Consultshah Financial Services Private Limited vs Vienna Multi Ventures Private Limited

Per: Anuradha Sanjay Bhatia, Member (Technical)

This Company petition is filed by Consultshah Financial Services Private Limited (hereinafter called “Financial Creditor”) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Vienna Multi Ventures Private Limited (hereinafter called “Corporate Debtor”) by invoking the provisions of Section 7 of the Insolvency and Bankruptcy Code (hereinafter called “Code”) read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, for resolution of an unresolved Financial Debt of Rs. Rs. 9,31,62,640/-, which includes interest of Rs. 1,93,47,878/-.

The counsel for the Financial Creditor submits that the Financial Creditor is in the business of financial advisory and consultation. The Corporate Debtor is also in similar business.

As the Corporate Debtor was in need of funds, on 01.03.2017, an Inter-Corporate Deposits Agreement (hereinafter ICD) was executed between the Financial Creditor and the Corporate Debtor. The said ICD is reproduced below;

The Inter-Corporate Deposits Agreement contains a maximum grant of Rs. 8 crores towards the working capital facilities which can be advanced to the Corporate Debtor. It also carries an interest component. Hence, the ICD contains all the facets of being a financial instrument and any default in terms of the same, contemplates a ‘financial debt’, within the meaning of the Section 5(8) of the IBC, 2016. Section 5(8)(a) defines “financial debt” to mean a debt along with the interest, which is disbursed against the consideration for the time value of money and includes money borrowed against the payment of interest.

As per the ICD, working capital facilities were being extended from time to time, and from the perusal of the ledger copies, various transactions are shown, both credit and debit.

On 31^st December, 2020, the Corporate Debtor confirmed an outstanding of Rs. 7,64,07,672/- , as on 31^st December, 2020 vide the Balance Confirmation, dated 31^st December, 2020.

The Corporate Debtor had remitted some amount to the account of the Financial Creditor, thereby reducing the total outstanding to Rs. 7,38,14,672/-. As per the ICD agreement, interest @ 9% p.a. was to be charged.

The counsel for the Financial Creditor further submits that as directed by the Hon’ble Bench, the Financial Creditor has produce the Ledger copies from the date of execution of the ICD (i.e. from 01.03.2017), and the same was provided. It is evident from the ledger accounts that the Corporate Debtor is in default of Rs. 7,38,14,672.00/-, which is due and payable to the Financial Creditor as per the terms of the ICD. The Corporate Debtor defaulted on repayment of principal and interest.

The Financial Creditor issued a Legal Notice dated 23.03.2021, upon the Corporate Debtor and its Directors, but the Corporate Debtor has chosen not to reply to the aforementioned Legal Notice. The Financial Creditor was not left with any other option, but to file a Company Petition, under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal.

The Corporate Debtor has not filed its reply despite being given an opportunity by the Bench to file their reply. On 05.12.2022, the Bench has given a direction to the Corporate Debtor to file their reply within two weeks, subject to the payment of Rs. 25,000/- as costs. The Corporate Debtor has neither filed the reply nor the cost of Rs. 25,000/- imposed on the Corporate Debtor has been paid. Thereafter, on 04.01.2023, the Corporate Debtor’s right to file reply was forfeited.

The following documents categorically demonstrate the financial debt due and payable by the Corporate Debtor, to the Financial Creditor:-

a. Inter Corporate Deposit Agreement Dated 01.03.2017

b. Ledger account of the Corporate Debtor

c. Board Resolution dated 19.03.2021

d. Legal notice dated 23.03.2021

Heard the submissions of Mr. Rajeep Lahiri, counsel appearing for the Petitioner/ Financial Creditor and Mr. Abhishek Kaushik, counsel appearing for the Corporate Debtor and perused the material available on record. As mentioned above the Corporate Debtor chose not to file a written reply, despite the Bench directing it to file.

After hearing the submission of both sides, this Bench notes that the Financial Creditor and the Corporate Debtor has signed an Inter Corporate Deposits Agreement (ICD) on 01.03.2017. As per the ICD, the Borrowers has approached the Lender for grant of inter corporate deposit for the short-term working capital for a period of 90 days, beginning from the date of disbursal of loan.

The ICD itself contains a clause that the maximum sanction of Rs. 8 crores towards the working capital facilities to the Corporate Debtor and also carried an interest component.

The counsel for the Financial Creditor has placed a reliance on the ledger accounts produced by him on 09.01.2023. It is evident from the ledger account that the Corporate Debtor is in default of Rs. 7,38,14,672/- as principal amount, which is due and payable to the Financial Creditor as per the terms of the ICD.

On 23.03.2021, the Financial Creditor has issued a legal notice upon the Corporate Debtor demanding the repayment of the outstanding dues. Despite receipt of legal notice, Corporate Debtor neither repaid the outstanding dues nor submitted any reply.

The Corporate Debtor was accorded an opportunity to present his defence, through their counsel, vide oral argument on 09.01.2023. The learned counsel for the Corporate Debtor stated the following two arguments.

a. The Criminal complaint has been filed against Financial Creditor.

b. However, we find no copy of the any FIR / Charge sheet / Notice was placed before the Bench and hence we hold that the defense taken by the Corporate Debtor has no merit.

c. There is a collusion amongst the Directors of the Corporate Debtor.

The Corporate Debtor was unable to place before this Bench any evidence of any collusion amongst the Directors. The Bench is of the considered view that so far as the question of admission of the Petition under section 7 or 9 of Insolvency and Bankruptcy Code, 2016 is concerned, the collusion amongst the Directors does not play any role, anywhere, in the process of admission of the Petition.

The Bench is of the considered opinion that the Corporate Debtor is liable to pay the Financial Creditor/ Petitioner and it has defaulted in making the payment to the Petitioner. Considering the above facts, we come to conclusion that the nature of Debt is a “Financial Debt” as defined under Section 5 (8) of the Code. It has also been established that there is a “Default” as defined under Section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e., existence of ‘debt’ and ‘default’, for admission of a petition under section 7 of the I&B Code, have been met in this case.

The Petitioner had suggested the name of Mr. Amarnath Matadin Sharma as Interim Resolution Profession along with his consent letter in Form 2.

After hearing the submissions and upon perusing the material available on record, this Bench is of the considered opinion that the above Company Petition is liable to be admitted and accordingly the same is admitted by passing the following:

a. The above Company Petition No. 9/IBC/MB/2022 is hereby allowed and initiation of Corporate Insolvency Resolution Process (CIRP) is ordered against Vienna Multi Ventures Private Limited.

b. This Bench hereby appoints Mr. Amarnath Matadin Sharma, Insolvency Professional, Registration No: IBBI/IPA-001/IP-P00458/2017-2018/10801, having Registered Address at: 607, Ijmima Complex, Interface, Off. Link Road, Malad West, Mumbai City, Maharashtra ,400064 as the Interim Resolution Professional to carry out the functions as mentioned under the Insolvency & Bankruptcy Code, 2016.

c. The Financial Creditor shall deposit an amount of Rs. 5 Lakhs towards the initial CIRP costs by way of a Demand Draft drawn in favour of the Interim Resolution Professional appointed herein, immediately upon communication of this Order.

d. That this Bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, 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 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 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.

e. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.

f. That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

g. That the order of moratorium shall have effect from the date of pronouncement of this order till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be.

h. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code.

j. Registry shall send a copy of this order to the Registrar of Companies, Mumbai, for updating the Master Data of the Corporate Debtor.

k. Accordingly, this Petition is admitted.

l. The Registry is hereby directed to communicate this order to both the parties and to IRP immediately.