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Judgment
PER: MS. SUMITA PURKAYASTHA, MEMBER (TECHNICAL)
The Focus Realcon Private Limited has filed the instant application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity 'the Rules') with a prayer to trigger Corporate Insolvency Resolution Process in respect of Respondent Company M/s. Royal Crown Projects Private Limited, referred to as the Corporate Debtor.
It is appropriate to mention that the Applicant M/s. Focus Realcon Private Limited is a company registered under the provisions of the erstwhile Companies Act, 1956 (CIN No. U70101DL2010PTC210013) on 29.10.2010 having its registered office situated at H.No. 4-B, Office No. 25, 1st Floor, Ashirward Complex, behind Shiva Market, Village Pitampura, New Dlhi-110034 represented through Mr. Raj Kumar duly authorised on behalf of the Applicant vide board resolution dated 25th March, 2021, has preferred the present application on behalf of the Applicant for initiation of insolvency resolution process against the Respondent Corporate Debtor.
The Respondent Company M/s. Royal Crown Projects Private Limited is company incorporated on 25.01.2012 under the provisions of the Companies Act, 2013, (CIN No. U70101DL2012PTC230571) against whom initiation of Corporate Insolvency Resolution Process has been prayed for, having its registered office situated at H.No. 136-A, Pocket-H, Near Paltani Jewellery, Dilshad Garden, New Delhi-110095. Since the registered office of the Respondent Corporate Debtor is in New Delhi, this Tribunal having territorial jurisdiction over the NCT of Delhi is the Adjudicating Authority in relation to the prayer for initiation of Corporate Insolvency Resolution Process in respect of respondent corporate debtor under sub-section (1) of Section 60 of the Code.
The details of transactions leading to the filing of this petition as averred by the applicants are as follows: -
The Financial Creditor and Corporate Debtor had entered into a Memorandum of Understanding dated 16.03.2015 ("MoU") for aggregation of and development of land in Delhi NCR region where by the Corporate Debtor was obligated to undertake the said work for the Financial Creditor.
The Scope of Work of the Corporate Debtor was to identify potential contagious land parcels of not less than 20 ("twenty") acres situated in the National Capital Region in order to support the Financial Creditor with the process of land aggregation in order to make such process time and cost efficient for itself ("Scope of Work") for a term of 4 ("Four") years ("Term").
That in terms of Clause 2 of the said MoU, the Financial Creditor in lieu of the Scope of work, agreed to fund the Corporate Debtor to the tune of up to Rs. 30,00,000/- which shall be proportionately reduced/ adjusted from the Corporate Debtor's allocation once the construction and development activities on the identified/ aggregated project land are initiated or the said amount shall be refundable in case of failure to perform and comply with the terms and conditions of MoU.
Pursuant to the abovementioned Memorandum of Understanding, the Applicant has extended financial assistance for total amount of Rs. 16,57,28,750/- (Rupees Sixteen Crores Fifty -Seven Lakhs Twenty-Eight Thousand Seven Hundred Fifty Only) in the following tranches:-
| Date | Amount |
|---|---|
| 24.03.2015 | Rs. 16,39,08,750 |
| 08.06.2017 | Rs.1,00,000 |
| 06.07.2017 | Rs.2,00,000 |
| 13.09.2017 | Rs.3,00,000 |
| 06.03.2018 | Rs.7,50,000 |
| 10.08.2018 | Rs.70,000 |
| 10.09.2018 | Rs.3,00,000 |
| 08.02.2019 | Rs.1,00,000 |
| Total | Rs.16,57,25,750/- |
The Corporate Debtor failed to undertake the aggregation of land and therefore was unable to take the arrangement ahead for execution of definitive agreements for development etc. in terms of the scope of work as illustrated in MoU and further it failed to provide information on the status and progress of the land identification in terms of its land identification in terms of its obligations under MoU.
The Financial Creditor vide its letters dated 15.04.2019, 13.05.2019 and 18.10.2019 reiterated its decision to terminate the MoU and requested a refund of Rs. 16,57,28,750/- to be paid till date within 15 days from the date of receipt of letter.
As per Part IV of the Form – 1 of the Application, the Financial Creditor claimed a sum of Rs. 16,57,28,750/ is due payable by the Corporate Debtor with effect from 13.05.2019.
The applicants have placed the following documents on record to prove the claims –
Memorandum of Understanding (“MoU”) dated 16.03.2017 executed between the Financial Creditor and Corporate Debtor.
Letter dated 16.03.2017 and 27.07.2018 sent by the Corporate Debtor to Financial Creditor requesting for additional sum of money and extending the period of MoU.
Correspondence between the Financial Creditor and Corporate Debtor vide letters dated 10.08.2018, 26.11.2018, 08.02.2019, 15.04.2019, 01.05.2019, 13.05.2019, 01.06.2019, 15.06.2019, 10.08.2019.
Letter dated 17.11.2019 sent by the Corporate Debtor wherein Corporate Debtor acknowledged the debt of Rs. 16,57,28,750/- and agreed to refund the amount of Rs. 16,57,28,750/-.
Legal Notice dated 03.03.2021 addressed to the Corporate Debtor sent by the Financial Creditor calling to make payment to the Financial Creditor of Rs. 16,57,28,750/-.
Ledger Accounts and Balance Sheets of the Financial Creditor.
Bank Statement of the Financial Creditor in respect to the loan amount disbursed to the Corporate Debtor.
Sub-section (3) (b) of Section 7 mandates the financial creditor to furnish the name of an Interim Resolution Professional. In compliance thereof the Applicant has proposed the name of Mr. Debashis Nanda, for appointment as Interim Resolution Professional having registration number IBBI/IPA-003/IP-N00040/2017-2018/10316 resident of Flat No. C S - 14, C-Floor, Ansal Plaza, Vaishali, Ghaziabad, Uttar Pradesh- 201010 with email - id nanda.cma@gmail.com . Mr. Debashis Nanda has agreed to accept the appointment as the interim resolution professional and has signed a communication in Form 2 in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or elsewhere. In addition, further necessary disclosures have been made by Mr. Debasis Nanda as per the requirement of the IBBI Regulations. Accordingly, it is seen that the requirement of Section 7 (3) (b) of the Code has been satisfied.
The Corporate Debtor has filed its reply and the averments of the Corporate Debtor in the Reply are listed here: -
The Corporate Debtor had made all possible efforts to abide by and adhere to the scope of work and made best efforts in progressing the work under the arrangement.
The Corporate Debtor is not shying away from the facts, and only seeking sufficient time and genuine accommodation for refund of amount of Rs. 16,57,28,750/- and settle all claims of the Applicant.
Needless to say, that an application under Section 7 of the Code is maintainable if the debt is proved to be due and there is default. In view of the Section 4 of the Code, the moment default is of Rupees one hundred lakhs or more, an application to trigger Corporate Insolvency Resolution Process under the Code is maintainable.
With reference to the request of the Corporate Debtor for granting time to settle the matter, we are strengthened by the order passed by the Hon'ble Supreme Court in E.S. Krishnamurthy and Ors. vs. M/s. Bharath Hi-Tech Builders Private Limited held that National Company Law Tribunal cannot compel any party to settle a dispute. The Court has reiterated that the powers of the National Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code are restricted only to verifying whether or not a ‘default’ has occurred, basis which it may decide to either admit or reject an application for initiation of corporate insolvency resolution process (CIRP).
The Applicant clearly comes within the definition of Financial Creditor. The material placed on record as stated in the paras above further confirms that respondent has debt due and has committed default in repayment of the outstanding financial debt. On a perusal of Form – I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed Interim Resolution Professional.
We are satisfied that the present application is complete in all respect. The applicant financial creditor is entitled to move the application against the corporate debtor in view of admitted outstanding financial debt and default of the same by the corporate debtor. The default in repayment of the financial debt is not refuted by the Corporate Debtor.
As a sequel to the above discussion and in terms of Section 7 (5) (a) of the Code, the present application is hereby, admitted.
Mr. Debashis Nanda, having registration number IBBI/IPA-003/IP-N00040/2017-2018/10316 is appointed as an Interim Resolution Professional for corporate debtor.
In pursuance of Section 13 (2) of the Code, we direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by Explanation to Regulation 6(1) of the IBBI Regulations, 2016) with regard to admission of this application under Section 7 of the Insolvency & Bankruptcy Code, 2016.
We direct the applicant Financial Creditor to deposit a sum of Rs. 2 Lakhs with the Interim Resolution Professional namely Mr. Debashis Nanda to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Financial Creditor. The said amount however is subject to adjustment towards Resolution Process cost as per applicable rules.
We also declare moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) & (d) of the Code. Thus, the following prohibitions are imposed:
“(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.”
It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract of guarantee to the corporate debtor in terms of Section 14 (3) (b) of the Code.
The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the Code, Rules and Regulations. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day-to-day affairs of the 'Corporate Debtor'. In case there is any violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing a appropriate orders. The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code, Rules and Regulations.
The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCT of Delhi & Haryana at the earliest possible but not later than seven days from the date of pronouncement of the order.