Hemraj Choudhary vs Rattan Spirit Private Limited

The Financial Creditor is an individual and is engaged in the business of metal trading.

The Corporate Debtor is a Private Limited Company incorporated and registered as a Private Limited Company under the provisions of the Companies Act, 2013 and is engaged in the business of retail sales and deals in the country and foreign wine and beers, spirits, and liquors potable, commercial, industrial powder and absolute alcohols, rectified, methylated, sweet spirits, beers, aerated waters and mineral waters and dry ice and as a wholesaler, retailer, distributors, stockiest, dealers, godown keepers, C&F Agents, agents, marketers, merchandiser of all kind of alcoholic spirits, including Foreign liquor, Country liquor, beer, wine, rum, brandy etc. and manufacturers and dealers, importers and exporters of thermocoal, plastics, plastic material and plastic goods.

The Corporate Debtor approached the Financial Creditor in the year 2019 and requested the Financial Creditor for financial assistance to meet the short-term working capital requirement of the Corporate Debtor.

The Financial Creditor advanced a loan to the Corporate Debtor to the extent of Rs.1,39,00,000/- (Rupees One Crore Thirty-Nine Lakhs Only) in tranches, through NEFT bank transfer to the Corporate Debtor’s account.

As per the oral understanding between the parties, the financial loan was to be paid within a period of 2 years along with an interest of 18% p.a. from the date of disbursement.

As per the last available Audited financial statement on the website of the Ministry of Corporate Affairs for the year ended 31st March 2020, the Corporate Debtor has acknowledged the debt of the Financial Creditor and has shown the said financial loan as an advance instead of borrowing or loan.

The Financial Creditor on the expiry of 2 years, i.e. in April 2022, approached the Corporate Debtor for repayment of the financial debt. The Corporate Debtor requested some more time to make the payment and took the excuse of the Covid-19 pandemic. Considering the situation, the Financial Creditor granted a further 3 months to the Corporate Debtor to repay the loan.

The Financial Creditor as agreed again approached the Corporate Debtor in August 2022 whereby the management of the Corporate Debtor neither met nor responded to the Financial Creditor. Thereafter, the Financial Creditor made several attempts seeking repayment of his loan from the Corporate Debtor, but the Corporate Debtor dismissed the Financial Creditor on account of one or other reason.

Constrained by the act of the Corporate Debtor, the Financial Creditor vide legal notice dated 05.04.2023 called upon the Corporate Debtor to repay the loan.

The Corporate Debtor vide reply dated 14.04.2023 acknowledged the financial debt of the Financial Creditor and sought some time to make the payment along with interest. However, to date, the Corporate Debtor has not made any payment to the Financial Creditor.

The Financial Creditor has been continuously requesting the Corporate Debtor to clear the outstanding loan but despite numerous attempts, the Corporate Debtor has to date not made the payment. The default is continuing as the Corporate Debtor has not paid the amount.

The disbursement between the parties took place in the following manner:

The Ld. Counsel for the Financial Creditor referred to the judgments of the Hon’ble NCLAT in the following matters:

The date of default as mentioned in Part IV of the petition is April 2022, the date on which the loan became due and payable as per the oral understanding between the parties, as contended by the Ld. Counsel for the Financial Creditor.

However, no specific date of default has been mentioned in Part IV of the Petition. Assuming that the debt fell due in April 2022, and thereafter, even after giving of legal notice dated 05.04.2023 to the Corporate Debtor to pay the outstanding amount of loan, no payment was made by the Corporate Debtor, and hence the Petition was filed on 15.01.2024, which we find as having been filed well within the period of limitation of three years.

The term ‘Financial Debt’ is defined in Section 5(8) of the Code as:

Though there is no written agreement for giving of loan amount but when a legal notice dated 05.04.2023 was sent by the Financial Creditor to the Corporate Debtor for repayment of amount in question, the Corporate Debtor replied vide letter dated 14.04.2023 stating that “we are aware of the loan and the associated interest obligation as per the oral agreement in place. However, I regret to inform you that due to certain unforeseen financial circumstance we are currently unable to make the requested payment of the outstanding balance”. A copy of the reply dated 14.04.2023 sent by the Corporate Debtor is reproduced hereunder:

This letter from the Corporate Debtor clearly demonstrates that the amount in question is loan taken on interest by the Corporate Debtor from the Financial Creditor, though there is no written agreement.

It is settled law now that for a financial debt, written agreement is not essential and with the evidences available on record, conclusion can be drawn whether a particular amount is a financial debt or not as in the present case, the letter from the Corporate Debtor clearly demonstrates that it had taken loan from the Financial Creditor on interest.

The Hon’ble NCLAT in the matter of Satish Balan vs. M/s Neeta Navin Nagda & Others (supra), observed as under:

Also, for a debt to be a financial debt, charging of interest is not an essential factor. In Orator Marketing Pvt Ltd. v. Samtex Desinz (P) Ltd. Case, (2023) 3 SCC 753, the Hon’ble Supreme Court has specifically held that an interest-free loan can also be classified as a financial debt if it satisfies the criteria under Section 5(8).

In the given facts and circumstances, the present application is admitted in terms of Section 7(5) of the IBC and accordingly, the Moratorium is declared in terms of Section 14 of the Code. As a necessary consequence of the Moratorium in terms of Section 14(1) (a), (b), (c) & (d), the following prohibitions are imposed, which must be followed:

The institution of suits or continuation of pending suits or proceedings against the Respondent 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 Respondent 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 Respondent 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 Respondent.”

It is further directed that 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. The provisions of Section 14(3) shall, however, not apply to such transactions as may be notified by the Central Government in consultation with any operational sector regulator and to a surety in a contract of guarantee to a corporate debtor.

The order of moratorium shall have effect from the date of this order till 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 the corporate debtor under Section 33 as the case may be.

The AFA of the proposed Interim Resolution Professional in Part-III of the petition, Mr. Rajan Sharma, has expired on 26.03.2024. Therefore, this Bench appoints Mr. Prashant Gupta, as IRP having Registration No. IBBI/IPA-001/IP-P-02471/2021-2022/13868, Email: [email protected], Mobile No. 9815993315, whose AFA is valid upto 31.12.2025, and antecedents of the proposed IRP have been verified by the Legal Research Associate of this Adjudicating Authority, with the following directions:-

The term of appointment of Mr. Prashant Gupta, shall be in accordance with the provisions of Section 16(5) of the Code;

In terms of Section 17 of the Code, from the date of this appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the Interim Resolution Professional and the officers and the managers of the Corporate Debtor shall report to the Interim Resolution Professional, who shall be enjoined to exercise all the powers as are vested with Interim Resolution Professional and strictly perform all the duties as are enjoined on the Interim Resolution Professional under Section 18 and other relevant provisions of the Code, including taking control and custody of the assets over which the Corporate Debtor has ownership rights recorded in the balance sheet of the Corporate Debtor, etc. as provided in Section 18 (1) (f) of the Code. The Interim Resolution Professional is directed to prepare a complete list of the inventory of assets of the Corporate Debtor;

The Interim Resolution Professional shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government, and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standards of ethics and morals;

The Interim Resolution Professional shall cause a public announcement within three days as contemplated under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of the initiation of the Corporate Insolvency Resolution Process in terms of Section 13 (1) (b) of the Code read with Section 15 calling for the submission of claims against Corporate Debtor;

It is hereby directed that the Corporate Debtor, its Directors, personnel, and the persons associated with the management shall extend all cooperation to the Interim Resolution Professional in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor;

The Suspended Board of Directors is directed to give complete access to the Books of Accounts of the corporate debtor maintained under section 128 of the Companies Act. In case the books are maintained in the electronic mode, the Suspended Board of Directors are to share with the Resolution Professional all the information regarding Maintaining the Backup and regarding Service Provider kept under Rule 3(5) and Rule 3(6) of the Companies Accounts Rules, 2014 respectively as effective from 11.08.2022, especially the name of the service provider, the internet protocol of the Service Provider and its location, and also address of the location of the Books of Accounts maintained in the cloud. In case accounting software for maintaining the books of accounts is used by the corporate debtor, then IRP/RP is to check that the audit trail in the same is not disabled as required under the notification dated 24.03.2021 of the Ministry of Corporate Affairs. The statutory auditor is directed to share with the Resolution Professional the audit documentation and the audit trails, which they are mandated to retain pursuant to SA-230 (Audit Documentation) prescribed by the Auditing and Assurance Standards Board ICAI. The IRP/Resolution Professional is directed to take possession of the Books of Account in physical form or the computer systems storing the electronic records at the earliest. In case of any non-cooperation by the Suspended Board of Directors or the statutory auditors, he may take the help of the police authorities to enforce this order. The concerned police authorities are directed to extend help to the IRP/RP in implementing this order for retrieval of relevant information from the systems of the corporate debtor, the IRP/RP may take the assistance of Digital Forensic Experts empanelled with this Bench for this purpose. The Suspended Board of Directors is also directed to hand over all user IDs and passwords relating to the corporate debtor, particularly for government portals, for various compliances. The Interim Resolution Professional is also directed to make a specific mention of non-compliance, if any, in this regard in his status report filed before this Adjudicating Authority immediately after a month of the initiation of the CIRP.

The Resolution Professional is directed to approach the Government Departments, Banks, Corporate Bodies and other entities with requests for information/documents available with those authorities/ institutions/ others pertaining to the corporate debtor which would be relevant in the CIR proceedings. The Government Departments, Banks, Corporate Bodies and other entities are directed to render the necessary information and cooperation to the Resolution Professional to enable him to conduct the CIR Proceedings as per law. The Interim Resolution Professional shall after collation of all the claims received against the Corporate Debtor and the determination of the operational position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of the constitution of the Committee; and

The Interim Resolution Professional is directed to send a regular progress report to this Tribunal every fortnight.

The Petitioner is directed to deposit Rs.1,00,000/- (Rupees One Lakh only), with the IRP to meet the immediate expenses in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The amount, however, will be subject to adjustment by the Committee of Creditors as to be duly accounted for by IRP and shall be paid back to the Petitioner.

A copy of this Order shall immediately be communicated to the Petitioner, the Respondent Company, and the IRP named above, by the Court Officer/Registry of this Tribunal.

The petition is admitted for CIRP of the Respondent and is disposed of accordingly.