of the entire outstanding dues.
Thereafter, the Petitioner Bank was constrained to issue notice under Section 13(2) read with 13(13) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SURFAESI Act) on 08.06.2016 to the Respondent Company by demanding an amount of Rs.14,21,08,197=00 Crore due as on 05.06.2016 (a copy of said Demand Notice has been annexed with the present petition as Annexure-A46). However, the Respondent Company, even after receipt of such Demand Notice failed in to repay the dues, which shows its malafide intention for not making payment of its debts.
The Petitioner Bank further informed that it has issued Bank Guarantees (bearing no.149) at the request of the Respondent Company for amount of Rs.9,20,000=00 which was valid up to 01.11.2019.
As per the Bank, the statement of account of cash credit and term loan accounts of Respondent Company shows an outstanding amount due as on 22.05.2018 for Rs.21,30,88,548/-. In support of its contention, the Petitioner Bank has annexed a summary of details of amount due and recoverable from the Corporate Debtor, which is annexed as Annexure-A4 to the present I.B. Petition.
The Petitioner bank submits that in spite of repeated reminders, which were sent to the Respondent/Corporate Debtor Company i.e. M/s. Sunlight Extrusion Private Limited did not make payment of any of its pending dues nor at any stage raise dispute about the dues payable to the Petitioner/Financial Creditor.
Therefore, the Respondent Company is liable to make payment of undisputed admitted debt and liability to the Petitioner Bank.
In reply to the present I.B. Petition dated 30.05.2018, the Respondent/Corporate Debtor has filed its written submission before this Bench on 14.08.2019 and has denied its loan liability and execution of various documents as alleged.
The Respondent/Corporate-Debtor has contended that the sanction letter do not match with the amount of various debts in Part IV of the Petition.
It was also contended that the demand notice issued under SARFAESI Act, 2002 also contradict figures of various alleged debts in Part IV of the Petition.
It is contended that the hypothecation documents so produced by the Petitioner do not prove the alleged debt and/or creation of hypothecation for securing the said alleged debt.
It is also contended that the mortgage documents produced by the Petitioner do not prove the alleged debt. The Corporate Debtor has denied the creation of such mortgage for securing the debts.
It is further contended that in respect of the claim of the Petitioner before the DRT-II, Ahmedabad in O.A. No.1220/2017, the Respondent has filed its objection which is pending for adjudication before the Debts Recovery Tribunal. Hence, the existence of debt is not yet proved.
We examined the merits of the present I.B. Petition in the light of above stated contentions of both the parties and perused the material available on record and the documents annexed therewith the present I.B. Petition. It is pertinent to note here that the Corporate Debtor has made attempt to make general denial of its loan liability by pointing out mismatching of loan account and execution of loan documents. But the Corporate Debtor, during the pendency of the present I.B. Petition itself offered settlement proposal by admitting its debt liability for Rs.5.0 Crore by its proposal letter dated 03.07.2018, which is self-evident that there was debt and default thereof has been occurred. The relevant extract of company's letter is reproduced here in below:-
"With reference to the above, we are ready to pay Rs.5.00 Crores (Rupees five crores only) towards full and final settlement of your bank's claim against our company within a period of one and half years from the date of this letter. We will pay Rs.3.00 crores in the first six months and the balance amount in equal instalments within the next one year. We are ready to pay Rs.10.00 Lacs (Rupees Ten Lacs only) of the above amount by way of cheque, which shall be kept in "no lien" account with the bank, which shall be returned by the bank if the proposal is not accepted by the bank. With regard to our H/L running in the name of our personal name of Director, Mr. Yeshwant Jain and 11 others, we proposed to upgrade the account by depositing criticle amt. within six month. Which is Rs.1.5 Cr. (approx.)."
In addition to the above, it is found from the perusal of bank statements of Loan Account of the Corporate Debtor that it made payment towards instalment of Term Loan III and by depositing Rs.11,00,000/- on 30.12.2015, which can be treated as good as part admission of its debt.
Hence, the contentions raised by the Respondent Company lack of substance hence not sustainable in the eyes of Law. Moreover, it is now well settled legal position that if admitted debt liability is of more than of rupees one lakh and above, then the question of mismatching of loan account is of no relevance and the Corporate Insolvency Resolution Process ("CIRP") can be triggered in respect of the Corporate Debtor. That apart, that pre-existing dispute or pendency of case in the Debts Recovery Tribunal (Ahmedabad) or proceedings under the SARFAESI Act neither debar the Financial Creditor to file the present I.B. Petition under Section 7 of I.B. Code nor prevent this Court to exercise jurisdiction conferred to it under the I.B. Code and to entertain I.B. Petition against the Corporate Debtor seeking the Corporate Interim /Insolvency Resolution Process in respect of the present Corporate Debtor because the nature of the Remedy prescribed under I.B. Code is a Remedy in Rem not a Remedy in Personem. Hence, the present petition is found maintainable before this court.
During the course of hearing and after the order was reserved, the Corporate Debtor further filed an I.A. No.748 of 2019 to defer the pronouncement on the pretext of was not entertained by this Court and was rejected vide our order dated 03.12.2019.
As per record of the case, it is established that the outstanding debts due and payable which the Corporate Debtor has defaulted in making payment thereof. Therefore, it became 'Non Performing Asset,' since 29.03.2016 and the last payment towards loan account, TL-III was made on 30.12.2015 while, the present I.B. Petition came to be filed on 30.05.2018, hence, it is found to be filed well within the limitation. Since, the present petition is filed under the provision of the I.B. Code by furnishing all the relevant information and documents. Therefore, it is found complete. The present I.B. Petition deserves to be admitted. Hence. It is hereby admitted with following directions.
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.
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 18, 20, 21 of I.B Code. Further the personnel of the Corporate Debtor are advised to extend co-operation to Interim Resolution Professional as required Under Section 19 of IB Code.
An authentic copy of this order to be communicated by the Petitioner as well as by this Registry to the Corporate-Debtor-Company, as well as to the Interim-Resolution-Professional and the Registrar of Companies at the earliest.
In the present matter, the Petitioner Bank has suggested the name of an Interim Resolution Professional, Mr. Abhishek Nagori, who, vide his letter dated 29.05.2018 has given his affirmative consent to act as an Interim Resolution Professional in the present matter. He also certified himself for not having any disciplinary proceedings pending against him with the Board or ICSI, Insolvency Professional Agency. Hence, this Adjudicating Authority hereby appoints, as proposed, Mr. Abhishek Nagori, having Insolvency Professional Registration No. IBBI/IPA-001/IP-P00020/2016-17/10044, Email ID: [email protected], Address: 330/348, Third Floor, Tower-A, Atlantis K-10, Opp. Vadodara Central, Sarabhai Main Road, Vadodara - 390007 as an Interim-Resolution-Professional. The Interim-Resolution-Professional is further directed to make public announcement of moratorium in respect of Corporate-Debtor-Company 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.
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.
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 18, 20, 21 of I.B Code. Further the personnel of the Corporate Debtor are advised to extend co-operation to Interim Resolution Professional as required Under Section 19 of IB Code.
An authentic copy of this order to be communicated by the Petitioner as well as by this Registry to the Corporate-Debtor-Company, as well as to the Interim-Resolution-Professional and the Registrar of Companies at the earliest.
Accordingly, the present IB-Petition stands admitted.