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Judgment
ORDER
The case is fixed for pronouncement of order
The order is pronounced in open Court vide separate sheet.
O R D E R
This application is filed on 22.12.202 by M/s. Gusaiji Trading Private Limited (hereinafter referred to as “the Financial Creditor”) through its authorized representative Mr. Bhupendra Kumar Mewara who is duly authorized vide Board Resolution dated 04.11.2022 to file this application, against M/s. Saffron Therapeutics Private Limited (hereinafter referred to as “the Corporate Debtor”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 with a prayer to initiate the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor. The amount claimed in default is Rs. 3,20,71,902.80 (Rs. 1,75,91,335/- being the principal amount + 1,44,80,567.80 being interest charged on the principal amount @ 12%). The date of default is stated to be 22.03.2020.
Learned Counsel for the Applicant/Financial Creditor appeared and made the averments which are summarised as under:-
(a). The Applicant/Financial Creditor i.e., M/s. Gusaiji Trading Private Limited is a private limited company incorporated under the provisions of the Companies Act, 1956 on 07.01.2008 with CIN No. CIN: U52590GJ2008PTC052574. The registered office of the Applicant/Financial Creditor is situated at 304, Shoppers Plaza, Opp. Municipal Market, C.G. Road, Navrangpura, Ahmedabad-380009.
(b). The Respondent/Corporate Debtor i.e., M/s. Saffron Therapeutics Private Limited is a private limited company incorporated under the Companies Act, 2013 on 10.07.2014 with CIN: U24233GJ2014PTC080089. The registered office of the Respondent/Corporate Debtor is situated at B14, Sthapna Complex, Near Ankur Bus Stand, Opp. GHP Complex, Naranpura, Ahmedabad-380013. The authorized and Paid Up Share Capital of the Respondent/Corporate Debtor are Rs. Rs.1,00,000/- and Rs. 1,00,000/- respectively.
(c). In the year 2017, the Respondent/Corporate Debtor approached the Applicant/Financial Creditor for availing financial facilities for business purposes and requested Applicant/Financial Creditor to lend money as a loan. Accordingly, the Respondent/Corporate Debtor and Applicant/Financial Creditor entered into a loan agreement dated 22.03.2017 wherein the Applicant/Financial Creditor agreed to provide necessary financial assistance to Respondent/Corporate Debtor. Thereafter, an amount of Rs. 2,17,46,000/- @ 12% interest was disbursed to the Respondent/Corporate Debtor which was to be repaid without fail within three years i.e., on or before 22.03.2020 which is annexed as at page 9.
(d). Thereafter, the Respondent/Corporate Debtor made a part payment towards repayment of the loan. However, as on 31.03.2022 an amount of Rs. 1,87,91,335/- with 12.00% interest was due and payable by the Respondent/Corporate Debtor.
(e). Even after various reminders and requests, made to the Respondent/Corporate Debtor for payment of the outstanding amount due and payable to the Applicant/Financial Creditor, the Respondent/Corporate Debtor failed and neglected to do so.
(f). Thereafter, the Applicant/Financial Creditor as well as Applicant/Financial Creditor again entered into another agreement dated 01.04.2022 for unpaid amount of Rs.1,87,91,335/- inter-alia agreeing that the entire said amount along-with @ 12.00% interest will be repaid within six months which is annexed as at page 10.
(g). The Respondent/Corporate Debtor again defaulted in repayment of outstanding amount due and payable to the Applicant/Financial Creditor. Therefore, the Applicant/Financial Creditor was left with no other option and was constrained to issue a Demand Notice dated 04.11.2022 calling upon the Respondent/Corporate Debtor to pay the outstanding amount due with interest thereon. A copy of the Demand Notice dated 04.11.2022 is attached with the application.
(h). Since the Respondent/Corporate Debtor failed to make the payment of the outstanding amount along with 12% interest, the Applicant/Financial Creditor filed this application on 22.12.2022 under section 7 of IBC, 2016 to initiate the CIRP against the Respondent/Corporate Debtor.
Learned Counsel for the Respondent/Corporate Debtor appeared and made the submissions which are summarised as under:-
(a). As per Section 10A of the IBC, 2016, no application for initiation of CIRP of a Respondent/Corporate Debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such period, not exceeding one year from such date. Further, no application shall ever be filed for initiation of CIRP of a Respondent/Corporate Debtor for the said default occurring during the said period.
(b). As per the case of the Applicant/Financial Creditor, the amount was to be repaid by the Respondent/Corporate Debtor on or before 22.03.2020. Thereafter, the Respondent/Corporate Debtor made a part payment towards the repayment of the loan. Hence, the default of the Respondent/Corporate Debtor falls within the ambit of Section 10A of IBC, 2016.
(c). The Applicant/Financial Creditor has disbursed amounts admittedly on or around 22.03.2017. However, the said application is filed under Section 7 of IBC, 2016 only 22.12.2022 viz. after 3 years from the date of disbursement and, therefore, the said is beyond the period of limitation.
(d). The Applicant/Financial Creditor is trying to utilise the provisions of IBC, 2016 for a mere recovery of its debts. The Hon’ble Apex Court in the case of Swiss Ribbons Pvt. Ltd. v. Union of India & Org (2019) 4 SCC 17 has opined that the primary focus of the legislation is to ensure the revival and constitution of the Respondent/Corporate Debtor and that object of IBC, 2016 is the resolution of the Respondent/Corporate Debtor but not simply the recovery of debt of a creditor. The conduct of Applicant/Financial Creditor makes it clear that it is trying to utilise this forum as a ‘recovery mechanism’.
(e). Moreover, the Respondent/Corporate Debtor is facing a temporary cash crunch which has resulted in the alleged default. This Adjudicating Authority ought to exercise discretion and ought not to admit the matter into insolvency in the interest of justice as laid down by the Hon’ble Supreme Court in the case of Vidarbha Industries Vs. Axis Bank Ltd. The Applicant/Financial Creditor has not shown that the Respondent/Corporate Debtor is unable to pay its debt and therefore also the application is required to be dismissed in limini.
We have heard Learned Counsel for the Applicant/Financial Creditor and Learned Counsel for the Respondent/Corporate Debtor and perused the relevant documents available on record. It is noted that the Applicant/Financial Creditor and the Respondent/Corporate Debtor initially entered into Loan Agreement dated 22.03.2017 and the Applicant/Financial Creditor disbursed an amount of Rs. 2,17,46,000/- which was to be paid within 3 years along with 12% interest on or before 22.03.2020. However, the Respondent/Corporate Debtor made only part payments towards repayment of the loan. The entire unpaid amount fell due along-with interest on 22.03.2020 which is prior to the exempted period of Section 10 A of the Code. The Respondent/Corporate Debtor committed default prior to the exempted period of Section 10 A of the Code.
Thereafter, the Applicant/Financial Creditor as well as Applicant/Financial Creditor again entered into another agreement dated 01.04.2022 for unpaid amount of Rs.1,87,91,335/- inter-alia agreeing that the entire said amount along-with @ 12.00% interest will be repaid within six months. The entire unpaid amount again fell due along-with interest on 30.09.2022 which is after the exempted period of Section 10 A of the Code.
However, the Respondent/Corporate Debtor again failed to make the entire payment. The Applicant/Financial Creditor sent a Demand Notice to the Respondent/Corporate Debtor on 04.11.2022 calling upon the Respondent/Corporate Debtor to repay the amount of Rs. 1,87,91,335/- along with 12% interest. The entire unpaid amount fell due along-with interest on after the exempted period of Section 10 A of the Code. The Respondent/Corporate Debtor again committed default after the exempted period of Section 10 A of the Code.
As per the initial agreement dated 22.03.2017, the Respondent/Corporate Debtor had to repay the entire loan within 3 years along with 12% interest thereon i.e. by 21.03.2020 Hence, the date of default is rightly mentioned as 22.03.2020 which is prior to the exempted period of Section 10 A of the Code.
This application is filed before this Adjudicating Authority on 22.12.2022. Notice of this application was duly served upon the Respondent/Corporate Debtor. The Respondent/Corporate Debtor has filed its reply and we have perused the same. This Adjudicating Authority vide its order dated 05.05.2023 has directed the Applicant/Financial Creditor to comply with the provisions of Regulation 20(1A) within seven days. On 19.06.2023, the learned counsel for the Applicant/Financial Creditor submitted that the order dated 05.05.2023 has been complied with and a copy of NeSL data has been filed on 03.06.2023 in which Date of default is also recorded as 22.03.2020.
Learned Counsel for the Respondent/Corporate Debtor admitted that last payment was made on 04.11.2022. Thereafter, no payment was made due to financial difficulty being faced by the Respondent/Corporate Debtor. He also admitted that debt amount in this case is Rs. 3,20,71,902/- and the outstanding amount is Rs. 1,75,91,335/- which is above threshold prescribed under Section 4 of the IBC, 2016.
In view of the above, we hold that present application is complete in terms of Section 7 (5) of the Code. The Applicant/Financial Creditor is entitled to claim its dues, establishing the default in payment of the financial debt beyond doubt as per initial agreement dated 21.03.2017 the actual default occurred on 22.03.2020 which was prior to the date specified under Sec 10 A of the Code. Further, the application has been filed on 22.12.2022 with in three years of initial default.
Further, the outstanding financial debt is of more than rupees one crore which meets the threshold limit as per section 4 of the Code and is well within the three years of limitation for filing the present application. Accordingly, the Application filed under section 7(2) of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the Respondent/Respondent/Corporate Debtor deserves to be admitted.
The Applicant/Financial Creditor has proposed the name of the Interim Resolution Professional („IRP‟) Mr. Omkarchand Rikhabdas Maloo, having registration No. IBBI/IPA-001/IP-P00435/2017-18/10758. He has filed his written communication annexed with the Application as Annexure- I at Page 45-47 as per the requirement of Rule 9(l) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is a declaration made by him that there are no disciplinary proceedings pending against him with the Board or in Indian Institute of Insolvency Professionals of ICAI. In addition, further necessary disclosures have been made by him as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of the Section 7(3)(b) of the code.
Accordingly, in light of the above facts and circumstances, it is, hereby ordered as under:-
The Respondent/Corporate Debtor M/s. Saffron Therapeutics Private Limited (CIN: U24233GJ2014PTC080089) is admitted in Corporate Insolvency Resolution Process (CIRP) under section 7 of the IBC, 2016.
As a consequence thereof, moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the Code.
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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2022;
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 a Corporate Debtor.
The order of moratorium under section 14 of the Code shall come to effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of section 31 or passes an order for liquidation of the corporate debtor under Section 33 of the IBC 2016, as the case may be.
However, in terms of Section 14(2) to 14(3) of the Code, the supply of essential goods or services to the corporate debtor as may be specified, if continuing, shall not be terminated or suspended, or interrupted during the moratorium period.
As proposed by the Applicant/Financial Creditor, we appoint Mr. Omkarchand Rikhabdas Maloo, having registration number no. IBBI/IPA-001/IP-P00435/2017-18/10758, having address at 403, 4th Floor, Shaival Plaza, Near Hope Neuro Care Hospital, Gujart College Road, Ellisbridge, Ahmedabad, Gujaerat-380006, (e-mail: [email protected]) to act as Interim Resolution Professional (IRP) subject to the condition that no disciplinary proceedings are pending against him. He shall conduct the Corporate Insolvency Process as per the Insolvency and Bankruptcy Code, 2016 r.w. Regulations made thereunder.
The IRP so appointed shall make a public announcement of the initiation of Corporate Insolvency Resolution Process and call for submissions of claims under section 15, as required by Section 13(1)(b) of the Code.
The IRP shall perform all his functions as contemplated, inter-alia, by sections 17, 18, 20 and 21 of the Code. It is further made clear that all personnel connected with the corporate debtor, its promoters, or any other person associated with the management of the corporate debtor are under legal obligation as per section 19 of the Code to extend every assistance and cooperation to the IRP. Where any personnel of the corporate debtor, its promoters, or any other person required to assist or co-operate with IRP, do not assist or cooperate, the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.
The IRP is expected to take full charge of the corporate debtor’s assets, and documents without any delay whatsoever. He is also free to take police assistance in this regard, and this Court hereby directs the Police Authorities to render all assistance as may be required by the IRP in this regard.
The IRP shall be under a duty to protect and preserve the value of the property of the ‘corporate debtor company’ and manage the operations of the corporate debtor company as a going concern as a part of obligation imposed by section 20 of the Code.
The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.
We direct the Applicant/Financial Creditor to pay IRP a sum of Rs Rs.2,00,000/- (Rupees Two Lakh Only) in advance as fees and expenses arising out of issuing public notice and inviting claims till the CoC decides about his fees/expenses.
The Registry is directed to communicate this order to the Applicant/Financial Creditor, corporate debtor, and to the Interim Resolution Professional, the concerned Registrar of Companies and the Insolvency and Bankruptcy Board of India after completion of necessary formalities, within seven working days and upload the same on the website immediately after pronouncement of the order. The Registrar of Companies shall update its website by updating the Master Data of the Corporate Debtor in MCA portal specific mention regarding admission of this Application and shall forward the compliance report to the Registrar, NCLT.
The IRP shall also serve a copy of this order to the various departments such as Income Tax, GST (centre), State Trade Tax, Provident Fund etc. who are likely to have their claim against Corporate Debtor as well as to the trade unions/employees associations so that they are informed timely of the initiation of CIRP against the Corporate Debtor timely.
The commencement of the Corporate Insolvency Resolution Process shall be effective from the date of this order.
Accordingly, the present application i.e., CP (IB)/02(AHM)2023 stands admitted. A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.