M/S. State Bank Of India vs M/S. Mackeil Ispat & Forging Limited

Per Shri Harish Chander Suri, Member (Technical).

This petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has been filed by M/s. STATE BANK OF INDIA through one of its authorized officers Ms. Shobha Mittal, one of the Assistant General Manager, authorised by the Chairman vide authorisation dated June 16, 2017 for seeking Corporate Insolvency Resolution process against M/S. MACKEIL I SPAT & FORGING LIMITED, having its registered office at Kolkata, West Bengal, hereinafter referred to as the Corporate Debtor.

It is submitted that Rs.83.00 crores (Rupees Eighty Three crores only) ("Term Loan Consortium Facility") was sanctioned to Mackeil Ispat & Forging Limited ("Corporate Debtor") by a consortium of lenders consisting of the Applicant as the lead bank, (erstwhile State Bank of Saurashtra, erstwhile State Bank of Patiala, erstwhile State Bank of Travancore, each of them now stands amalgamated with the Applicant i.e. State Bank of India), Indian Overseas Bank and City Union Bank, with the Applicant's proportionate share being Rs.58.00 crores (Rupees Fifty Eight Crores Only), under a common rupee loan agreement dated August 05, 2008, as amended vide common rupee loan amendment agreement dated November 29, 2008 to include the loan facility extended by Andhra Bank and further amended vide common rupee loan amendment agreement August 05, 2009 to include Allahabad Bank whereby the aggregate loan amount increased to Rs. 94.83 crores (Rupees Ninety Four Crores and Eighty Three Lakhs), along with other transaction documents and security documents. Additionally, working capital facilities were also extended by consortium of lenders comprising of the Applicant, Indian Overseas Bank, erstwhile State Bank of Travancore, City Union Bank Limited, Andhra Bank and Allahabad Bank vide a working capital consortium agreement dated March 06, 2010 for an aggregate amount of Rs.41.38 crores (Rupees Forty One Crores and Thirty Eight Lakhs), with the Applicant's proportionate share being Rs.19.08 crores (Rupees Nineteen Crores and Eight Lakhs) ("WC Facilities") (the Term Loan Consortium Facilities and the WC Facilities are hereinafter together referred to as the "Credit Facilities").

Since, the Corporate Debtor failed to discharge its financial obligations properly and the account became irregular, at the request of the Corporate Debtor, the Credit Facilities were restructured vide Master Restructuring Agreement dated March 21, 2012, pursuant to the MRA, the facilities extended by the Applicant were as follows ("Restructured Facilities"):

The Financial Creditor has proposed the name of Mr. Siba Kumar Mohapatra, for being appointed as the Interim Resolution Professional, in case of admission of the application. Mr. Siba Kumar Mahapatra vide his letter dated 31st January, 2019 written to this Tribunal, agreed to accept the appointment as IRP, if the present application is admitted.

The Financial Creditor has also filed CIBIL Report in respect of the Corporate Debtor which classifies the account of the Corporate Debtor as ("doubtful"). It is submitted in the application that the Financial Creditor herein i.e. State Bank of India had acquired by way of amalgamation the business including the assets and liabilities of State Bank of Saurashtra vide order dated 13th August, 2008 and similarly also acquired by way of amalgamation the business including the assets and liabilities of the following Associate Banks viz., State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Patiala and State Bank of Travancore vide Gazette notification dated 13th August, 2008 and Gazette notification dated 22nd February, 2013 (Annexure 'A' to the petition).

It is submitted that to secure the loan and other facilities granted to the Corporate Debtor, various security documents had been executed, which are part of the petition. It is submitted that O.A. No. 103 of 2015 in the matter of State Bank of India v. Mackeil Ispat & Forging Limited & Others is pending before the Hon'ble Debt Recovery Tribunal-II, Kolkata. The Hon'ble Tribunal vide its order dated June 08, 2018, has held that since the Corporate Debtor has approached the Applicant bank for settlement of the accounts for Rs.60 crores (Rupees Sixty crores), this is the specific admission of a part of the amount of debt due, to the Applicant bank despite the rejection of the settlement proposal by the Applicant bank and to the extent of the debt due admitted by the Corporate Debtor, the Hon'ble Tribunal is empowered to issue a recovery certificate. A copy of the said order dated June 08, 2018 has been annexed marked as Annexure 'F'.

According to the Financial Creditor a total sum of Rs.217,42,97,170.42 (Rupees Two hundred Seventeen Crores Forty Two Lakhs Ninety Seven Thousand One Hundred Seventy and Paise Forty Two Only) is due from the Corporate Debtor and the Corporate Debtor has committed default in payment there-of in spite of repeated requests and reminders.

In reply to the application, the Corporate Debtor has submitted that material facts have been suppressed by the Financial Creditor, the application of the Financial Creditor is barred by law of limitation as well as principles of waiver, estoppels, acquiescence and principles analogous thereto. It is stated that there are no admitted dues or debts for any particular payment and there are pre-existing disputes between the parties especially the suit for damages being C.S. No. 202 of 2014 filed in the High Court of Kolkata. It is submitted that pursuant to term loan sanctioned on 25th June, 2008 and agreement executed on 5th August, 2008 by the Corporate Debtor, disbursal of whole amount of the term loan was not made by the Financial Creditor. The loan was disbursed in driblets and there was enormous delay of 20 months which adversely affected the operational and financial viability of the project of the Corporate Debtor. It is submitted that the purported NPA accounts of the Corporate Debtor were not really NPA and were very much operational even after the alleged debt of NPA being 31st March, 2013.

It is submitted that even on 4th December, 2013 Rs.30.00 crores of further fresh Working Capital Loan was sanctioned by the Financial Creditor in favour of the Corporate Debtor which indicates that the account of the Corporate Debtor was not NPA and the business of the Corporate Debtor was still financially viable with adequate financial assistance from the Banks. However, this sanctioned amount of Rs.30.00 crore loan was never disbursed by the Financial Creditor which directly resulted in worsening of the debt position of the Corporate Debtor. The Financial Creditor approached this Tribunal on 1st February, 2019, even while they were in negotiation of OTS proposal with the Corporate Debtor till 7th & 14th February, 2019 and Corporate Debtor had submitted substantial sums towards such settlement. The Corporate Debtor has denied that the principal amount was disbursed to the Corporate Debtor under various facilities to the tune of Rs.100,41,97,000/- (Rupees Hundred Crores Forty One Lakhs Ninety Seven Thousand Only) or that the amount claimed to be in default is a sum of Rs.217,42,97,170.42 (Rupees Two Hundred Seventeen Crores Forty Two Lakhs Ninety Seven Thousand One Hundred and Seventy and Forty Two Paise Only).

In the rejoinder to the reply affidavit, the Financial Creditor has submitted that the contents of the application might be treated as a part and parcel of the rejoinder affidavit as well. It is submitted that this application under Section 7 of the Code is complete in all respects, and a default has occurred which has been set out in detail in the application because due to failure on the part of the Corporate Debtor to make timely payment, the facilities were recalled and all the amounts there-under were declared due and payable, forthwith vide demand and recall letter dated 25th February, 2015 issued to the Corporate Debtor as well as by the Guarantor by the applicant.

It is submitted that in O.A. No. 103 of 205 filed by the applicant against the Corporate Debtor, the Hon'ble DRT-2 has held in its order dated (8^th) June, 2018 that since the Corporate Debtor has approached the applicant for settlement of the accounts for Rs.60,00,00,000/- (Rupees Sixty Crores Only), this would qualify as specific admission of debt due to the applicant, despite the rejection of the settlement proposal by the Applicant bank and to the extent of the debt due admitted by the Corporate Debtor, the Hon'ble DRT is empowered to issue a recovery certificate.

It is submitted that there was stay of recovery proceedings by way of orders passed by the Hon'ble High Court of Calcutta vide its order dated (19^th) September, 2014 wherein it was observed that "till the decision is communicated to the Petitioner, no coercive action shall be taken by the Respondent against the Petitioner".

It is submitted that the said matter was finally decided by the Hon'ble High Court of Calcutta on (2^nd) November, 2016 when it was directed that the order dated (29^th) September, 2014 stands vacated. Since the order had been passed after around 2 years and 2 months, the said period shall be excluded from the period of limitation and thus there is no question of the debt being barred by time as alleged by the Corporate Debtor. The application of the applicant is well within the time as the present application has been filed on 05/02/2019.

We have gone through the Ld. Counsel for both the parties. The Financial Creditor has referred to and relied upon the judgment in the case of Gouri Prasad Goenka vs. Punjab National Bank & Ors reported in Company Appeal (AT) (Insolvency) No. 28 of 2019 dated 8th November, 2019. The relevant extract of the said judgment is reproduced as under:-

The Financial Creditor has referred to and relied upon the judgment in the case of Shalini Publicity Creative Pvt. Ltd. vs. Dena Bank reported in Company Appeal (AT) (Insolvency) No. 153 of 2019 dated 18.02.2019. The relevant extract of the said judgment is reproduced as under:-

We have gone through the pleadings of the parties and all the documents placed on record, and also heard the Ld. Counsel for both the parties at length. The Ld. Counsel for the Financial Creditor has taken us through all the documents filed along with the application and the rejoinder. The judgments referred to above cited by the Financial Creditor are fully supportive to the Financial Creditor. The application is complete in all respect and the financial debt and default thereof is fully proved on record. The Corporate Debtor has failed to repay its debt owed to the financial Creditor. On the other hand, the Ld. Counsel for the Corporate Debtor has unsuccessfully argued on the various points raised in the reply which have not been found to be convincing. The net result, therefore is that in the aforesaid facts and circumstances proves undoubtedly default in repayment of the debt found due and payable by the corporate debtor, the present application of the Financial Creditor deserves to be admitted with the following orders:-