M/s. Asset Reconstruction Company (India) Limited vs M/s. ABT (Madras) Private Limited

In the year 2016, ABT Limited applied for demerger into two entities namely, M/s.ABT (Investments) Private Limited and M/s. ABT (Madras) Private Limited (Corporate Debtor). The demerger was approved by the Hon’ble High Court of Madras on 18.04.2016. Further, as per the Scheme of Demerger and more specifically Part-V of Clause 5 (Loans and related Security) of the Scheme of Demerger, the liabilities of ABT Limited including secured properties situate at Guindy (Chennai) and Coimbatore were transferred and stood absorbed by the Corporate Debtor as “Transferred Borrowings”. It is further submitted that in pursuance of demerger and in order to pay aforesaid loans, the Corporate Debtor submitted OTS proposal for ₹325 crores to the Assignor (Dewan Housing Finance Limited) on 12.07.2016. On the approval of OTS, the Corporate Debtor made part payment of ₹115 crores but defaulted in repayment of the balance amount. As per the terms agreed upon between the parties, the Financial Creditor was constrained to revoke the OTS after adjusting the amount paid by the Corporate Debtor against the outstanding dues. The date of default commenced from 30.10.2017. By an Assignment Agreement dated 03.07.2018, the Assignor (Dewan Housing Finance Limited) assigned the aforesaid debts disbursed to Corporate Debtor to the Financial Creditor herein (ARCIL). On 07.01.2019, the Corporate Debtor acknowledged the outstanding debt and requested time to submit a proposal and also sent an e-mail dated 11.04.2019 in this regard.

To substantiate their claim, the Financial Creditor (ARCIL) has filed dates and events disclosing existence of debt and occurrence of default, which are as follows:

The Corporate Debtor counsel argued that the Assignment Agreement Clause 2.3.1 states "nothing other than a financial asset as defined in the SARFAESI Act is acquired by the Assignee (ARCIL) from the Assignor (DHFL) as per this Agreement". From the above, what has been taken over by the Financial Creditor is merely the loan given by the original lender (DHFL) to the Corporate Debtor. There are no terms of payment between the Applicant and Corporate Debtor.

This Agreement between the lender (DHFL) and Applicant (ARCIL) was done with the sole purpose of getting benefit under Section 8F of the Indian Stamp Act. Since there is great deficit of stamp duty on the Assignment Agreement, it has to be impounded and no rights would flow for the Applicant against the Corporate Debtor unless the same is rectified.

The Corporate Debtor is unaware of the internal agreement between Assignor (DHFL) and the Financial Creditor (AIRCIL) since the Corporate Debtor was not a party to the Assignment Agreement. However, it is certainly clear that there are no dues payable to the Financial Creditor as on date. In the light of the same, the Assignment Agreement is not binding on the Corporate Debtor and the Financial Creditor herein therefore cannot claim based on the said Assignment Agreement.

It is further submitted that with regard to first loan of ₹215 crores, the Corporate Debtor paid ₹296.50 together with interest at 11.57%. The statement of repayment to DHFL along with the respective RTGS details is given in Annexure-B of the counter. It is submitted that there was no due to DHFL as on December 2017.

As per the Assignor's (DHFL) sanction letter dated 29.03.2012, the Corporate Debtor had to make repayment of first loan of ₹215 crores in 120 Equated Monthly Instalment of ₹4,51,74,046 with interest at 22.50%. Similarly, for the second loan of ₹140 crores sanctioned on 26.12.2014, the Corporate Debtor had to repay in Equated Monthly Instalment of ₹2,92,71,918 with interest at 22.35%. During adjudication of the present proceedings, the Corporate Debtor has paid a sum of ₹4,60,60,701 to the Financial Creditor vide RTGS No.CIUBR 52019092600303184 towards partial discharge of aforesaid loans.

It is evident from the balance sheet as on 31.03.2016 of the Corporate Debtor that he had agreed to repay the Assignor a total amount of ₹325 crores towards first loan and second loan as per the OTS proposal dated 15.07.2016.

Further, the 2^nd loan of ₹140 crores was availed by Corporate Debtor to pay the dues of 1^st Loan and the other loan account (M/s.Sakthi Auto Component Limited) of the Corporate Debtor with the Assignor. It is submitted that out of the total loan of ₹140 crores availed by the Corporate Debtor, a sum of ₹91,07,32,312 was paid to the Assignor for the 1^st Loan and a sum of ₹47,37,18,140 towards repayment of M/s.Sakthi Auto Component Limited's loan account as the said loans were overdrawn and the balance sum of ₹1,55,49,548 towards payment of interest of the 2^nd Loan. Therefore, the averment that the 2^nd Loan was paid by the Corporate Debtor is false and denied.

It is also denied that the Corporate Debtor paid a sum of ₹296.50 crores towards 1^st Loan at the agreed rate of interest at 11.57% per annum. It is submitted that the unsigned working sheet filed along with the counter reflects a payment of ₹190,76,57,927 and not ₹493,69,04,442 as claimed by the Corporate Debtor. Through e-mail dated 11.04.2019 the Corporate Debtor stated that it was facing liquidity issues and sought time till 30.04.2019 to clear the outstanding dues. Since the Corporate Debtor failed to service the liability, the Financial Creditor approached this Adjudicating Authority.

I. that moratorium is hereby declared prohibiting all of the following actions, namely,

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;

transferring, encumbering, alienating or disposing of by the corporate debtor 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 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;

the recovery of any property by a owner or lessor where such property is occupied by or in the possession of the corporate debtor.

II. That the supply of essential goods or services of the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period.

III. That the provisions of Sub-section (1) of Section 14 of IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

IV. That the order of moratorium shall have effect from the date of issue of order till the completion of the corporate insolvency resolution process or until this Bench 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 IBC, as the case may be.

V. That the public announcement of the Corporate Insolvency Resolution Process shall be made immediately as specified under section 13 of IBC.

VI. That this Bench hereby appoints Mr. Balakrishnan Venkatachalam, having Regn. No. [IBBI/IPA-001/IP- P00229/2017-18/10458], GF02, “Lttina Padma-I” 5^th Main Road, Ramamurthy Nagar, Bengaluru – 560016, E-mail: [email protected], Mobile: 8095768000, as Interim Resolution Professional (IRP), with his consent to carry the functions as mentioned under the Insolvency and Bankruptcy Code. Fee payable to IRP/RP shall be in compliance with the IBBI Regulations/ Circulars/Directions issued in this regard.