JM Financial Asset Reconstruction Company Limited vs MAA Durga Commotrade Private Limited

Per P. Mohan Raj, Member, (Judicial)

This petition is filed to initiate Corporate Insolvency Resolution Process against the Corporate Debtor under Section 7 of Insolvency and Bankruptcy Code. 2016 R/w Rule 4 of Insolvency and bankruptcy (Application to Adjudication Authority) Rules, 2016.

Brief facts of the petition are as follows: The financial creditor/petitioner assignee of Karnataka Bank Limited filed this petition for initiation of corporate resolution process against the corporate debtor/respondent. The respondent availed a credit facility from Karnataka Bank Limited in the year 2010 amounting Rs.100 lacs. When the respondent failure to repay the dues the loan account of the corporate debtor was classified as Non-performing Asset by the Karnataka Bank Limited on 05.07.2013. The demand notice dated 29.08.2013 under section 13 (2) of SARFAESI Act, 2002 was sent to the respondent, the respondent sent reply dated 06.09.2013. The original lender assigned the debt in favour of the financial creditor by assignment deed dated 15.12.2014. The corporate debtor submitted OTS proposal to the petitioner vide letter dated 21.10.2016 for an amount of Rs.7.50 Crore, which was approved by the petitioner, however the respondent failed to pay any amount in terms of sanction hence the sanction was subsequently revoked. The respondent committed default on 05.07.2013, acknowledged the debt in reply to SARFEAESI notice dated 06.09.2019, the CD acknowledged the debt in favour of original lender in the balance sheet for the financial year 2014-2015, the OTS proposal submitted on 21.10.2016, the debt was acknowledged by the corporate debtor in its financial statements for the years 2017-2018, 2018-2019, the Ape court in Suo moto Writ petition excluded the period from 15.03.2020 to 28.02.2022 in computing the period of limitation hence the petition filed on 20.06.2022 is in time. The outstanding amount is Rs. 14,59,49,073.31/- towards principal and a sum of Rs. 25,00,54,487.70/- totaling Rs.39,60,03,561/- Hence the petition

Brief facts of the Reply are as follows: The petitioner relied upon the balance sheet of the respondent for the year 2014-2015, 2017-18 and 2018-19 to show that there is acknowledgement of debt by the respondent in favour of Karnataka Bank. The loans claimed by the petitioner are not reflected in the balance sheet rather Karnataka Bank name appeared. The assignment agreement dated 15.12.2014 was entered between the petitioner and Karnataka Bank, however the respondent is not party to the assignment agreement, hence the assignment agreement is not completed.

The point for consideration is:

Whether the acknowledgment of debt made by the corporate debtor in its balance sheet in favour of assignor, after the assignment of debt is valid?

The corporate debtor availed the loan from the Karnataka Bank, subsequently the loan was assigned to the petitioner by assignment deed dated 15.12.2014. The respondent acknowledged the debt in its reply notice dated 06.09.2013 and submitted OTS proposal to the petitioner on 21.10.2016, after three years from the reply notice. In between the respondent acknowledged the debt in its balance sheet for the financial year 2014-2015. This acknowledgement saves limitation. The sole contention of the respondent is that the acknowledgement of debt made in the financial statement for the year 2014-2015 is not valid acknowledgement because acknowledgement was made in favour of assignor Karnataka Bank, not against the petitioner/financial creditor. The petitioner cannot avail the benefit out of the acknowledgement made by the respondent in favour of assignor after the assignment of debt.

Section 5(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 speaks about the effect of assignment.

The assignment is transfer of one's right to recover debt to another person. Assignment is essentially a contractual concept and refers to an agreement by which the rights and obligations of one party can be transferred to another. By virtue of assignment, the assignee steps into the shoes of her assignor and assignee is entitled to enforce it. An assignment of rights effectively makes the assignee stand in the shoes of the assignor. The assignee gains all the rights against the debtor that the assignor had. The assignment is absolute hence any right already accrued and any right will acquire in future over the subject matter of assignment all vest upon the assignee.

In respect of acknowledgement of debt is concern section 18 of Limitation Act speaks about acknowledgement of property and rights accordingly here the respondent in the financial statement 2014-2015 acknowledge the debt covered under the assignment deed, of course in favour of the assignor it will not change the position. The debt is acknowledged by the debtor against whom the debt is claimed.

In these circumstances it is answerer that the acknowledgment of debt made by the corporate debtor in its balance sheet for the year 2014-2015 in favour of assignor, is valid, and subsequently the respondent submitted OTS proposal to petitioner recognizing it as an assignee. On the petitioner side proved that there is a debt, and default, the twin vital requirements to admit the petition.

The financial creditor has taken consent from Mr. Bishwanath Choudhary, registration No. IBBI/IPA-002/IP-N00597/2018-2019/12042 having contact address- Flat No.8F, Block 7, Praswad Eotica, 71/3, Canal Circular Road, Kolkata 700054, an insolvency Professional to become interim Resolution Professional (IRP) of the Corporate Debtor in Form No.2 and that no disciplinary proceedings are pending against him.

We therefore consider it a fit case for admitting the petition, and for initiation of Corporate Insolvency Resolution Process in respect of the corporate debtor.

In view of the aforesaid observations, we hereby admit the petition and pass the following Orders.

The petition bearing CP (IB) No.30/CTB/2022 under section 7 of Insolvency and Bankruptcy Code 2016 read with rule 4 (1) of Insolvency and Bankruptcy (Petition to Adjudicating Authority) Rules 2016 for initiating CIRP against MAA DURGA COMMODRADE PRIVATE LIMITED, the corporate debtor is admitted.

There will be a moratorium under section 14 of the Code.

The moratorium shall have effect from the date of this order till the completion of the CIRP or until the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of IBC or passes an order for liquidation of Corporate Debtor under section 33 of the Code, as the case may be.

Public announcement of the CIRP shall be made immediately as specified under section 13 of the code read with regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations 2016.

Mr. Bishwanath Choudhary, registration No. IBBI/IPA-002/IP-N00597/2018-2019/12042 having registered address- Flat No.8F, Block 7, Prasad Exotica, 71/3, Canal Circular Road, Kolkata, West Bengal 700 054, (email [email protected]) is hereby appointed as an Interim Resolution Professional (IRP) of the corporate debtor to carry out the functions as per the Code, subject to his possessing a valid Authorisation for Assignment (AFA) in terms of 7A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations 2016. The fee payable to IRP or as the case may be, the RP shall comply with such Regulation, Circulars and Directions as may be issued by the Insolvency and Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by section 15,17,18,19,20 and 21 of the Code.

During the CIRP period the management of the Corporate Debtor shall vest with the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this order, in default of which coercive steps will follow.

The IRP/RP shall submit to this Adjudicating Authority periodical reports concerning the progress of the CIRP in respect of the Corporate Debtor.

The financial creditor shall deposit a sum of Rs.2,00,000/- (Two Lakhs Only) with the IRP to meet the expenses arising out of issuing publication and inviting claims. These expenses are subject to approval by the Committee of Creditor (COC).

In terms of section 7(5)(a) of the Code, the Registry is hereby directed to communicate a copy of this Order to the Financial Creditor, the corporate debtor and IRP by Speed Post, e-mail, immediately, and in any case, not later than two days from the date of this order.

Additionally, the Financial Creditor shall serve a copy of this Order on the IRP and on the Registrar of Companies, Odisha, Cuttack by all available means for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Tribunal within seven days from the date of receipt a copy of this order.

For filing for progress report list the matter by 01.11.2023.

Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.