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Judgment
Pradeep R. Sethi, J
The application in the prescribed Form No. 1 is filed by ICICI Bank Limited (hereinafter referred to as Bank) for initiation of Corporate Insolvency Resolution Process (CIRP) in the case of Lakshmi Energy and Foods Limited (hereinafter referred to as Corporate Debtor). The application is filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (Rules). The application is signed by Ms. Shilpi Garg, Chief Manager of the Bank. Her affidavit verifying the contents of the application is at page 40 of the petition. Copy of the Power of Attorney dated 27.11.2017 authorizing Ms. Shilpi Garg for proceedings under the Code is filed at Annexure-A of the petition.
The copy of certificate of incorporation and Memorandum and Articles of Association of Corporate Debtor are stated to be filed at Annexure-D (Colly) of the petition. Corporate Debtor is stated to be incorporated on 20.07.1990 and the registered address is stated to be SCO 18 & 19, 1st Floor, Sector 9-D, Chandigarh 160017. The Master Data of the Corporate Debtor is at Page No. 52 of the petition Therefore, the jurisdiction lies with this Bench of the Tribunal.
It is stated in Part-IV of Form No. 1 that the Corporate Debtor was granted various credit facilities by ICICI Bank Limited. The sanctioned credit facilities are as under:
(i) On 27.05.2010, the Bank and the Corporate Debtor executed a Master Facility Agreement and the Bank sanctioned the following credit facility as follows:-
Nature of Credit Facility
Amount (in Rs.)
Export packing credit
50 crores
Packing credit in foreign currency
50 crores
It is stated that the repayment of the loan was either on demand or on the 180th day from the date of disbursement or the date of expiry of the validity period.
(ii) On 22.10.2010, Further vide another Credit Arrangement Letter dated 14.10.2010, the overall limit was increased to Rs. 70 crores including a facility of Rs. 20 crores in relation to Derivatives.
(iii) On 28.09.2011, further vide another Credit Arrangement Letter dated 28.09.2011, the existing credit facility of Rs. 50 crores was increased to Rs. 75 crores and a new line of credit for short term loan of Rs. 50 crores was sanctioned for a validity of 12 months.
It is stated that the repayment of the loan was 360 days or expiry of mentioned sub-limits was 360 days or expiry of contract from the earlier maximum repayment term of 270 days.
(iv) On 28.12.2011, a Working Capital Consortium Agreement for granting short term loan for Rs. 125 crores with the Bank along with Punjab National Bank, Syndicate Bank and Axis Bank (Consortium Bank) was executed by the Corporate Debtor. The facilities were continued to be secured by the Consortium Banks by way of first pari passu charge on current assets and second pari passu charge on the fixed assets of the Corporate Debtor.
(v) On 13.03.2012, further vide another Credit Arrangement Letter, a cash credit of Rs. 125 crores was sanctioned to the Corporate Debtor as a sub limit of the existing line of credit for the short term loan.
(vi) On 24.04.2013, Further vide another Credit Arrangement Letter, the non-fund based facility towards Derivative was reduced from Rs. 20 crores to Rs. 10 along with sanction of line of credit for short term loan facility of Rs. 125 crores.
(vii) On 10.04.2015, Restructuring was adopted as Corrective Action Plan. The facilities were restricted and the following facilities were sanctioned to the Corporate Debtor:
Nature of Credit Facility
Amount (in Rs.)
Working Capital
64.96 crores
Funded Interest term loan
26.56 crores
Short term loan
68.47 crores
Non fund based
9.7 crores
(viii) On 27.06.2015, Post approval of the restructuring package by all the Consortium Banks, the Corporate Debtor executed a Joint Restructuring Agreement dated 27.06.2015 and the facilities were classified as follows:-
Nature of Facility
Amount (in Rs.)
Working Capital Term Loan (Facility B)
64.97 crores
Funded Interest Term Loan (Facility D)
12.47 crores
Funded Interest Term Loan (Facility E)
14.09 crores
Fund Based Working Capital (Facility H)
68.47 crores
Non-fund based working Capital (Facility I)
9.70 crore
A tabulation computation of amount in default against the corresponding date on which default occurred is at Annexure V (Colly) of the petition.
Annexure-W of the petition shows that NPA date is 31.12.2016.
In Part-V of Form No. 1, the particulars of security held are given. It is stated that the credit facilities are primarily secured by way of hypothecation and there is also collateral security by way of mortgage of lands. Copy of the report obtained from the website of Central Repository of Information on Large Credit is stated to be attached as Annexure-AA of the petition accompanied by certified under the Bankers Books Evidence 1891 are stated to be attached as Annexure-BB of the petition. It is stated that the following loan and security documents were executed by the Corporate Debtor:- Copy of the Cash Arrangement Letter dated 27.05.2010 Annexure-H, Master Facility Agreement dated 27.05.2010 Annexure-I, Credit Arrangement Letter dated 14.10.2010 Annexure-J, Master Facility Agreement dated 22.10.2010 Annexure-K, Credit Arrangement Letter dated 28.09.2011 Annexure-L, Master Facility Agreement dated 29.09.2011 Annexure-M, Working Capital Consortium dated 28.12.2011 Annexure-N, Credit Arrangement Letter dated 13.03.2012 Annexure-O, Credit Arrangement Letter dated 24.04.2013 Annexure-P, Credit Arrangement Letter dated 27.06.2014 Annexure-Q, Credit Arrangement Letter dated 10.04.2015 Annexure-R, Restructuring Agreement dated 23.06.2015 Annexure-S, and Joint Lenders Restructuring Agreement dated 27.06.2015 dated 27.06.2015. The repayment of loan is stated to be guaranteed and the guarantee deeds by different guarantors are stated to be at Annexures Z/3, Z/4, Z/8, Z/9, Z/13, Z/17 and Z/20 which are a part and parcel of the petition.
It is stated that due to continuous default in the repayment of loan, the account was classified as NPA on 31.12.2016 as per the Reserve Bank of guidelines.
It is further averred that a Joint Lenders Restructuring Agreement was executed between the Consortium Banks with "Punjab National Bank" as the Lead Bank and Corporate Debtor as the borrower on 27.06.2015. Copy of such agreement is at Annexure-T of the petition.
In Part IV of Form No. 1, it is stated that the outstanding of the corporate debtor towards the Financial Creditor i.e. ICICI Bank is Rs. 1,77,77,60,053.153 comprising Rs. 76,67,48,709.55 for cash credit facility, Rs. 72,40,11,652.35 for working capital term loan and Rs. 28,69,99,691.25 for funded interest term loan facility. The Statement of Loan Accounts are stated to be attached at Annexure-A and B (Diary No. 1078 dated 09.04.2018) of the petition duly accompanied by the Certificate under Section 2A of the Bankers' Books Evidence Act, 1891.
The charge on securities held is stated to be registered with the Registrar of Companies under the provisions of Companies Act, 1956 and the record of registration of charge available with the Registrar of Companies i.e. Form No. 8 are at Annexure-Z/2, Z/6, Z/10, Z/22 of the petition.
The Bank also issued a loan recall notice to the Corporate Debtor on 05.01.2018 to pay a sum of Rs. 1,77,77,60,053.15 (outstanding as on 31.12.2017) within 7 days from the receipt of such notice. Further notice under Section 13(2) of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) claiming the corporate debtor to be in default in repaying the outstanding dues as on 31.12.2017 and stating that the bank classified the account as NPA as per the Reserve Bank of India guidelines. The Loan Recall Notice dated 05.01.2018 and notice dated 18.01.2018, under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI 2002) are at Annexure X & Y of the petition.
In Part-III of Form No. 1 Mr. Ravinder Agarwal, Registration No. IBBI/IPA-001/IP-P00329/2017-18/10599 has been proposed as Interim Resolution Professional (IRP). Form No. 2 dated 09.02.2018 submitted by the proposed IRP is stated to be attached as Annexure-G of the petition.
Vide order dated 27.03.2018, notice of petition was directed to be issued to the Corporate Debtor.
When the matter was listed on 25.05.2018, the following order was passed:-
"As per office report, reply has not been filed by the respondent-corporate debtor.
Mr. R. Kartikeya, Advocate for the respondent states that Writ Petition (Civil) No. 5555 of 2018 has been filed by the respondent-corporate debtor by impleading Reserve Bank of India and others including ICICI Bank Ltd., the petitioner herein, in which an order dated 20.05.2019 has been passed by the Hon'ble Delhi High Court directing to maintain status quo of the proceedings pending before NCLT, Chandigarh Bench filed by ICICI Bank Ltd. Learned counsel for the respondent seeks time to file certified copy of the aforesaid order.
List the matter on 04.07.2018 for placing on record the copy of order of the Hon'ble Delhi High Court."
During the course of hearing on 12.10.2018, Learned Counsel for the petitioner submitted that Hon'ble High Court of Delhi has dismissed the Writ Petition, W.P. (C) No. 5555/2018 and now the matter is pending adjudication in Letter Patents Appeal before the Division Bench of High Court of Delhi.
The Hon'ble High Court of Delhi was further pleased to dismiss the appeal filed by the Respondent Corporate Debtor vide its order dated 06.02.2019 in LPA 579/2018.
On 18.03.2019, C.A. No. 191/2019 was filed by the Respondent Corporate Debtor before this Tribunal to issue directions to the Financial Creditor to first approach the Adjudicating Authority constituted under Section 8 of the Prevention of Money Laundering Act (PMLA), 2002 for seeking permission/orders to take any resolution of the assets of the Corporate Debtor already attached vide order No. 03/2017 dated 15.03.2017 passed by the Directorate of Enforcement, Government of India.
Vide order dated 26.04.2019, it was held that in view of the judgment of the Hon'ble High Court of Delhi in CRL.A 143/2018 and Crl.M.A.2262/2018; The Deputy Director, Directorate of Enforcement, Delhi v. Axis Bank, that the PMLA, RDBA, SARFAESI and the Insolvency Code, (for such other laws) must co-exist, each to be construed and enforced in harmony, the proceedings in CP(IB) No. 73/Chd/Chd//2018, for initiation of CIRP in case of the corporate debtor, be continued and not kept in abeyance and that the financial creditor and/or the Resolution Professional, who may be appointed may take appropriate action as deemed fit for declaration under the PMLA, 2002 that the property to the extent of the interest of the respective secured creditor is not to be subjected to confiscation.
Vide order of the same date of 26.04.2019, it was stated that after the finalization of the application, being CA No. 191/2018, the parties are directed to complete the pleadings in the main case, well in advance before the next date, if not completed and the matter was adjourned to 11.07.2019.
CA No. 475/2019 was filed by the corporate debtor on 08.07.2019 submitting that against the order dated 06.02.2019 passed by the Hon'ble Delhi High Court, the corporate debtor has filed a Special Leave Petition, vide Diary No. 22494 of 2019. It was prayed that the further proceedings in CP(IB) No. 73/Chd/Chd/2018 be adjourned till the final disposal of the Special Leave Petition.
Vide order dated 11.07.2019, it was noted that CA No. 475/2019 dated 08.07.2019 is in a way another attempt to seek adjournment on the ground that the corporate debtor has filed SLP before the Hon'ble Supreme Court. Further, it was noted that the learned counsel for the petitioner strongly contested the application and submitted that there is no stay granted by any Court for proceedings under the Code. It was observed that number of opportunities were granted on earlier occasions and on the previous hearing of 26.04.2019, after seeing the conduct and delay in the proceedings, it was made clear that pleadings be completed in the main case well in advance before the next date and the matter was adjourned to 11.07.2019. It was noted that so far admittedly, no reply or pleading are submitted from the side of the corporate debtor. The Bench therefore, forfeited the right of the corporate debtor to file any reply/pleadings and after the forfeiture, right to argue on merits was granted to the corporate debtor. CA No. 475/2019 was disposed and the main case was directed to be heard on merits on 12.07.2019.
On 12.07.2019, the learned counsel for the corporate debtor pleaded that in view of the filing of the SLP, he cannot make submissions on merits and requested for time for filing additional affidavit before the date of pronouncement. It was also pleaded that the Managing Director was indisposed but no evidence in this regard was furnished.
The learned counsel for the financial creditor stated that there was no reference in the application under Section 7 of the Code to the RBI Circular dated 12.02.2018. it was also pleaded that the RBI Circular was not applicable in the present case since the subject matter of the circular related to debts with an aggregate exposure of Rs. 2,000 Crores and over on or after 01.03.2018. The learned counsel for the financial creditor referred to Para No. 89 of the judgment dated 24.09.2018 passed by the Hon'ble Single Judge of the Hon'ble Delhi High Court, deciding that the contention that since the banks have not disbursed additional working capital, they should be restrained from proceeding under the SARFAESI Act or the IBC is not merited, because there is no dispute that the company owes substantial amount to the banks and as financial creditor they are entitled to seek remedies under the IBC.
The learned counsel for the corporate debtor stated that the core issue before the Hon'ble Single Judge of the Hon'ble Delhi High Court was whether any directions can be issued with regard to implementation of the circulars dated 26.02.2014 and 05.05.2017 in view of the RBI subsequent circulars dated 12.02.2018. A reference was made to the judgment of the Hon'ble Supreme Court in Dharani Sugars and Chemicals Ltd. v. Union of India, (2019) 5 SCC 480 and it was pleaded that it was held by the Hon'ble Supreme Court that all cases in which debtors have been proceeded against by financial creditors under Section 7 of the Code only because of the operation of the circular dated 12.02.2018, will be proceedings, which being faulted at the very inception are declared to be nonest. It was pleaded that the issue raised before the Hon'ble Supreme Court in the SLP filed is whether the application and the action sought under Section 7 of the Code is nonest. A request was once again made for granting opportunity for one more hearing.
We find that the Hon'ble Delhi High Court in LPA 579 of 2018 in the case of corporate debtor, had noted in Para No. 92 thereof, that the writ petition was filed by the corporate debtor on 21.05.2018 much after the financial creditor approached the Tribunal on 09.03.2018 and so, it is clear that the writ petition was filed as an afterthought only with a view to possibly interdict the proceedings already initiated by the financial creditor. After the LPA was rejected on 06.02.2019, the Tribunal passed order dated 14.02.2019 listing the matter on 20.03.2019 and gave directions that the reply/objections with power of attorney and the board resolution be filed within two weeks with a copy advance to the counsel opposite. The time was allowed as per the request of the learned counsel for the corporate debtor seeking two weeks' time to file the reply. However, the reply was not filed. Even vide order dated 26.04.2019, the parties were directed to complete the pleadings in the main case well in advance before the next date and the matter was adjourned to 11.07.2019. The reply was still not filed and it was noted in the order dated 11.07.2019 that CA No. 475/2019 is in a way another attempt to seek adjournment on the ground that the corporate debtor has filed SLP before the Hon'ble Supreme Court. We may add here that the notice of the petition to the corporate debtor was issued on 27.03.2018 fixing the date of hearing for 02.05.2018 and on that date, the learned senior counsel for the respondent sought and was granted 10 days time to file the reply, however, the reply was not at all filed. In view of these facts, the right of the corporate debtor to file any reply/pleadings was forfeited by order dated 11.07.2019. The right to argue on merits was granted, but on the next date of hearing on 12.07.2019, the learned counsel again requested for one more hearing, which was rejected and the order was reserved.
We have carefully considered the submissions of learned counsel for the financial creditor and the Corporate Debtor and have also perused the record.
Section 7(5)(a) of the Code is as follows:
"(5) Where the Adjudicating Authority is satisfied that-
(a) a default has occurred and the application under subsection (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application."
The first issue is whether a default has occurred. Vide Diary No. 1078 dated 09.04.2018, the financial creditor has filed the statements of account for the loan/cash credit facility along with the certificates under Section 2A of the Bankers Book Evidence Act, 1891. The default in the repayment of the loans/cash credit facility is stated to have occurred from 30.11.2016 onwards when quarterly instalments and monthly interest became due. The computation of the overdues and default is given in Annexure V (colly). A letter dated 02.02.2017 is stated to have been issued by the financial creditor informing the corporate debtor that its account maintained with the financial creditor was declared as a Non-Performing Asset as on 31.12.2016 in terms of the guidelines of the RBI. A loan recall notice is stated to be issued on 05.01.2018 and notice under Section 13(2) of SARFAESI Act, 2002 on 18.01.2018. The facts sufficiently evidence the occurrence of the default.
The main contention of the learned counsel for the corporate debtor is that prior to filing of the instant application by the financial creditor, the loan accounts of the corporate debtor were under the process of restructuring by joint lenders forum in terms of various guidelines dated 30.01.2014, 26.02.2014, 24.09.2015, 25.02.2016 and were also under consideration for S4S Scheme of restructuring in terms of guidelines dated 13.06.2016 and 10.10.2016 but vide Circular dated 12.02.2018, the Reserve Bank of India discontinued all the restructuring Schemes going on under various earlier guidelines and in view of this situation, all the banks including the financial creditor abandoned the ongoing restructuring process and the financial creditor filed the present petition.
It has been held by the Hon'ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 (Para No. 30) that in the case of a corporate debtor, who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred and it is of no matter that the debt is disputed so long as the debt is "due" that is payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. In the present case, the evidence produced by the financial creditor has been discussed above and it has been concluded that a default has occurred. The debt is also due since it is not interdicted by any law.
Further, the Hon'ble Supreme Court also held in Para No. 59 that the obligation of the corporate debtor was unconditional and did not depend upon infusing of funds by the creditors into the corporate debtor and that also, the argument taken for the first time that no debt was in fact due under the MRA as it had not fallen due (owing to the default of the secured creditor) is not something that can be countenanced at this stage of the proceedings. No evidence has been furnished that there was any default of the secured creditor in providing funds. Moreover, the corporate debtor has not proved that it had any right to any additional funds from the bank. Therefore, the plea raised cannot be accepted.
We may add here that the Law Research Associate in the Tribunal has downloaded the copy of order dated 22.07.2019 in SLP(C) 16217/2019 arising out of the judgment and order dated 06.02.2019 in LPA No. 579/2018 of the Hon'ble Delhi High Court, filed by the corporate debtor. It has been held by the Hon'ble Supreme Court that no merit in the SLP is found and the SLP is accordingly dismissed.
We therefore, conclude that the occurrence of default is proved in the present case.
The application filed in the prescribed Form No. I is found to be complete.
The proposed IRP Ravinder Agarwal has filed Form No. 2 dated 09.02.2018 (Annexure-G of the petition) certifying that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professionals of ICAI.
The conditions provided for by Section 7(5)(a) of the Code being satisfied in the present case, we direct that the application for initiation of CIRP against Corporate Debtor be admitted. The directions regarding moratorium and appoint of IRP are given below.
We declare the Moratorium in terms of sub-section (1) of Section 14 of the code as under:
(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 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 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 financial 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 pass an order for liquidation of corporate debtor under Section 33 as the case may be.
The following directions are also issued in respect of the appointment of the Interim Resolution Professional:
i) Appoint Mr. Ravinder Agarwal, Address: SCO-131, Sector-5, MDC, Panchkula-134112, having Registration No. IBBI/IPA-001/IP-P00329/2017-18/10599 and email address: [email protected], Mobile No. 98117-76017 as an Interim Resolution Professional;
ii) The term of appointment of Mr. Ravinder Agarwal, shall be in accordance with the provisions of Section 16(5) of the Code;
iii) 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 inventory of assets of the Corporate Debtor;
iv) 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 morality;
v) 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;
vi) 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;
vii) The Interim Resolution Professional shall after collation of all the claims received against the corporate debtor and the determination of the financial position of the corporate debtor constitute a committee of creditors and shall file a report, certifying constitution of the committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the committee within seven days of filing the report of constitution of the committee; and
viii) The Interim Resolution Professional is directed to send regular progress report to this Tribunal every fortnight.
A copy of this order be communicated to both the parties. The learned counsel for the petitioner shall deliver copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send copy of this order to the Interim Resolution Professional at his email address forthwith.
Shri M.K. Sharawat, Member (Judicial) is not available today.
Pronounced in open Court under Rule 151 of the National Company Law Tribunal Rules, 2016.