M/s. Kumar Electronics vs M/s. Sargam India Electronics Private Limited

That frequent business dealings took place between the Operational Creditor and the Corporate Debtor since the incorporation of the Corporate Debtor in the year 2010. ii. That the Operational Creditor maintained a running account of the Corporate Debtor qua the payments being received by the Operational Creditor in respect of the invoices issued by the Operational Creditor in favour of the Corporate Debtor. The Corporate Debtor used to clear the dues of the Operational Creditor within the period specified in the specific invoice issued by the Operational Creditor. iii. That the consideration for the sale executed between the Operational Creditor and the Corporate Debtor were to be made within a period of 7 days from the Date of Invoice, failing which interest was to be charged at a rate of (18%) and (24%) per annum. iv. That during the year 2020, on account of spread of Coronavirus in the country and complete lockdown in the country, the Corporate Debtor expressed its inability to clear the dues of the Operational Creditor qua the invoices issued by the Operational Creditor. Accordingly, owing to the frequent dealings between the Operational Creditor and the Corporate Debtor, the Operational Creditor agreed to the aforesaid requests of the Corporate Debtor. However, as per the understanding between the parties, the Corporate Debtor was liable to continue to pay interest upon the unpaid amount to the Operational Creditor at a rate of 18% and 24% per annum respectively, as the case may be.

That as per the requests of the Corporate Debtor, the Operational Creditor supplied materials/goods to the Corporate Debtor and duly raised invoices in favour of the Corporate Debtor, however, the Corporate Debtor failed to release payments which were due to the Operational Creditor against the said Invoices.

That the Corporate Debtor vide Letter dated 06.05.2022 issued to the Operational Creditor, had even acknowledged its liability of Rs.2,39,31,920/- (Rupees Two Crore Thirty-Nine Lakh Thirty-One Thousand Nine Hundred and Twenty) as on 31.03.2022 and thereby assured the Operational Creditor that the payment against the outstanding dues shall be made to the Operational Creditor at the earliest.

That the Corporate Debtor always assured the Operational Creditor that the dues would be cleared, however, the Corporate Debtor failed to abide by its terms for the reasons best known to them.

That the Operational Creditor was constrained to issue a Demand Notice dated 13.05.2022 as per Form - 4 under Section 8 of the Code read with Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as the "Demand Notice"), upon the Corporate Debtor for the outstanding payment of Rs.3,52,34,840/- (Rupees Three Crore Fifty-Two Lakh Thirty-Four Thousand Eight Hundred and Forty Only) along with Interest of Rs.76,40,098/-(Rupees Seventy-Six Lakh Forty Thousand and Ninety-Eight Only) due to the Operational Creditor on account of supply / delivery of goods / products.

That the default on the part of the Corporate Debtor is recurring in nature as the payments are yet to be made to the Operational Creditor by the Corporate Debtor.

That the Corporate Debtor, during the year 2013, had availed various Credit Facilities from the Union Bank of India (hereinafter referred to as the "Union Bank") which were subsequently renewed vide Sanction Letter dated 01.02.2021 qua a Guaranteed Emergency Credit Line (GECL) Facility of Rs.9.97 Crore and Sanction Letter dated 08.04.2021 qua a Cash Credit Facility of Rs.50 Crore availed by the Corporate Debtor from the Union Bank.

That the Corporate Debtor further availed a loan facility from the ICICI Bank (hereinafter referred to as the "ICICI") in the year 2020 to the tune of Rs.6 Crore and in view of the same, a Sanction Letter dated 16.06.2020 was issued by ICICI to the Corporate Debtor.

That in the interim, due to the prevailing pandemic in the country, the Corporate Debtor in the year 2020, hypothecated its goods in favour of the Union Bank vide a Composite Hypothecation Deed dated 28.07.2020 and further availed a Covid Emergency Line of Credit Facility to the tune of Rs.5 Crore.

That the Corporate Debtor, during the year 2021, yet again availed a financial assistance from the State Bank of India to the tune of Rs.25.65 Crore. In furtherance of the same, the State Bank of India issued a Sanction Letter dated 17.03.2021 in favour of the Corporate Debtor and thereby, an Agreement of Loan-cum Hypothecation dated 05.06.2021 was executed between the State Bank of India and the Corporate Debtor.

That the Corporate Debtor during the year 2021 availed a Working Capital Credit Facility to the tune of Rs.29,01,00,000/- (Rupees Twenty-Nine Crore One Lakh Only) from the HDFC Bank and further the HDFC Bank issued a Sanction Letter dated 12.10.2021 in favour of the Corporate Debtor.

That during such rough times, the Corporate Debtor was making every possible endeavour to revive its brand and business operations by way of infusion of money taken on loan from its promoters, senior staff as well as support from vendors amongst the others. vii. That in the above backdrop, the first wave of Covid19 Pandemic spread in India like Tsunami, whereby the Government of India imposed a nationwide lockdown from 25.03.2020 till June 2020 extended till October 2020 in many states in the country. That the said Covid-19 was associated with numerous uncertainties and thereby the business operations of the Corporate Debtor were severely affected, resulting in loss of revenue and substantial shares in the market. The Corporate Debtor faced huge losses which initiated a chain reaction, leading to shutting down of its stores and inability to repay loans and debts.

That due to major crunch of Cash Flow in the Corporate Debtor, the Corporate Debtor failed to honour its obligations qua the Credit Facilities availed by the Corporate Debtor.

That whilst the Corporate Debtor was limping on its foot to restore its business operations, it came as a shock when the account of the Corporate Debtor was declared as a Non-Performing Asset by the State Bank of India on 19.03.2022, thus, multiplying the miseries of the Corporate Debtor in repaying the loans and debt amounts.

That thereafter, on account of default on the part of the Corporate Debtor to clear the dues of the State Bank of India, the State Bank of India issued a Notice dated 05.05.2022 under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "SARFAESI Act, 2002"), to the Corporate Debtor, to clear the outstanding dues of the State Bank of India to the tune of Rs.22,15,27,885.40/- (Rupees Twenty-Two Crore Fifteen Lakh Twenty-Seven Thousand Eight Hundred and Eighty-Five and Forty Paise Only) within 60 days from the receipt of the aforesaid Notice.

That subsequently, the State Bank of India through its Counsel, issued a Notice dated 12.05.2022 to the Corporate Debtor to repay its outstanding dues within a period of 15 days from the receipt of the aforesaid Notice.

That it is significant to submit that the Union Bank issued Letters dated 17.05.2022 and 07.06.2022 to the Corporate Debtor directing the Corporate Debtor to pay its dues on an urgent basis, as the same has not been paid since 31.03.2022 and thereby provide the information regarding the hypothecation of goods of the Corporate Debtor to the Union Bank.

That on account of default on the part of the Corporate Debtor to clear the dues of the Union Bank, the Union Bank issued a Notice dated 05.07.2022 under Section 13 (2) of the SARFAESI Act, 2002, to the Corporate Debtor, to clear its outstanding dues to the tune of Rs.62,04,25,306.36/- (Rupees Sixty-Two Crore Four Lakh Twenty-Five Thousand Three Hundred and Six and Thirty-Six Paise Only) within 60 days from the receipt of the aforesaid Notice. The account of the Corporate Debtor was declared as a Non-Performing Asset by the Union Bank on 28.06.2022.

That in the meantime, upon failure of the Corporate Debtor to clear the dues of the ICICI Bank, the ICICI Bank issued a Notice dated 18.06.2022 to the Corporate Debtor to clear its dues to the tune of Rs.5,33,44,739.05/- (Rupees Five Crore Thirty-Three Lakh Forty-Four Thousand Seven Hundred and Thirty-Nine and Five Paise Only) as on 02.06.2022.

That as the Corporate Debtor was again making utmost efforts to bring itself out of distress and maintain the customer's faith in its brand, the second wave of Covid-19 pandemic once again struck around India, thereby affecting the business operations of the Corporate Debtor.

That in light of the above circumstances, it is submitted that the Corporate Debtor, despite of making innumerable attempts to bring back its business operations, became incapable to repay the debts as well as the loan amounts. The Corporate Debtor is ready and has all good intentions to repay the creditors including the Operational Creditor herein in due course of time. The Corporate Debtor is presently being faced with multiple litigations which has increased the overhead cost and with the accounts of the Corporate Debtor being freezed, there has been no cash flow in the Corporate Debtor.

That as per the requests of the Corporate Debtor, the Operational Creditor supplied materials/goods to the Corporate Debtor and duly raised invoices in favour of the Corporate Debtor, however, the Corporate Debtor failed to release payments which were due to the Operational Creditor against the said Invoices.

That the Corporate Debtor has failed in its duties to clear the debts of the other financial institutions as well from where it had availed certain credit facilities to run its business.

That the Corporate Debtor has failed and defaulted to repay the agreed loan amounts to the aforesaid other financial institutions as stated by the Corporate Debtor itself.

That the accounts of the Corporate Debtor have been declared as Non-Performing Asset and the Corporate Debtor in its Reply has duly acknowledged its inability to repay the amounts of the Operational Creditor herein and is undergoing huge financial crunch.

The interim resolution professional (“IRP”) proposed by the Applicant, Mr. Ankit Goel, (Email [email protected]), Reg. No: IBBI/IPA-001/IP-P-02671/2022-23/14088 is being confirmed by this Bench. He shall take such other and further steps as are required under the statute, more specifically in terms of Section 15, 17 and 18 of the Code and file his report within 30 days before this Bench. Mr. Ankit Goel has agreed to accept the appointment as the interim resolution professional and has signed a communication in Form 2 in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 dated 30.05.2022.

the institution of suits or continuation of pending suits or proceedings against the Respondent 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 Respondent 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 Respondent 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 an owner or lessor where such property is occupied by or in the possession of the Respondent.