M/s. Stressed Assets Stabilization Fund vs M/s. Hotline Glass Limited

[Per: Shri Harihar Prakash Chaturvedi, Member (Judicial)]

The present I.B. Petition is preferred by the Petitioner/Financial-Creditor M/s. Stressed Assets Stabilization Fund under Section 7 of the I.B. Code (read with Rule 4 of The Insolvency and Bankruptcy Rules, 2016 (hereinafter referred to as "the Rules"), to seek reliefs for triggering the Corporate Insolvency Resolution Process ("CIRP" in Short) in respect of the Corporate-Debtor-Company namely, M/s. Hotline Glass Limited.

The relevant facts/information about the Petitioner, M/s. Stressed Assets Stabilization Fund ("SASF") as displayed in its web portal is as below:

It is stated that the Respondent/Corporate-Debtor, M/s. Hotline Glass Limited is a company incorporated on 15.06.1992 with CIN: L32101MP1992PLC011567. The authorised share capital of the company is Rs.80,00,00,000/- (Rupees Eighty Crores only) and the paid-up share capital is Rs.79,95,92,600/- (Rupees Seventy-Nine Crore Ninety-Five Lakh Ninety-Two Thousand Six Hundred Only). It is stated that the Respondent/ Corporate Debtor is engaged in the business of manufacturing of components of colour televisions – glass parts for colour picture tubes. The registered office of the Corporate Debtor Company is located at: CBG 7-51, Ghirongi Industrial Area, Malanpur, Dist. Bhind, Madhya Pradesh, India.

It is the case of the Petitioner that the Respondent, M/s. Hotline Glass Limited approached the Industrial Development Bank of India ("IDBI") for availing of the financial assistance. On such request, the Petitioner disbursed an amount of Rs.3171=00 Lakhs in the form of private placement of secured 16.50% Non-Convertible Debentures vide its sanction letter No: CFD-III/HGL/4082 dated 18.02.1999. So as to secure the loan, the Respondent/ Corporate Debtor executed requisite security documents in the favour of the Petitioner IDBI Bank, which includes hypothecation of movable assets, pledging of shares and creation of charge over immovable property. Thereafter, the IDBI assigned/ sold the above said credit facility and decree debts to the present Petitioner through a transfer deed dated 30.09.2004.

The Petitioner, in the present I.B. Petition has contended that the Respondent/ Corporate Debtor has failed in and defaulted to pay the interest to the desired extent and to make payment of instalments of Rupee Term Loans, which were overdue. Thereafter, the loan account of Corporate Debtor was classified as Non-Performing Asset ("NPA") on 01.01.2008 in accordance with the guidelines of the Reserve Bank of India as per recall statutory notice dated 17.06.2008 issued under Section 13(2) of the SARFAESI Act, 2002.

It is stated by the Petitioner (page no.108 to 115, Annexure-II) of the notice that the Petitioner, vide his letter dated 20.04.2005 offered one-time settlement of dues as owned by the Corporate Debtor for an amount of Rs.3011=00 Lakhs. However, the Respondent failed in to comply with the terms and conditions of settlement package, hence, later on the Petitioner revoked such settlement package.

It is stated that the Respondent/ Corporate Debtor filed a reference before the Board of Industrial and Financial Reconstruction (BIFR), New Delhi, which registered the reference as Case No.20/2007 under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA").

It is further stated that the SICA got repealed with effect from 01.12.2016 under the provision of Section 1(2) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004) [vide Government of India, Ministry of Finance, Department of Financial Services, New Delhi's Notification dated 25.11.2016 under S.O.No.3568(E)]. Hence, Therefore, the Petitioner proceeded to move the present application under Section 7 to trigger the Corporate Insolvency Resolution Process ("CIRP") in respect of the Respondent/ Corporate Debtor Company.

It is stated that, earlier, the Petitioner had issued a notice dated 17.06.2008 under Section 13(2) of the SARFAESI Act, 2002 to the Corporate Debtor and demanded from the Respondent a sum of Rs.56,14,70,352=00 (Rupees Fifty-Six Crores Fourteen Lakhs Seventy Thousand Three Hundred Fifty-Two only) which includes the accrued interest up to 31.12.2007.

It is also stated that present Petitioner issued a recall notice dated 17.02.2018 to the Corporate Debtor by demanding a sum of Rs.210,92,31,740=00 as on 01.01.2018.

Thus, there is a debt due against the Corporate Debtor and payable to the Petitioner with the accrued interest as on 01.12.2018 which is to the tune of Rs.600,10,01,165=00 (Rupees Six Hundred Crores Ten Lakhs One Thousand One Hundred Sixty-Five only).

The Respondent/Corporate Debtor, in reply to the present petition has filed its affidavit in reply/objection dated 09.09.2019, by opposing the present petition mentioning and raising the issue of maintainability of the present I.B. Petition mainly on the point of limitation as well as on the legality and validity of transfer/ assignment deed, executed by the IDBI in favour of the Petitioner. The Petitioner also annexed a copy of the same to its written submission, filed on 13.01.2020. It is contended that such assignment deed by transferring debts in favour of the present Petitioner is unsigned and incomplete, hence, cannot be enforceable.

However, the Respondent explained in its Rejoinder to Reply/objection of the Corporate Debtor that the said deed of assignment has been properly executed with the signatures of all the concerned parties, i.e. between IDBI and the trustees of SASF. Hence, it is duly authenticated and can be acted upon. It is also replied that a stamp duty of Rs.1.00 Lakh has also been paid on the instrument of transfer deed on its due adjudication by the Collector of Stamps and Deputy Inspector General of Registration and Deputy Controller of Stamps, which may be seen on page 141 of the present petition. The said deed was registered with the concerned registering authority, the stamp is having registration number 9654 dated 10.11.2004 and seal of concerned Registrar office has been put on all the pages of the said transfer deed. A copy of the same has been annexed as Annexure – A to the present petition. The Learned Counsel appearing for the Corporate Debtor in his written submission has contended that the present petitioner case is squarely covered by this Bench's earlier decision in the matter of ARCIL Vs. Neesa Leisure decided on 26.04.2019.

The Respondent/Corporate Debtor has also raised an issue of limitation in Para 23 to 28 of its reply affidavit, which has also been replied as follows.

The Respondent, contending that it approached the Petitioner for One Time Settlement ("OTS") and in response to this, the Petitioner had conveyed its approval of OTS (on certain terms and conditions attached within), vide its letter dated 20.04.2005 (annexed at Page104 of the petition) but the Respondent failed in to comply with these terms and conditions. Hence, the Petitioner withdrew the offer of OTS vide a letter dated 17.08.2006 (Page No.106 of the present petition). The Respondent filed a reference before BIFR in February 2007 on the basis of its audited balance sheets as on 31.12.2006, which was registered as a case no.20/2007 by the SICA. The Respondent/ Corporate Debtor, for this purpose filed Form-A before the BIFR, mentioning the company is 'temporarily closed' and the BIFR dismissed the reference by order dated 04.05.2009 as being non-maintainable. The Respondent thereafter filed an appeal before AAIFER and by its order dated 21.06.2010, AAIFER remanded the case back to BIFR. The BIFR appointed PNB as Operating Agency ("OA") and directed to carry out special investigation audit (SIA) of the Company. Based on the findings/observations of the SIA report, BIFR dismissed the said reference based on audited financial statement as on 31.12.2006. Later on, the Respondent herein, filed a fresh reference number before the BIFR based on audited balance sheets as on 31.03.2012 vide letter dated 16.06.2012 addressed to BIFR and the same was registered as Case No.06/2014, which was said to be pending till the date of repealing of SICA with effect from 01.12.2016. Hence, the present petition is filed within prescribed limitation.

In similar matter between M/s. Stressed Asset Stabilization Fund Vs. M/s. Hotline CPT Limited bearing IB-33/(ND)/2019, the NCLT, New Delhi, vide order dated 27.08.2019 has admitted the petition and pleased to exclude such period spent in proceedings of BIFR from 15.01.2007 onwards till the SICA Act came to be repealed with effect from 01.12.2016 when the present I.B. Code came in to force.

It is therefore contended by the Petitioner that its right to sue has accrued with effect from 01.12.2016, while the present I.B. Petition came to be filed before this Bench on 10.01.2019, which is within three years and thus it is filed within the prescribed limitation.

In support of its contention the Corporate Debtor has placed reliance on a decision of the Coordinate Bench of NCLT, New Delhi in the matter of M/s. Stressed Asset Stabilization Fund Vs. M/s. Hotline CPT Limited. It is further contended that M/s. Hotline CPT Limited is a group company of M/s. Hotline Glass Limited with the same promoters and the SASF filed applications one before this Bench and another one before the NCLT, New Delhi because of different jurisdictions. It is pertinent to note here that the Hon'ble NCLT, New Delhi has admitted the petition and imposed a moratorium on one of the Corporate Debtor Company, i.e. M/s. Hotline CPT Ltd. Hence, the present I.B. Petition also needs to be dealt with and to be admitted on similar footings.

Contrary to the above, the Respondent/ Corporate Debtor has stated that the present petition is barred by limitation and also there is mismatch of account and dispute about computation of exact amount of debts due and payable.

The Petitioner, by refuting such objection has further clarified the issue in its written submission by stating that the financial assistance granted to the Corporate Debtor was restructured by the IDBI in the form 01 subscription issue of non-convertible debentures ("NCD") of Rs.31.71 crores vide sanction letter dated 18.02.1999 and the said NCDs carried interest at the rate of 16.50% per annum with the first instalment of interest for broken period from the date of subscription to 30.09.1999 was to be paid by the Corporate Debtor on 01.10.1999 and subsequently on the first of every month. Thus, by taking the principal amount outstanding for Rs.31.71 Crores as on 24.03.1999, total unpaid interest, penalty and charges accrued up to 01.12.2018 (total 17 years) for Rs.563,39,01,165=00 has been added to the total outstanding dues for Rs.600,10,01,165=00. Hence, it is stated to be calculated properly in accordance with the terms and conditions of sanction letter which has been accepted by the Respondent/ Corporate Debtor Company.

We examined the above stated issue on its merits and have gone through the averments made by both the parties in their respective pleadings, i.e. application/ objections, I.B. Petition, reply affidavit etc. as well as in their written submissions.

The crucial point of limitation involved in this present I.B. Petition needs consideration and to be dealt with by this Court in the light of the Law settled by the Hon'ble Supreme Court and judicial precedents applicable.

It is now undisputed legal position that, while, filing the present Petition under Section 7 of the I.B. Code, only article 137 of the Limitation Act would attract which provides that the application can be filed within three years from the right to sue accrue i.e. the date of default from the date of non-performing asset declared by the lender bank.

Undisputedly, in the present matter, the date of default is 01.01.2008, while the present I.B. petition came to be filed before this Bench on 19.01.2019. However, by a careful examination of such issue of limitation, it is evident and the matter of record as being admitted position that the Corporate Debtor itself had wrote a letter offering one time settlement ("OTS") to the present Financial Creditor on 19.03.2005 and such proposal was got approved by the Financial Creditor vide its letter dated 20.04.2005 for payment of 100% of principal amount of Rs.300 Lakh within three months. It is also evident that the Corporate Debtor duly accepted by signing the above stated one-time proposal. This fact has been further admitted by the Corporate Debtor vide its reply dated 26.08.2008 to the statutory demand notice (under Section 13(2) of the SARFAESI Act) by the Petitioner, wherein, the Corporate Debtor took such plea that company is still keen for OTS and was looking for alternative source of funding including sale of its surplus land. Further, the Company vehemently denied that it defaulted the payment of OTS, but made an attempt to explain that such payment could not be realised due to alleged non-cooperation from its banker, i.e. PNB who fall back from its assurance of finance. Therefore, the company was forced to default on OTS. Hence, such accepting the terms of OTS by the company can be treated a valid and legal acknowledgement of debt under Section 18 of the Limitation act

Thus, it has held that the Corporate Debtor has accepted the settlement proposal OTS and again confirmed its debts due as per terms of OTS in its reply dated 26.08.2008 (Annexure 15, page 116-121) which can be considered as valid acknowledgement of its debt liability to the extent of certain sum of Rs.300 Lakhs which is obviously more than of rupees one lakh. Hence, the Corporate Insolvency Resolution Process (C.I.R.P.) can very well be triggered in respect of the Corporate Debtor provided that such petition is filed within the limitation period.

As per record, it is further admitted position in the matter that having made proposal for settlement in 2005, the Corporate Debtor itself moved a reference in February, 2007 before the BIFR, under the provision of SICA and such BIFR reference was kept pending till 01.12.2016, when the present I.B. Code came in to force. By operation of this, the proceedings pending under the provision of SICA Act stood abated. Therefore, the commencement of limitation for the present matter would start from the date acknowledgement for debts due and payable under one time settlement, i.e. 26.08.2008 (the date of reply admitting of debt) or 20.04.2005 the date of OTS which was assured to be complied with by the Corporate Debtor. Further, the period spent in during the pendency of SICA proceedings is required to be excluded. It is further found that the present petition is filed within the remaining period of three years from 01.12.2016. Admittedly, the Petitioner/Financial Creditor has filed the present petition on 10.01.2019, which is found to be filed within three years after exclusion of such period consumed in the SICA proceedings. Hence, the present petition is maintainable before this Adjudicating Authority.

Further, the Learned Counsel appearing for the Petitioner Bank drew our attention to the decision of co-ordinating Bench of NCLT, New Delhi having similar circumstances wherein, the NCLT, New Delhi took a view that such period needs to be excluded for the purpose of counting limitation and thus it pleased to admit the petition so as to trigger the CIRP against another Corporate Debtor Company namely M/s. Hotline Glass Limited vide IB-33/(ND)/2019 dated 27.08.2019. The relevant paragraphs 3 and 4 of the NCLT, New Delhi judgment is reproduced herein below:

It is also reported that the present Corporate Debtor the same group of company. Hence, we find no cogent reason to go for different stand and take a different view from what has been observed and taken by the Adjudicating Authority of NCLT, New Delhi because the fact and circumstances of both cases are based on similar footings. Hence, we follow and reiterate the same in the present matter also. Thus, the present I.B. Petition deserves for admission.

In the present matter, the Petitioner/Financial Creditor has suggested a name of Insolvency Professional, in case of admission order of this petition is passed by this Tribunal. The Insolvency Professional also, vide his letter dated 24.12.2018 has further accepted and agreed to act as an IRP stating that he is not acting as an IP in any of the proceedings and there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. Hence, the present petition is found complete under the discipline of the I.B. Code and for the reason(s) stated above, deserve for admission.

The Adjudicating Authority admits the present I.B. Petition to trigger the C.I.R.P. in respect of the Corporate Debtor Company and declare moratorium. This Adjudicating Authority also appoints Mr. Jigar Pradipchandra Shah, B-801, Gopal Palace, Near Shiromani Complex, Nehrunagar Cross Roads, Ahmedabad, Gujarat having Registration No. IBBI/IPA-001/IP-P01121/2018-19/11820 as Interim Resolution Professional under Section 13(l)(a) of the Code.

Further, this Adjudicating Authority hereby order for declaration of moratorium under Section 13(l)(a) prohibiting the following as laid down in Section 14 of the Code, which reads as under:

This order of moratorium shall be in force from the date of order till the completion of Corporate Insolvency Resolution Process subject to the Proviso under sub-section (4) of Section 14.

An authentic copy of this order be communicated by the Petitioner as well as by this Registry to the Corporate-Debtor-Company, as well as to the Interim-Resolution-Professional and the Registrar of Companies at the earliest.

Accordingly, the present IB-Petition stands admitted.

It is observed that the Applicant disbursed Rs.31.71 Crores on 18/02/1999 in the form of NCD. The Applicant claimed Rs.56.15 Crores under SARFAESI as on 31/12/2007. It is also further observed that the Applicant has claimed Rs.600.10 Crores with interest as on 01/12/2018. When the Principal amount was Rs.31.71 Crores but interest of Rs.568.39 Crores has been added over the period from 1999 till 2018. One of the prime objectives of the Insolvency and Bankruptcy Code, 2016 is to find out an Insolvency Resolution Plan in time for the Corporate Debtor and in order to have a Resolution Plan viable, feasible and implementation successful, in the era of Minimum Cost of funds based Lending Rate ("MCLR" in short) )/Repo Linked Interest Rate/Interest Rate falling Regime and Competitive market condition, the Committee Of Creditor(s) (COC) may explore, while finalizing the Resolution Plan for the Corporate Debtor, the possibility of loading maximum interest at the Applicant's Bank Base Rate (BR) +1% from the date of default to the date of implementation of MCLR and further from the date of implementation of MCLR till the date of approval of the Resolution Plan at the rate of Applicant's Bank one Year MCLR or One Year MCLR + 1% without any penal /overdue interest.