M/s. Sadhana City Homes Pvt. Ltd. vs M/s. Vayu Putra Constructions Private Limited

This Application has been filed on 21.10.2023 by M/s Sadhana City Homes Pvt. Ltd. under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as “Code/IBC,216”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 against M/s Vayu Putra Constructions Pvt. Ltd. (hereinafter referred as “Respondent/Corporate Debtor”) in Form 1 containing all the information as required in Part I, II, III, IV and V of the Form showing a total financial debt of Rs. 1,93,65,176.47/-declaring date of default being 20.05.2022.

The Financial Creditor is engaged in the business of development of Commercial and Residential real estates. The Corporate Debtor on the other hand was incorporated on 06.09.2006 and is engaged in the business of land aggregation and constructions of buildings.

Submitted that in 2016, the Corporate Debtor in 2016 approached the Financial Creditor for financial assistance in form of a loan for its working capital needs and requirements. After due diligence, the Financial Creditor considering the request and long relationship with the Promoters and members of the Corporate Debtor agreed to advance and give an intercorporate loan facility to the Corporate Debtor based on mutually accepted terms and conditions. Further, a special resolution in terms and compliance of section 186 of the Companies Act, 2013 was passed in a shareholders meeting of Financial Creditors convened on 16.09.2016 for granting of the said loan facility.

Pursuant to the abovementioned agreement, the Financial Creditor issued payments of Rs. 1,10,00,000/- through RTGS via Axis Bank, Sector 44, Noida, Uttar Pradesh Branch as per schedule mentioned hereunder:

The Applicant submitted that on 01.05.2017, a loan agreement was signed between the Financial Creditor and the Corporate Debtor. The terms and conditions of the loan agreement provided that the said loan amount shall carry an interest on monthly basis @ 2% which would be compounded on a yearly basis, and on end of every financial year, the same shall be credited into the loan account, payable at the end of the tenure of the loan along with the principal amount. In addition to the said interest, the interest tax, service tax or any other tax imposable by the government and other authorities from time to time would also be paid by the Corporate Debtor. Further, on the event or occurrence of default in payment of the said loan amount along with the interest, the Corporate Debtor would be liable to pay a penal additional interest over and above the agreed interest, at the rate of 1% per month to the Financial Creditor. The said Loan Facility was advanced for the term of 36 months commencing from the date of signing of said loan agreement on 01.05.2017.

Thereafter, the Corporate Debtor approached the Financial Creditor and expressed inability to repay the full loan amount along with its interest due to outbreak of COVID-19 pandemic, and sought an extension of time for repayment of loan amount along with the interest thereon. Therefore, vide a Memorandum of Understanding (MOU) cum loan amendment agreement dated 20.05.2020, the Financial Creditor agreed to grant an extension of 2 years (24 months) to the Corporate Debtor. Further, as per the terms of MOU, the entire Loan Amount along-with already accrued interest thereon was mutually agreed to be considered as Principal Amount i.e. a sum of Rs.1,89,20,000/- along with an interest @ 2.5% per month.

The Applicant submitted that in order to further safeguard and secure the interest of Financial Creditor, the Corporate Debtor executed an unconditional and irrevocable Corporate Guarantee from one of its group companies namely - M/s Upal Buildetech Private Limited (Guarantor) in favour of the Financial Creditor and pursuant to the same, an independent and distinct Corporate Guarantee Agreement were signed in between the Guarantor and the Financial Creditor.

In response to the aforesaid application, the Corporate Debtor has filed reply vide dairy no. 1679 dated 03.06.2024 wherein the same facts submitted by the Applicant have been reiterated which need not be repeated for the sake of brevity. The Corporate Debtor has not put forward any new fact or contention that opposes the submissions made by the Applicant. During the course hearing also, the Ld. Counsel appearing for the Corporate Debtor prayed only for being given some more time to pay the outstanding debt.

We have heard the Ld. Counsel for the Applicant and perused the records, exhibits/annexures and after considering arguments advanced by respective Learned Advocates, the main issues which are before us to be decided in respect of the present Application u/s 7 are:

Whether the application is filed within the period of limitation.

Whether there is debt and default within the meaning of the Code, 2016.

With regard to the first issue, it is stated in Part-IV of the Application that the total outstanding debt is Rs.1,93,65,176.47/- stating the date of default as 20.05.2022. These details are also reflected in Form C issued by the NeSL. The same has not been disputed by the Corporate Debtor. This application was filed on 21.10.2023 which is well within the period of limitation.

With regard to the existence of debt and default, the Respondent has averred that due to COVID-19 pandemic, it faced financial constraints and is making efforts to improve its financial condition. For this purpose, it sought additional time to make repayment of its outstanding debt. In addition to this, the Corporate Debtor also made a request to the Financial Creditor for rescheduling its Financial Facilities. Furthermore, during the proceeding, Ld. Counsel representing the Corporate Debtor stated that he is willing to repay the entire debt, for which request was made to grant a time period of about 18 months. This submission was vehemently contested by the Ld. Counsel representing the Financial Creditor on the ground that no payments have so far been made and in the reply vide Para No.16, it has been admitted by the Corporate Debtor that it is in default and the Corporate Debtor would ensure that they will pay the debt amount within a short span of time. This implies that debt is due and payable.

In IBC, 2016, there is no provision for granting any time to the Corporate Debtor for facilitating it to make the repayment of Debt. If there is debt and default, the application u/s 7 is to be admitted as held by the Hon'ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank & Anr. (2018) 1 SCC 407.

Thus, in view of the aforesaid analysis, we find that the Applicant / Financial Creditor has proved that there is a 'debt' and 'default' on the part of the Corporate Debtor. Hence, as per Section 7(5) of IBC, 2016, the present application is found to be fulfilling all the conditions for admissions of the Application and initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor i.e. M/s Vayu Putra Constructions Pvt. Ltd.

Thus, in view of the aforesaid analysis, as the Applicant / Financial Creditor has proved that there is a 'debt' and 'default' on the part of the Corporate Debtor, this Application is fit to be admitted for CIRP of the Corporate Debtor. We further find that as per Section 7(5) of IBC, 2016, the present application is found to be fulfilling all the conditions for admissions of the Application and initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor i.e. M/s Vayu Putra Constructions Pvt. Ltd.

In view of our above findings, we are satisfied that the Applicant/Financial Creditor has proved the debt and the default, which is more than the threshold limit of Rs. 1 crore applicable at present. The application is also filed within limitation period and complete in all respect and a resolution professional is also proposed as per section 7(3)(b). Accordingly, the present application under Section 7, has been found fit to be admitted as per Section 7(5) of the I & B Code, 2016.

The Financial Creditor initially proposed Mr. Amit Agrawal as IRP, however during the proceedings it was submitted that the AFA of the said proposed RP had expired. Therefore, a supplementary affidavit has been filed vide Diary No.2002 dated 27.09.2024, whereby the name of another IRP, namely Shivanand Chaudhary has been proposed having valid AFA until 30.06.2025.

As mentioned above, the Financial Creditor has proposed the name of Shivanand Chaudhary as IRP. His Registration Number is IBBI/IPA-001/IP-P-02661/2021-2022/14049, R/o Flat No-P306, Logix Blossom County, Gautam Buddha Nagar, Uttar Pradesh-201301, Email: [email protected]. He has duly given the consent in Form No. 2 dated 18.09.2024 annexed as Annexure- 2 with the affidavit of compliance filed on 27.09.2024. The Law Research Associate of this Tribunal, Mr. Sarim Husain, has checked the credentials of Mr. Shivanand Chaudhary and found that there are no disciplinary proceedings pending against the proposed Resolution Professional and also there is nothing adverse against him. Upon verification from the website of IBBI, it is found that IRP holds valid authorization till 30-06-2025. After considering these details, we appoint Mr. Shivanand Chaudhary having registration No. IBBI/IPA-001/IP-P-02661/2021-2022/14049, as Interim Resolution Professional (IRP).

In the given facts and circumstances of the case as per our above findings, the present application u/s 7 being complete in all respect and having established the default in payment of the Financial Debt for the default amount being above the threshold limit and an IRP also having been appointed as per above para 32, the application is admitted in terms of Section 7(5) of the I & B Code, 2016 against the Corporate Debtor and accordingly, moratorium is declared in terms of Section 14 of the Code.

The IRP is directed to take steps as mandated under section 13 and 15 of the IBC for making public announcement about the commencement of CIRP against the Corporate Debtor and moratorium against it u/s 14, and also take necessary actions as per sections 17, 18, 20 and 21 of IBC, 2016. The Suspended Board of Directors is directed to give complete access to the Books of Accounts of the corporate debtor maintained under section 128 of the Companies Act. In case the books are maintained in the electronic mode, the Suspended Board of Directors are to share with the Resolution Professional all the information regarding Maintaining the Backup and regarding Service Provider kept under Rule 3(5) and Rule 3(6) of the Companies Accounts Rules, 2014 respectively as effective from 11.08.2022, especially the name of the service provider, the internet protocol of the Service Provider and its location, and also address of the location of the Books of Accounts maintained in the cloud. In case accounting software for maintaining the books of accounts is used by the corporate debtor, then IRP/RP is to check that the audit trail in the same is not disabled as required under the notification dated 24.03.2021 of the Ministry of Corporate Affairs. The statutory auditor is directed to share with the Resolution Professional the audit documentation and the audit trails, which they are mandated to retain pursuant to SA-230 (Audit Documentation) prescribed by the Auditing and Assurance Standards Board ICAI. The IRP/Resolution Professional is directed to take possession of the Books of Account in physical form or the computer systems storing the electronic records at the earliest. In case of any non-cooperation by the Suspended Board of Directors or the statutory auditors, he may take the help of the police authorities to enforce this order. The concerned police authorities are directed to extend help to the IRP/RP in implementing this order for retrieval of relevant information from the systems of the corporate debtor, the IRP/RP may take the assistance of Digital Forensic Experts empanelled with this Bench for this purpose. The Suspended Board of Directors is also directed to hand over all user IDs and passwords relating to the corporate debtor, particularly for government portals, for various compliances. The Interim Resolution Professional is also directed to make a specific mention of non-compliance, if any, in this regard in his status report filed before this Adjudicating Authority immediately after a month of the initiation of the CIRP.

The IRP is directed to approach the Government Departments, Banks, Corporate Bodies and other entities with requests for information/documents available with those authorities/institutions/ others pertaining to the Corporate Debtor which would be relevant in the CIR proceedings. The Government Departments, Banks, Corporate Bodies and other entities are directed to render the necessary information and cooperation to the IRP to enable him to conduct the CIR Proceedings as per law.

The IRP shall after collation of all the claims received against the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of Constitution of the Committee. The Interim Resolution Professional is further directed to send regular progress reports to this Tribunal every month.

As a necessary consequence of the moratorium in terms of Section 14, the following prohibitions are imposed, which must be followed by all and sundry:

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. It is further directed that the supply of essential goods or services to the corporate debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period. - f. The provisions of Section 14(3) shall, however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a corporate debtor. - g. The order of moratorium shall have effect from the date of this order till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the corporate debtor under Section 33 as the case may be.

We direct the Financial Creditor to deposit a sum of Rs.1,00,000/- with the Interim Resolution Professional, to meet out the expenses to perform the 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 amount, however, is subject to adjustment by the Committee of Creditors as accounted for by the Interim Resolution Professional on the conclusion of CIRP.

A certified copy of the order shall be communicated to both the parties. The learned counsel for the petitioner shall deliver a certified copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send a certified copy of this order to the Interim Resolution Professional at his e-mail address forthwith.

List the matter on 06.01.2025 for filing of the progress report/further proceeding.