Indian Bank vs City Mall Developers Private Limited

Per Balraj Joshi, Member (Judicial)

This court convened via video conferencing.

CP (IB) No.149/KB/2019 and CP (IB) No.391/KB/2021 are being considered in one order because the relief sought in both the Petitions are similar.

City Mall Developers Private Limited (‘Corporate Debtor’), a Company incorporated under the Companies Act, 1956 having its registered office at Perfect Chamber, 36, G.C Avenue, Kolkata - 700013 , West Bengal.

The Corporate Debtor purchased 17000 sq. meters of land for construction of mall (‘City Mall 36’) in Raipur. After construction all the units were leased out to national and international brands.

Vide letter dated 30 November, 2005 and 01 December, 2005, State Bank of India (‘SBI’) sanctioned a credit facilities in the shape of term loan of Rs.12 Crores, repayable in 21 quarterly instalments commencing from 31 March, 2008¹ in favour of the Corporate Debtor.

Vide letter dated 02 February, 2006, Small Industrial Development Bank of India (‘SIDBI’) sanctioned a credit facility in the shape of term loan of Rs.8 Crores, repayable in 21 quarterly instalments commencing from twenty four months after the first disbursement^{22.Annexure R-7 of the Reply to CP (IB) No.149/KB/2019} in favour of the Corporate Debtor.

Allahabad Bank (Now known as Indian bank), a banking company, having its office at 2, Netaji Subhash Road, Kolkata -700001, West Bengal (‘Financial Creditor’) vide sanction letter dated 11 June, 2007 decided to take over the loans of SBI and SIDBI and also to provide a term loan of Rs.50 Crores against security of^{33.Annexure R-8 of the Reply to CP (IB) No.149/KB/2019};

¹Annexure R-6 of the Reply to CP (IB) No.149/KB/2019

ii) Mortgage of Multiplex Cum Shopping Mall having value of Rs.84.50 Crores;

iii) Personal guarantee of promoters

An amount of Rs.14 Crores were paid by the Corporate Debtor by the year 2011. In the meantime, the promoters of the Corporate Debtor had constructed and started another Multiplex cum Shopping Mall at Bilaspur (‘Mall’).

The said project was also financed by the Financial Creditor. However, there were certain problems in the said project because of which the loan could not be paid regularly.

Vide sanction letter dated 21 October, 2011, the Financial Creditor considered sanctioning of fresh loan of Rs.50 Crores against existing/future lease rentals.^{44.Annexure R-8 of the Reply to CP (IB) No.149/KB/2019}

This is a Company Petition filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (‘the Code’) read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 by Indian Bank, the Financial Creditor, represented by Mr. Annadanam Vasudeva Sastry, Assistant General Manager, duly authorised vide board resolution dated 17 November, 2018^{55.Annexure - A of the Petition} for initiation of Corporate Insolvency Resolution Process (‘CIRP’) against the Corporate Debtor.

The present Petition was filed on 22 January 2019 before this Adjudicating Authority . The total amount to be claimed in default by the Financial Creditor is ₹63,17,76,185/- (Rupees Sixty Three Crores Seventeen Lakh Seventy Six Thousand One Hundred Eighty Five only) including unapplied interest. The date of default is 27 July, 2015 and the account became NPA on 28 October, 2015.

It is submitted in the Petition, Part – II that the authorised share capital of the Corporate Debtor is ₹3,00,00,000/- (Rupees Three Crore only) with paid-up capital as ₹2,06,96,000/- (Rupees Two Crore Six Lakh Ninety Six Thousand Seven Hundred only).

The said Petition is not maintainable in the eyes of law because if suffers from major suppression of material facts. The Financial Creditor has only mentioned about the pendency of O.A. No.430 of 2018 filed by the Financial Creditor but has suppressed the fact that the Corporate Debtor has challenged such proceeding and initiated proceeding being S.A. No.153 of 2016 against the Financial Creditor.

The steps taken by the Financial Creditor, which includes declaring the account of the Corporate Debtor as NPA is under consideration before Ld. Debt Recovery Tribunal, Jabalpur.

In the year, 2011 the business required some new ventures as in promotional events, strategic marketing, amongst others, to boost up the potential of the mall but majority of the revenue went for repayment of loan. However, due to non-availability of additional funds and non-cooperation from the Financial Creditor, the Corporate Debtor failed to keep up with the growth of the mall, ultimately led to sale of some portion of the mall measuring about 48,125 sq. ft. in 2013 by the promoters.

The financial history of the mall would clearly indicate that if the Financial Creditor had supported the project in time and if fresh loan had not been imposed by the Financial Creditor, the Corporate Debtor would have been in a position to recover.

After restructuring the Financial Creditor started charging additional interest i.e. rate of interest was increased. Further, revenue earned by the Corporate Debtor through lease rent also fell.

Vide letters dated 28 August, 2013 and 06 September, 2013 the Corporate Debtor applied for permission to sell part of the Mall. Subsequently, vide order letter dated 28 September, 2013 the Financial Creditor granted permission to sell 48,174 sq.ft. built up area and exclusive parking of 125 cars, subject to deposit of Rs.10.50 Crores.‘No objection’ was also issued by the Financial Creditor to the Corporate Debtor.^{66.Annexure R-16 of the Reply to CP (IB) No.149/KB/2019}

The Financial Debtor started operating mall on a minimum lease rent basis and was only able to deposit the amount in the escrow account which covered the maintenance of the mall.In the above noted background, the Financial Creditor initiated recovery proceeding against the Corporate Debtor.

The Corporate Debtor has repaid huge interest on the term loan along with principle amount since 2007.

At present Ninety-five people are working in multiplex cum shopping mall and their livelihood is dependent on operation of the multiplex cum shopping mall.

To secure various credit facilities sanctioned by the Financial Creditor, the Corporate Debtor created equitable mortgage in favor of the Financial Creditor. Details of the land are as follows:

ii) All that piece and parcel of land and building of Multiplex Cum Shopping Mall having an area 0.324 Hectare, PH. No.113, Khasara No.435, Mouza-New Puraina, Tehsil/District- Raipur being Deed No.3667 dated 09.03.2005 which is butted and boundary as follows: North-Khasara No.434, South-Khasara No.425, East- Khasara No.436/1-2 and West-Khasara No.433.

iii) All that piece and parcel of land and building of Multiplex Cum Shopping Mall having an area 1.032 Hectare, PH. No.113, Khasara No.436/1 & 436/2, Mouza-New Puraina, Tehsil/District- Raipur being Deed No.3665 dated 09.03.2005 which is butted and boundary as follows: North-Khasara No.437, South-Khasara No.425, East- Land of other, and West-Khasara No.434 & 435

On receipt of the loan application dated 05 September, 2011 from the Corporate Debtor, the Financial Creditor renewed/enhanced the credit facility in respect of Term Loan Account limit of Rs.50.00 Crores. The terms and conditions are stipulated in the sanction letter dated 21 October, 2011 and the same were duly accepted by the Corporate Debtor in their Board of Directors meeting held on 27 October, 2011.^{77.Annexure G-2 of the Rejoinder.}

The Corporate Debtor availed the credit facilities but failed to operate the loan accounts as per the terms and conditions of the sanction letter. On several occasions reminders were given by the Financial Creditor to the Corporate Debtor for regularizing the loan account.

This is a Company Petition filed under section 10 of the Code by the Corporate Applicant, by Mr. Sanjay Kumar Gupta, Director duly authorised vide board resolution dated 22 November, 2021 for initiation of CIRP.

We have heard the Ld. Counsel appearing on behalf of the parties and perused the records.

In this instant case the questions that arises under section 7 of the Code are as follows;

ii) The date of default to examine whether the claim is barred by limitation.

With respect to the first contention, it is pertinent to mention that as per the terms and conditions between the parties, the amountswere disbursed by the Financial Creditor, accordingly. This disbursal of loan as per the agreed terms and conditions sets the stage for existence of outstanding Debt as envisaged under 3(11) of the Code. Last but not the least; the Corporate Debtor has paid interest on the term loan along with principle amount since 2007, which fulfills the requirement of the Financial debt as defined in the Code.

Further, the Corporate Debtor in para 17 of their reply submits that because of certain problems in the said project they were unable to repay the loan regularly. This submission on their part does not only reflect the existence of debt but also default by the Corporate Debtor. Hence, in view of Innoventive Industries Ltd. Vs. ICICI Bank⁸, we are satisfied that there is an existence of debt and the default^{99.3(12) - Default means non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be.} has occurred with respect to that debt.

With respect to the second contention, as per the facts of the case, the date of default is 27 July, 2015, whereas, the application was filed on 22 January, 2019. However, upon perusal of the balance sheet as on 31 March, 2018, at page 550 of the application it is evident that the Corporate Debtor acknowledges the debt due to the Financial Creditor under the heading ‘long-term borrowings’.

In the light of the judgment by Hon’ble Supreme Court in Asset Reconstruction Company (India) Limited v. Bishal Jaiswal and Ors.^{1010.MANU/SC/0279/2021}the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory and notes that are annexed to or forming part of such financial statements are expressly recognised undersection 134(7) of the Companies Act, 2013. Further,preparation and authentication would amount to admission of a liability and therefore satisfies the requirement of law for a valid acknowledgement under section 18 of the Limitation Act,1963. Hence, this application is not barred by limitation.

Under above noted facts and circumstances, it is, accordingly, hereby ordered as follows:-

CP (IB) No. 149/KB/2019 to come up on 25.04.2021 for filing the progress report.

Since, the Corporate Debtor is admitted into CIRP, the application filed by the Corporate Applicant under section 10 of the Code, being CP (IB) No.391/KB/2021, is hereby dismissed.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.