DSM Projects Private Limited vs A N Enterprises Infrastructure Services Private Limited

[PER: CORAM]

This is an application filed on 16.12.2024 by the Applicant- M/s. DSM Projects Private Limited (hereinafter also referred to as the “Financial Creditor” or “Petitioner”), against the Respondent- A.N. Enterprises Infrastructure Services Private Limited (hereinafter also referred to as the “Corporate Debtor”), under Section 7 of the Insolvency & Bankruptcy Code 2016 (in short, ‘the Code’) r/w Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, seeking commencement of the Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor, appointment of Interim Resolution Professional (‘IRP) and declaration of moratorium. The amount claimed to be in default is INR 60,19,50,000/- along with outstanding interest is INR 38,87,32,822/- and the date of default is stated to be 13^th March, 2022.

Vide Order dated 27.02.2025 of the predecessor Bench-Court V, NCLT Mumbai and Order dated 11.03.2025 passed by this Court, the Applicant has filed an Additional Affidavit dated 20.03.2025 placing certain additional documents on record. Thereafter, pursuant to the Order dated 21.03.2025, the Applicant filed amended Form I rectifying the date of default and incorporating additional documents as part of application. The reference in this order to the application or petition shall be construed as reference to the amended application/petition.

On perusal of Part-I of Form 1, it is seen that the present application is filed by M/s. DSM Projects Private Limited and the person authorised by the Board Resolution dated 21.11.2024, passed by the Corporate Debtor, to submit this application on its behalf is one Mr. Kunal Ambole. Further, an affidavit in support of the application dated 13.12.2024 is affirmed by the above-named authorised representative of the Applicant.

A perusal of Part II of the application in Form 1 reveals that the Respondent/Corporate Debtor i.e. A.N. Enterprises Infrastructure Services Private Limited, is a private limited company having its registered office at 708, Gateway Plaza, Hiranandani Gardens, A.S. Marg, Powai, Mumbai-400076.

On perusal of Part-III of Form 1, the Applicant has proposed the name of Mr. Pradeep Kumar Chakravarty to be appointed as the IRP of the Corporate Debtor in the event that this petition gets admitted. The Applicant has also obtained the Written Consent from the proposed IRP above-named in Form 2, the copy of which is annexed to the application as Annexure 2.

A perusal of Part IV of the application vide Form 1 reveals that the amount claimed to be in default by the Applicant/Financial Creditor is INR 60,19,50,000/- along with total outstanding interest of INR 38,87,32,822/- as on 12.12.2024. As evident from Part IV of the Application, the total amount of debt granted is INR 63,00,00,000/-. The date of default stated by the Applicant in Part IV of the application is 13^th March, 2022.

The facts narrated by the Applicant in Part IV of the Application are stated hereinbelow:

The Corporate Debtor vide its application letter dated 01^st September, 2017 requested and approached the Financial Creditor for a sanction of Inter-Corporate Deposit of Rs. 63 crores. Accordingly, the Financial Creditor executed a Loan Agreement dated 06.09.2017 with the Corporate Debtor for a sum of Rs. 63 crores as per the terms and conditions stated therein.

The Credit Facilities were granted by the Financial Creditors after executing the Loan Agreement dated 06.09.2017. Due to continuous defaults by the Corporate Debtor, the Financial Creditor vide various notice/letters called upon the Corporate for payments of the outstanding. Letters/Notices were dated 01^st April 2018, 30^th September 2018, 31^st March 2019, 30^th September 2019, 28^th February 2020, 30^th November 2022, 30^th September 2023, 31^st March 2024, 30^th July, 2024 and the Legal Notice dated 02^nd September, 2024. Reply to the aforementioned letters were made by the Corporate Debtor vide Letters dated 10^th April 2018, 05^th October 2018, 15^th April 2019, 05^th March 2022,15^th October 2023 and 02^nd August 2024. Through the aforementioned correspondences, though the Corporate Debtor acknowledged the debt but failed to offer any substantive resolution or payment.

The Applicant has attached the following documents to the application including the documents attached along with the additional affidavit dated 20.03.2025:

Annexure- 1: A Copy of the Authorization

Annexure- 2: Copy of the communication from the proposed insolvency professional in Form 2

Annexure- 3: Copy of the Request Letter.

Annexure- 4: A Copy of the Inter Corporate Loan Agreement dated 6th September 2017.

Annexure- 5: A Copy of the various reminder letters sent by the Financial Creditor to the Corporate Debtor.

Annexure- 6: A Copy of the replies to the various reminder letters sent by the Financial Creditor to the Corporate Debtor.

Annexure- 7: A Calculation Sheet.

Annexure-8: Copy of duly certified Bank Statement of Financial Creditor issued by Dombivli Nagari Sahakari Bank Ltd fortheperiod 01^st April, 2016 to 30^th September, 2017.

Annexure-9 to 15: Copies of the Balance Confirmations issued by the Financial Creditor to the Corporate Debtor.

Annexure-16: Copies of the Audited Balance Sheets of Financial Creditor for the period of 2017-2018, 2018-2019, 2019-2020, 2020-2021, 2021 -2022, 2022-2023 and 2023-2024.

Annexure-17: Copies of the Audited Balance Sheets of Corporate Debtor for the period of 2017-2018, 2018-2019,2019-2020,2020-2021,2021- 2022,2022-2023 and 2023 -2024.

Master Data of Financial Creditor

Master Data of Corporate Debtor

Undertaking Letter regarding non-requirement of NSEL Report

Registration Certificate of IRP

Validity Certificate of IRP

In regard to NeSL Record of Default, the Applicant has attached its letter dated 11.12.2024, stating that as the Applicant is not a financial institution, obtaining the NeSL Report for filing the application u/s 7 of the Code is not applicable to the Petitioner Company.

Reply Affidavit dated 02^nd May, 2025 was filed and affirmed by one Mr. Prakash Dhavale, the Authorised Signatory of the Corporate Debtor. The above-named signatory is authorised by a board resolution passed at the meeting of the board of directors of the Corporate Debtor held on 27.02.2025, the copy of which is attached to the reply affidavit as Exhibit ‘A’-Page 9. The contents of the aforesaid Affidavit are summarised hereinbelow:

The Corporate Debtor submits that certain communications addressed by it have been misconstrued by the Financial Creditor as acknowledgments of debt. These communications were made in good faith and on a “without prejudice” basis during the course of commercial negotiations with the Financial Creditor with the objective of reaching an amicable settlement and thus, such communications do not by themselves constitute an acknowledgement of debt and default.

It is submitted by the Respondent that under Clause 14 of the Loan Agreement, the parties unequivocally agreed to resolve any dispute arising therefrom through arbitration under the Indian Arbitration and Conciliation Act, 1996. However, despite the existence of an agreed dispute resolution mechanism, the Financial Creditor has chosen to file the present petition. The Applicant is using the instant proceedings as a debt recovery tool which is against the spirit and objective of the Code.

The Corporate Debtor was incorporated on 07.05.2012 and has been engaged in the business of road construction, repair and maintenance for over a decade. In 2017, the Corporate Debtor was awarded sub-contracts worth approximately INR 1,000 crores. Besides that, the Corporate Debtor also had a repair and maintenance contract for Mumbai’s 27 flyovers. During this period, the Corporate Debtor was in need of working capital and it was in this background on 01^st September 2017, the Corporate Debtor approached the Financial Creditor requesting for a loan of INR 63 crores for its business activities. Pursuant to the aforesaid request, the Financial Creditor agreed to lend an amount of INR 63,00,00,000/- (Rupees Sixty-Three Crores only) to the Corporate Debtor on the terms and conditions set out in the Loan Agreement dated 06.09.2017 entered into between the parties hereto. The Corporate Debtor repaid a sum of INR 4.50 crores to the Financial Creditor in 2018 and assured the repayment of balance amounts as per the tranches set out in the Loan Agreement.

The Corporate Debtor had partly completed the projects discussed hereinbefore and the Corporate Debtor was ready and willing to execute the remaining work in accordance with the work orders issued in its favour. However, since the principal contractor abruptly terminated the work orders and released only partial payments, the projected cash flows of the Corporate Debtor were adversely affected thereby impairing its ability to service the loans it had availed for business purpose. The Corporate Debtor submits that these circumstances were beyond its control owing to which the repayment of agreed tranches as per the Loan Agreement could not take place from the year 2019 onwards.

The outbreak of Covid-19 pandemic resulted in economic slowdown which adversely affected the infrastructure sector at large. The Corporate Debtor, like many others in the industry, suffered a sharp decline in revenue during 2020 to 2023 due to non-allocation of new contracts and interruptions in ongoing projects. These challenges, being industry-wide and unforeseeable, have directly impacted the Corporate Debtor’s cash flows and its payment obligations, including towards the Financial creditor.

The Corporate Debtor has been making sincere efforts to secure new contracts and restore liquidity. The management is in discussions for future projects and is confident of improving the financial position of the Corporate Debtor in the near future. The Corporate Debtor is hopeful that within a span of 12 to 18 months, it will be in a position to start discharging its repayment obligations in a phased manner.

The Corporate Debtor is a viable entity and therefore, subjecting it to CIRP would not be in the interest of any stakeholder. Admission of insolvency petition would cause serious prejudice to the public at large.

In light of the above submissions, the Corporate Debtor prays for dismissal of the instant petition and refer the parties to arbitration as per Clause 14 of the Loan Agreement.

Affidavit-in-Rejoinder dated 17^th May, 2025: The Authorised Signatory of the Petitioner viz. Mr. Kunal Ambole, has filed an affidavit-in-rejoinder on behalf of the Applicant, which was affirmed on 17.05.2025. The contents of the aforesaid rejoinder are hereinbelow summarised:

The Financial Creditor has filed an Additional Affidavit dated 20^th March, 2025 bringing on record certain documents and facts essential to adjudicate this petition. It is denied that the Financial Creditor has misconstrued the communications addressed by the Corporate Debtor as an acknowledgment of debt. A bare perusal of the record before this Tribunal reveals that there were a series of acknowledgements of debt issued by the Corporate Debtor all of which clearly establish not only the jural relationship of creditor and debtor but also the factum of there being a default by the Corporate Debtor. It is denied that the parties were engaged in settlement discussions. Even assuming without admitting the settlement talks, the same is immaterial in the conspectus of Section 7 of the Code.

As regards the contention of arbitration, it is settled position in law that the existence of arbitration clause in a contract does not oust the jurisdiction of this Tribunal under the IB Code given that the proceedings before this Tribunal are not for recovery of debts.

The plea of pandemic resulting in Corporate Debtor’s inability to service its debt to the Financial Creditor is nothing but an admission of debt and default. The Financial Creditor was constrained to file this application u/s 7 of the Code to initiate CIRP against the Corporate Debtor due to non-repayment of outstanding debt due and payable by the Corporate Debtor.

We have heard the learned Counsel for the Petitioner and the learned Counsel for the Respondent. We have perused the materials and documents placed by both the parties on record of this Tribunal.

A perusal of the Loan Agreement dated 06.09.2017, which was executed between the parties herein, reveals that the Corporate Debtor agreed to borrow a loan of INR 63 crores from the Applicant at the rate of 10% p.a. payable on monthly basis, for its business and general corporate purpose. The tenure of the loan was fixed as 4 years and 6 months. The Bank Account Statement annexed at Annexure 8 to the application shows that a sum of INR 63,00,00,000/- was disbursed to the Corporate Debtor on 13.09.2017 from the bank account of the Applicant held with Dombivli Nagari Sahakari Bank Ltd, Vishnunagar Branch. Thus, the existence of financial debt and its disbursal to the account of the Corporate Debtor stands proven on record.

The Loan Repayment Schedule, as stated in the aforementioned Loan Agreement, is reproduced hereinbelow:

As per the ledgers contained in the confirmation of accounts, the copies of which have been annexed to the application from Annexures 9 to 15, the following details of payments received and made by the Corporate Debtor have come to our notice:

Closing 58,50,00,000 Balance

It is further seen from the records that the Corporate Debtor has been giving balance confirmations for the financial years from FY 2017-18 to FY 2023-24. The last such balance confirmation was given by the Corporate Debtor to the Applicant on 01.04.2024 in respect of FY 2023-24 wherein the Corporate Debtor has confirmed the closing balance of Principal Outstanding Loan of INR 58,50,00,000/- payable to the Financial Creditor. Thus, we find that the Corporate Debtor has been acknowledging its liability towards the Applicant from time to time. As per the terms and conditions of the Loan Agreement, the loan was repayable in 4 years and 6 months as per the instalments given in the Loan Repayment Schedule (supra). It is not in dispute that the Corporate Debtor received the loan of Rs. 63 crores on 13.09.2017. Therefore, the last date for repaying the entire loan is 13^th March, 2022. However, the fact that the Corporate Debtor acknowledges debt due to the Applicant of INR 58.50 crores in its books of accounts as on 31.03.2024 proves that the Corporate Debtor failed to repay the debt to the Applicant the tenor of which expired on 13.03.2022. Thus, in our considered view, the factum of default on the part of the Corporate Debtor stands established on record and the Applicant has rightly ascertained 13^th March, 2022 as the date of default. Since the present petition was filed on 16.12.2024, which is within three years from the date of default, it is held to be not barred by the law of limitation as prescribed under Article 137 of the Schedule to the Limitation Act, 1963.

There were several correspondences exchanged between the Applicant and the Respondent in relation to the loan repayment and outstanding balances from time to time. For instance, vide Letter dated 10.04.2018 addressed by the Corporate Debtor to the Applicant, the Corporate Debtor stated as follows: “Reference to your reminder regarding outstanding payment of loan taken from you, we would like to say that, we are in receipt of the reminder dt 01.04.2018 and we have started the repayment of the same. And we have paid Rs. 3 crs till March 2018 and balance will try to pay as and when it possible for us.” In yet another Letter dated 02.08.2024, which was addressed by the Corporate Debtor to the Applicant, the Corporate Debtor stated the following: “We are in receipt of various reminders regarding outstanding repayment of loan taken from you. Balance amount of Loan is Rs. 60,19,50,000.00. Once against, assure you that as and when it is possible you to pay the loan, we will surely honored the same. Thanks for bearing with us.” In our considered view, the aforesaid letters tantamount to acknowledgements in writing having an effect u/s 18 of the Limitation Act, 1963. The aforesaid letters also support the case of the Applicant in establishing the existence of financial debt and its default by the Corporate Debtor.

Even otherwise, in the instant case, the Corporate Debtor has admitted its default in repayment of debt to the Financial Creditor, which is evident from the following paragraphs of the Affidavit in Reply dated 02.05.2025:

Learned Counsel for the Respondent has contended that under Clause 14 of the Loan Agreement, the parties unequivocally agreed to resolve any disputes arising therefrom through arbitration under the Indian Arbitration and Conciliation Act, 1996. However, despite the existence of an agreed dispute resolution mechanism, the Financial Creditor has chosen to file the present petition u/s 7 of the Code. We are unable to appreciate the aforesaid contention placed on behalf of the Respondent as mere existence of arbitration clause in the loan agreement does not bar the jurisdiction of this Tribunal to order CIRP of the Corporate Debtor u/s 7 of the Code. The Hon’ble Supreme Court of India in Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund & Ors. [Neutral Citation: 2021 INSC 216] has observed, inter-alia, as follows:

The Hon’ble Supreme Court in its landmark judgment in M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr. (Judgment dated August 31, 2017 in Civil Appeal Nos. 8337-8338 of 2017) has held as follows:

In view of the foregoing findings, discussions and analysis, we are satisfied that the Corporate Debtor has committed a default in repayment of debt which is due and payable to the Financial Creditor. We have also found that the Applicant has attached all the documents required to be filed along with the Petition/Application and therefore, we hold that the application filed by the Applicant is complete. The Applicant has also proposed the name of Mr. Pradeep Kumar Chakravarty as the proposed IRP and as per the consent given by the above-named proposed IRP, there are no disciplinary proceedings pending against him. Hence, as per the law laid down by the Hon’ble Apex Court in Innoventive Industries Ltd case (supra), we are left with no choice but to admit this application u/s 7(5)(a) of the Code. Accordingly, we pass the following orders:

a. 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;

b. transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

c. 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;

d. 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. The provisions of sub-section (1) shall however, not apply to such transactions, agreements as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to the Corporate Debtor.