M/s. Alchemist Asset Reconstruction Company Limited vs M/s. Patel Wood Products Limited

PER: MAHENDRA KHANDELWAL, MEMBER (JUDICIAL)

This is a Company Petition filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity "the Code") read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by M/s. Alchemist Asset Reconstruction Company Limited (hereinafter referred to as 'Financial Creditor'), represented by Mr. Suraj Singh Chauhan, seeking to initiate the Corporate Insolvency Resolution Process ("CIRP") against M/s Patel Wood Products Limited ("Corporate Debtor"). The Financial Creditor was incorporated on 19.09.2002, having Identification No. U74999DL200OLC117052.

The Corporate Debtor was incorporated on 27.05.1997, having CIN: U20299DL199PLC087495 under the Companies Act, 1956. Its registered office is RZ- B2/115, 1st Floor, Vijay Enclave Palam, South West Delhi, Delhi - 110045. Therefore, this Bench has jurisdiction to deal with this petition. The Authorized Share Capital of the Corporate Debtor is INR 12,50,00,000 (Twelve Crore Fifty Lakh Only). The Paid-Up Capital of the Corporate Debtor is INR 10,42,24,500 (Ten Crore Forty-Two Lakh Twenty-Four Thousand Five Hundred Only).

The present petition has been filed on the ground that the Corporate Debtor has defaulted to make a payment of a sum of INR 2,94,00,26,706 which is inclusive of interest at the rate of 21.75% p.a compounded monthly (Rupees Two Hundred Ninety, Four Crores, Twenty-Six Thousand, Seven Hundred and Six Only) on 30.04.2013 (date of NPA). Further, vide order dated 31.05.2019 the Hon'ble DRT issued a Recovery Certificate to Phoenix ARC Pvt. Ltd.

The details of transactions leading to the filing of this petition as averred by the Financial Creditor are as follows:

The details of the submissions made by the Corporate Debtor in their reply to the Section 7 petition are as follows:

We have heard the Learned Counsels for the Financial Creditor and the Corporate Debtor and perused the averments made in the petition and the reply filed by the Corporate Debtor and the written submissions presented by both the parties. Since the registered office of the Corporate Debtor is in Delhi, this Tribunal which has territorial jurisdiction over the Union Territory of Delhi, is the Adjudicating Authority in relation to the prayer for initiation of Corporate Insolvency Resolution Process in respect of the respondent Corporate Debtor under Section 7 of the Code.

In order to affirm that this petition falls within the ambit of Section 7, we need to see whether there is a “debt” owed to the Financial Creditor and whether there is a “default” with respect to such debt.

In the instant petition, the Corporate Debtor had availed credit facilities of Rs 14.978 Crores from the Original Lender. The Original Lender Declared the account of the Corporate Debtor as NPA on 30.04.2013. The Original Lender vide Assignment Agreement dated 25.06.2014 assigned the account of the Corporate Debtor to Phoenix ARC Pvt. Ltd. The Hon’ble DRT, Delhi vide order dated 31.05.2019 in O.A. No. 253/2014 issued a Recovery Certificate to Phoenix ARC Private Limited and directed the Corporate Debtor to pay a sum of Rs 35.83. Crores together with pendent elite and future interest rate of 21.75 % p.a compounded monthly, from the date of filing of O.A. till its realization. Further, the Phoenix ARC Private Limited vide Assignment Agreement dated 31.05.2024 has transferred the rights and obligations to the Financial Creditor. The total amount as declared outstanding and claimed by the Financial Creditor in Part IV is INR 2,94,00,26,706/- (Rupees Two Hundred, Ninety-Four Crores, Twenty-Six Thousand, Seven Hundred and Six Only) till 31.05.2024. The Assignment Agreement dated 25.09.2014 and 31.05.2024 is placed on record.

On the perusal of documents placed on record before this tribunal by the applicant for the purpose of proving the existence of debt, disbursal of Financial Debt and acknowledgement of debt, have annexed the document with the instant application.

Further, the Corporate Debtor has nowhere denied the existence of the debt in its averments. Therefore, one essential ingredient with respect to Section 7, that there has been a “debt”, stands substantiated.

Further, the Corporate Debtor has failed to repay the amount as undertaken, thereby committing default with respect to the loan agreement and the subsequent amendment agreement. Thus, it is concluded that there exists a debt worth more than Rs. 1 Crore by the Corporate Debtor towards the Financial Creditor and the said Corporate Debtor has defaulted in the repayment of the said debt. Therefore, another major essential ingredient of Section 7, i.e., “default” with respect to the debt, stand substantiated.

In the present case, it is observed that the Corporate Debtor has raised an objection that the said loan account was classified as NPA on 30.04.2013 and the period of limitation for filing an application under Section 7 of the Code is three years from the date of default as, per Article 137 of the Limitation Act, 1963. The present Petition is barred by limitation and hence not maintainable. However, the applicant in the rejoinder submitted that the Hon'ble Supreme Court in its judgement in Dena Bank v. C. Shivakumar Reddy & Anr. Civil Appeal No. 1650 of 2020, held that when a claim fructifies into a final judgment and a recovery certificate is issued to the creditor authorizing to realise its dues, the same provides a fresh cause of action to the Financial Creditor to initiate proceedings under Section 7 of the Code. The relevant excerpts from the aforesaid judgment are:

Further, it is on record that the corporate debtor has acknowledged the debt in the Annual Financial statements of the Corporate Debtor for the years 2020-2021, 2021-2022 and 2022-2023. The present application under Section 7 of the Code, 2016, was filed on 20.08.2024 as per the records, which is well within the period of limitation.

Thus, from the facts which are borne on record, as narrated above, we are of the considered view that the ‘financial debt’ is not barred by limitation, and the submissions of the Corporate Debtor as to the present application being barred by the limitation is not sustainable. Hence, in all respects, the ‘debt’ as claimed by the Financial Creditor is well within the period of limitation

From the perusal of aforesaid facts, it is clear that the applicants are Financial Creditors and the debt owed to them by the Corporate Debtor is a Financial Debt, and there has been a default, as stipulated in Sections 3(12), 5(7) and Section 5(8) of the IBC which are as follows:

The present petition made by the Financial Creditor is complete is all respects as required by law. The Petition established that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under Section 4(1) of the Code, stipulated at the relevant point of time. We are of the view that since this Petition was filed on 20.08.2024, and even admittedly the debt owed to the Financial Creditor is an amount of INR 2,94,00,26,706, which meets the threshold of Rs. One Crore.

In the light of the above facts and circumstances, and in terms of Section 7(5) (a) of the Code, the instant petition COMPANY PETITION IB (IBC)/555(ND) 2024 filed by M/s. Alchemist Asset Reconstruction Company Limited, the Financial Creditor, under section 7 of the Code, read with Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016, for initiating CIRP against M/s Patel Wood Products Limited, the Corporate Debtor, stands admitted.

The petitioner in Part-III of the petition has proposed the name of Mr. Manoj Kumar Anand, as Interim Resolution Professional, having Registration Number IBBI/IPA-001/IP-P00084/2017-18/10180 and E-mail ID [email protected], is hereby appointed as an Interim Resolution Professional (IRP) for the Corporate Debtor. The consent of the proposed interim resolution professional in Form 2 is taken on record. It is pertinent to mention that the IRP has a valid AFA.

We also declare moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) & (d) of the Code. Thus, the following prohibitions are imposed:

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.

e. The IB Code 2016 also prohibits Suspension or termination of any license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concessions, clearances or a similar grant or right during the moratorium period.

It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government and the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract of guarantee to the corporate debtor in terms of Section 14 (3) (b) of the Code.

In pursuance of Section 13 (2) of the Code, we direct that public announcement shall be made by the Interim Resolution Professional immediately (within 3 days) as prescribed by Explanation to Regulation 6(1) of the IBBI Regulations, 2016) with regard to admission of this application under Section 7 of the Insolvency & Bankruptcy Code, 2016.

We direct the applicant Financial Creditor to deposit a sum of Rs. 2 Lakhs (Two Lakh Rupees) with the Interim Resolution Professional namely Mr. Manoj Kumar Anand to meet out the expenses to perform the initial functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Financial Creditor. The said amount, however, is subject to adjustment towards the Resolution Process cost as per applicable rules.

The Interim Resolution Professional shall perform all his functions as contemplated, inter-alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the Code, Rules and Regulations.

It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day-to-day affairs of the 'Corporate Debtor'. In case there is any violation committed by the ex- management or any tainted/illegal transaction by ex-directors or anyone else, the Interim Resolution Professional would be at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing appropriate orders.

The Interim Resolution Professional shall be under a duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of his obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code, Rules and Regulations.

A copy of the order shall be communicated to the applicant, Corporate Debtor and IRP above named by the Registry. In addition, a copy of the order shall also be forwarded to IBBI for its records. Applicant is also directed to provide a copy of the complete paper book to the IRP. A copy of this order is also sent to the ROC for updating the Master Data. ROC shall send a compliance report to the Registrar, NCLT.

Accordingly, the instant application filed under Section 7 of the Code, 2016 bearing I.B./555 (ND)/2024 stands admitted.

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