M/s. Shriram Transport Finance Company Limited vs M/s. EMI Infrastructure Private Limited

This Application has been filed by M/s. SHRIRAM TRANSPORT FINANCE COMPANY LIMITED (hereinafter referred to as 'Financial Creditor') on 15.07.2022 under Section 7 of the Insolvency and CP(IB)/178(CHE)/2022 Bankruptcy Code, 2016 (I&B Code) r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against M/s. EMI INFRASTRUCTURE PRIVATE LIMITED (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP).

From Part - I of the Application, it is seen that the Applicant is the Financial Creditor. The registered office address as per the Application is stated to be situated at 14A, South Phase, Industrial Estate, Guindy, Chennai - 600 032. Further, Part-I lays down the one Mr. Sakthivel, who is the Senior Executive of the Applicant Financial Creditor is authorised by way of a 'Special Power of Attorney' dated 07.09.2021, the same is placed on record. Verifying Affidavit dated 30.06.2022 was filed for the same.

Part - II of the Application lays down the details of the Corporate Debtor. It can be seen that the Corporate Debtor is a Private limited company incorporated under the Companies Act, 1956 on 14.01.2008 with CIN: U45208TN2008PTC066054. The registered office of the Corporate Debtor as per the MCA master data is situated at Flat No. S2, 2nd Floor, 'LA CLIFF' Plot No. 11, V.O.C. Street, Rajakilpakkam, Chennai - 600 073. The Authorised Share Capital of the Corporate Debtor and Paid-up Share Capital is stated to be Rs.12,00,00,000/-.

From Part - III of the Application, it is seen that the Financial Creditor has proposed the name of the Interim Resolution Professional (IRP) viz., Mr. Mathur Sabhapathy Viswanathan, Reg. No. IBBI/IPA-001/IP-P00674/2017-2018/11148.

From Part - IV of the Application, it can be seen that the Financial Creditor has claimed a total debt amount of Rs.6,62,41,657.08/- (Rupees Six Crores Sixty-Two Lakhs Forty-One Thousand Six Hundred Fifty-Seven and Eight Paise only) which is due and payable by the Corporate Debtor as on the date of filing the present. Since the present case is that of a 'Financial Debt', the date of classifying the individual loan account(s) as a 'Non Performing Asset' is construed as the date of default. The date of default / NPA are as below:

Part - V of the application describes the particulars of Financial Debt and the documents filed along the present Application for substantiating default.

It is stated that the Corporate Debtor had approached the Financial Creditor for the purchase of vehicles by way of submitting twelve individual loan applications. After execution of individual 'Hypothecation Cum Loan Agreement' and obtaining 'Demand Promissory Notes' against the twelve vehicles being purchased, the Financial Creditor sanctioned the loan application and disbursed as under:

It is stated that after availing the above financial assistance, the Corporate Debtor did not come forward to repay the same as agreed upon by way of 'Equated Monthly Installments', and as a result, the twelve individual loan accounts were classified as 'Non Performing Asset' between the period 25.11.2019 and 29.05.2020 by the Financial Creditor. The Financial Creditor submits that a total amount of Rs.6,62,41,657.08/- (Rupees Six Crores Sixty-Two Lakhs Forty-One Thousand Six Hundred Fifty-Seven and Eight Paise only) is the debt in default which is due and payable by the Corporate Debtor. The Financial Creditor has placed the certified Statement of Accounts along with the Application and the summary of the same is tabulated as below:

The Corporate debtor filed reply dated 01.12.2022 on 19.12.2022 before this Tribunal. It is stated by the Corporate Debtor that between September, 2021 and February, 2022, the Financial Creditor seized eleven out of the twelve vehicles which were hypothecated in favour of the Financial Creditor, per contra, during the hearing of the matter on 12.01.2023, learned counsel for the Applicant on instructions submitted that no vehicles were seized. It is also stated that the Financial Creditor has invoked arbitration with respect to one vehicle (KA 51 AB 5231) and that the said proceeding is pending before the Arbitration Tribunal in C.M.A. No. 1257 of 2021.

In light of the above actions taken by the Financial Creditor under the 'Hypothecation and Loan Agreement', the Corporate Debtor states that the present Application cannot be maintained. It is contended by the Corporate Debtor that the Financial Creditor having seized eleven hypothecated vehicles cannot claim the entire sum of Rs.6,62,41,657.08/- and with respect to the arbitration proceeding for remaining one vehicle, it is contended that preferring this Application would amount to 'Res subjudice'.

Heard the submissions and perused the pleadings and documents on record. The Corporate Debtor has not denied that the loans were disbursed to it. The subsistence of default is also not disputed. The contention of the Corporate Debtor with respect to the maintainability of the present Application cannot be sustained since the exercise of a contractual right cannot bar the Financial Creditor to invoke Section 7 of the Code. Further, the present Application being filed on 15.07.2022 before this Tribunal is not hit by limitation since the date of default, i.e. the date of classifying the 1st loan account of the Corporate Debtor as 'Non Performing Asset' was only on 25.11.2019.

Having considered the representation by the parties, we are satisfied that this is a case of an admitted debt and considering that the Application is filed within the period of limitation, the Financial Creditor has made out a prima facie case proving debt and default warranting intervention of this Tribunal.

As a consequence of above discussion in light of facts of the present case, the Application is admitted in terms of Section 7 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor;

However during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;

The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;

The Financial Creditor has proposed the name of Mr. Mathur Sabhapathy Viswanathan, (Email ID: [email protected]), Reg. No. [IBBI/IPA-001/IP-P00674/2017-2018/11148] as the Interim Resolution Professional (IRP) who, has also filed their consent in Form - 2 and also upon verification from the IBBI website, it is seen that the said insolvency professional hold valid Authorization for Assignment till 23.12.2023.

Mr. Mathur Sabhapathy Viswanathan is appointed as the IRP who is directed to take charge of the Corporate Debtor's management immediately. The IRP is also directed to cause public announcement as prescribed under Section 15 of the IBC, 2016 within three days from the date the copy of this Order is received, and call for submissions of claim by the creditors in the manner as prescribed under Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Applicant / Financial Creditor is directed to remit a sum of Rs.2,00,000/- (Rupees Two Lakh only) to and in favour of the IRP for meeting out the initial expenses in relation to the CIR Process of the Corporate Debtor. The said amount shall be adjusted and ratified on account of the Financial Creditor.

The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15, 17, 18 of the IBC, 2016. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.

The IRP shall comply with the provisions of Sections 13 (2), 15, 17 & 18 of the Code. The Directors of the Corporate Debtor, its Promoters or any person associated with the management of the Corporate Debtor are directed to extend all assistance and cooperation to the IRP as stipulated under Section 19 of IBC, 2016 for the purpose of discharging his functions.

Based on the above terms, the Application stands admitted in terms of Section 7(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the Order shall be communicated to the Financial Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records and also to take necessary steps for updating in the Masterdata reflecting the status of the Corporate Debtor, Copy of this order is to be sent to the Interim Resolution Professional above named who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.