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Judgment
PER: SH. DHARMINDER SINGH, HON’BLE MEMBER (JUDICIAL)
This is an application filed by M/s. Syrex Infoservices (India) Private Limited having CIN: U72200DL2005PTC134742 under Section 10 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘Code, 2016’) read with Rule 7 of the Insolvency and Bankruptcy (Application to adjudicating Authority) Rules, 2016 (for brevity ‘the AAA Rules’) for initiation of Corporate Insolvency Resolution Process (for brevity ‘CIRP’) against M/s. Syrex Infoservices (India) Private Limited, the Corporate Debtor being the Corporate Applicant itself, following a default in meeting the financial obligations to its Financial Creditors (secured/unsecured creditors), Operational Creditors and other creditors as per the averments and records presented before us.
The Corporate Applicant is a private limited company incorporated on 06.04.2005 under the provision of the erstwhile Companies Act, 1956 having CIN: U72200DL2005PTC134742 and registered office situated at GH-13/334, Paschim Vihar, New Delhi-110087. The Corporate Applicant is engaged in the business marketing and providing high quality service of any product to clients directly, through telemarketing or through appointing sub-agents or franchises.
The details of the transactions leading to the filling of the instant petition as averred by the Corporate Applicant are as follows:
The Corporate Applicant submits that since its inception to 31.03.2019, the Corporate Applicant was engaged in providing Business Process Outsourcing services due to UNICEF, CRY, SOSO, Children Village of India, MSF and the business of Corporate Applicant was running successful.
The Corporate Applicant submits that during the financial year 2017-18, the business of the Corporate Applicant suffered losses as the clients to whom the Corporate Applicant rendered services had made defaults in the payment due to the poor market conditions.
The Corporate Applicant also submits that as on the date of filing the petition, the Corporate Applicant has seven (7) financial creditors namely: Axis Bank Limited, Bajaj Finance Limited, Capital First Limited (Now IDFC First Bank Limited), Equitas Bank Limited, HDFC Bank Limited, Aditya Birla Finance Limited and Tata Capital Financial Services Limited having an aggregate outstanding financial debt of Rs.1,70,58,286/- in default.
The Corporate Applicant has submitted details of its operational creditors (sundry creditors) as on 04.12.2019 having an aggregate outstanding debt of Rs.2,18,68,877/- in default.
The Corporate Applicant has further submitted a synopsis of the Corporate Applicant's financial position for the financial year ended 31.03.2017, 31.03.2018, 31.03.2019 and for the period ending 04.12.2019. The same is presented as follow:-
| For the year/period ended/as at | ||||
| Particulars | 31-3-2017 | 31-3-2018 | 31-3-2019 | 4-12-2019 |
| Turnover | 11,54,40,746 | 9,09,78,597 | 7,23,54,841 | 2,74,50,169 |
| Assets | 5,66,18,420 | 4,28,55,921 | 2,36,64,889 | 1,83,68,781 |
| Profit (Loss) | 38,20,867 | (2,08,51,712) | (1,88,48,485) | (29,81,635) |
| No. of employees | 272 | 225 | 122 | 35 |
| Default of debt/s | No | Yes | Yes | Yes |
The Corporate Applicant placed on record the audited financial statements for the financial year ended 31.03.2018, 31.03.2019 and the provisional financial statements of the Corporate Applicant from 01.04.2019 to 04.12.2019 reflecting the default of payment to the financial creditors and operational creditors.
The Corporate Applicant has referred to the minutes of the Annual General Meeting dated (30^{\text{th}}) September, 2019, wherein the members of the corporate debtor inter alia after due discussions and deliberation had resolved by way of Special Resolution to file an application under Section 10 of the Code, 2016. The extract of the special resolution dated (30^{\text{th}}) September, 2019 is reproduced herein below in verbatim:-
"Resolved that an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'Code, 2016') read with Rule 7 of the Insolvency and Bankruptcy (Application to adjudicating Authority) Rules, 2016 (for brevity 'the AAA Rules') be made before the National Company Law Tribunal, New Delhi Bench."
"Resolved further that Mr. Naresh Kakkar, Director of the company be and is hereby authorized to sign and submit the application and/or all documents on behalf of the company in this regard. He is further authorized to receive all notices, issue statements, appoint professionals and do all such things, deeds and acts as may be necessary and expedient in connection with these proceedings before the National Company Law Tribunal"
The Corporate Applicant submits that the instant petition is filed in Form -6 under Rule-7 of the IBC- Application to Adjudicating Rules, 2016 seeking initiation of Corporate Insolvency Resolution Process in respect of the Corporate Applicant under Section 10 of the Code, 2016 for the reason that the Corporate Applicant was unable to meet its day to day financial requirements and unable to pay its Financial Creditors for the reason that the condition of marketing is not favourable and also competing marking scenario leads it to become a debt strapped company. The Corporate Applicant further submits that in view of the aforesaid situation, the Corporate Applicant is unable to pay the debt due to Financial Creditors as well as Operational Creditors.
The Corporate Applicant has submitted the below mentioned documents to prove the existence of default of the financial debt:-
Two Notices dated 08.08.2019 of Metropolitan Magistrate - 03 (South District) Saket Court-207, New Delhi. ii. Arbitration References and Commencement Letter of Bajaj Finance Limited dated 03.08.2019 in Case No. JJ-Bajajj Arb-9595.
Two Second Notices of the Arbitral Tribunal of Sh. Pradeep J Mule dated 04.09.2019 & 05.09.2019. iv. Last and Final notice of Sh. SC Rajan, Arbitrator dated 18.12.2019 to answer to the claim of Axis Bank Limited
Legal Notice dated 16.11.2019 of M/s. Gaba Law Offices for default in making payment in Loan Account No. 52308682 (HDFC Bank Ltd.). vi. Copy of Notice of Demand under Section 13 (2) of SARFAESI Act, 2002 issued by ADITYA Birla Finance Limited.
This Tribunal vide interim order dated 07.01.2020, had issued notice to the all the seven Financial Creditors of the Corporate Applicant and to the statutory authorities i.e., the Registrar of Companies, NCT of Delhi and Haryana and the officer concerned of the Income Tax Department for submitting the objections, if any, to the instant petition filed by the Corporate Applicant under Section 10 of the Code, 2016. Pursuant to the notice issued, the Registrar of Companies, NCT of Delhi and Haryana and the concerned Income Tax Department had filed reply and out of the seven financial creditors, only three financial creditors have filed reply, out of which two financial creditors namely Aditya Birla Finance Limited and IDFC Bank Limited have raised objections to the instant petition and one financial creditor namely Axis Bank Limited has no objection.
The objections raised by the financial creditors to the instant petition filed by the Corporate Applicant in their respective reply are stated in brief as follow:-
Objections raised by the IDFC Bank Limited (Objector No.1):-
The IDFC Bank Limited (Objector No. 1) submits that the Corporate Applicant had taken business loan and has had two business loan accounts with the objector No. 1 that are Account no.13638337 and Account no.7415862 wherein, as on 02.05.2020, outstanding of Rs.17,42,059.91/- and Rs. 322493.78/- respectively is due and payable from the Corporate Applicant to the Objector No. 1. The Objector No.1 prays for the cooperation of the Corporate Applicant with the IRP in verifying the debt of the Objector No.1.
b) Objections raised by the Aditya Birla Finance Limited (Objector No.2)
The Objector No.2 submits that the Corporate Applicant had availed the loan facilities from Objector No.2 vide letter no. ABF/LOC/MAR18/N0240 dated 23.03.2018 for the expansion of its activities and required the said funds for building infrastructure for expansion of business.
The Objector No.2 submits that the Corporate Applicant in November, 2019 had approached the Objector No.2 for restructuring of loan amount as the Corporate Applicant could not make regular equated monthly installments. Further, the Objector No.2 submits that at the time of restructuring the loan, the Corporate Applicant had made tall projections for future profit in business.
The Objector No.2 submits that pursuant to the date of revised sanctioning of the loan i.e., in November, 2019 the Corporate Applicant is covered under the umbrella of Moratorium and immediately, in December 2019, the Corporate Applicant filed instant petition under Section 10 of the Code, which clearly denotes the intention of the Corporate Applicant to escape the liability. The Objector No.2 further submits that Corporate Applicant had requested to avail the moratorium in the wake of lockdown due to COVID-19 pandemic.
The Objector No.2 submits that the default which is shown in instant petition is intentional, self-created and result of fraud and siphoning of funds. The Objector No.2 further submits that the Corporate Applicant is not a going concern and hence, effectively no resolution plan under the Code can be arrived.
The Objector No.2 submits that the instant petition is incomplete and not fulfilling the requirements as provided under Section 10 of the Code, 2016 as the Corporate Applicant has withheld the material facts and documents such as the details pertaining to all Bank Accounts of the Directors/ Promoters of the Corporate Applicant showing transactions of substantial amount. The Objector No. 2 further submits that the intention of the Corporate Applicant is to divert the assets of the Corporate Applicant and escape the legal liabilities.
The Corporate Applicant filed rejoinder to the reply/objections raised by the Objector No.1 and Objector No.2. The submissions of the Corporate Applicant in the rejoinder are stated herein in brief:-
Reply to the Objections raised by the IDFC Bank Limited (Objector No.1)
The Corporate Applicant submits that after the initiation of the CIRP of the Corporate Applicant, actual claims of the Objector No.1 will be determined by the Interim Resolution Professional/ Resolution Professional.
Reply to the Objections raised by the Aditya Birla Finance Limited (Objector No.2)
The Corporate Applicant submits that the debt of the Objector No.2 is fully secured by the property of the guarantor who happens to be mother of the directors of the Corporate Applicant. The Corporate Applicant further submits that the Objector No.2 has already invoked the guarantees and has issued notice under Section 13(2) of the SARFAESI Act, 2002.
The Corporate Applicant submits that the Objector No.2 may further explore its rights to start the Insolvency and Bankruptcy proceedings against the Corporate Applicant as well as against the guarantors of the Corporate Applicant.
The Corporate Applicant submits that the promoters of the Corporate Applicant cannot run the company profitably even after restructuring the loan and the moratorium availed from the Objector No.2.
The Corporate Applicant submits that the apprehension of the Objector No.2 regarding the diversion of assets of the Corporate Applicant after start of the CIRP is totally against the concept of the Code, as after the start of CIRP , the Corporate Debtor shall be run by an independent Resolution Professional.
The Aditya Birla Finance Limited (Objector No.2) has also filed an application (IA No. 4096/2021 in C.P. No.(IB) 115/2020) under Section 60(5) of the Code, 2016 read with Rule 11 of the NCLT Rule, 2016, to bring on record additional documents to support their objections to the instant petition filed by the Corporate Applicant. The averments submitted by the Objector No. 2 are stated as follows (in brief):-
The Objector No.2 submits that the Corporate Applicant with a nefarious intent of defrauding the Objector No.2, had evaded the repayment of loan availed from the Objector No.2 by seeking moratorium on account of restructuring and later on displacing all the assets including the assets given as security.
The Objector No.2 submits that the Corporate Applicant has suppressed from this Hon'ble Tribunal that it has several other companies under the same directorship viz., Syrex Foundation, Care and Concern Infoservices Private Limited, Care and Concern Supermarkes Private Limited and LRS Syrex Solutions Private Limited that are running concerns which clearly shows that the Corporate Applicant had filed the petition under section 10 of the Code, 2016 with malicious intent.
The objector No.2 submits that the Corporate Applicant is not in default as per the records of the Objector No.2 and the instant petition under Section 10 of the Code is filed only with the intent to divert the assets and escape from the legal liability of the Corporate Applicant.
The Corporate Applicant had filed its reply in the application (IA No. 4096/2021 in C.P. No.(IB) 115/2020) filed by the Objector No.2. The submissions of the Corporate Applicant are stated as follows (in brief) :
The Corporate Applicant submits that Objector No.2 has taken extreme steps to take over the residential property of the mother of the directors of the Corporate Applicant under Section 13 of the SARFAESI Act, 2002. The Corporate Applicant further submits that the Objector No.2 has no locus standi to object the initiation of the corporate insolvency resolution process against the Corporate Applicant.
The Corporate Applicant submits that though the director of the Corporate Applicant also holds directorship in Syrex Foundation, Care and Concern Infoservices Private Limited, Care and Concern Supermarkets Private Limited and LRS Syrex Solutions Private limited, the management had never siphoned off any amount from the Corporate Applicant to the mentioned companies. The Corporate Applicant further submits that disclosure of holding directorship in other companies is not a requirement envisaged under Section 10 of the Code, 2016 read with Rule 7 of the of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity 'the AAA Rules')
We have heard Ld. Counsels for both the parties and perused the averments made in the application, reply and rejoinder filed by the parties. The relevant documents annexed with the respective submissions have been examined.
At this juncture, we have to consider what are the requirements for admitting an application under section 10 of the Code, 2016. For this purpose, it is useful to refer the judgment of the Hon'ble NCLAT in Unigreen Global Pvt. Ltd. VS. Punjab National Bank & Ors. CA (AT) (Ins. 81/2017) wherein it was held that:
"20.Under both Section 7 and Section 10, the two factors are common i.e. the debt is due and there is a default. Subsection (4) of Section 7 is similar to that of sub-section (4) of Section 10. Therefore, we hold that the law laid down by the Hon'ble Supreme Court in "Innoventive Industries Ltd. (Supra) is applicable for Section 10 also, wherein the Hon'ble Supreme Court observed as "The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority".
21.In an application under Section 10, the 'financial creditor' or 'operational creditor', may dispute that there is no default or that debt is not due and is not payable in law or in fact. They may also oppose admission on the ground that the Corporate Applicant is not eligible to make application in view of ineligibility under Section 11 of the I & B Code. The Adjudicating Authority on hearing the parties and on perusal of record, if satisfied that there is a debt and default has occurred and the Corporate Applicant is not ineligible under Section 11, the Adjudicating Authority has no option but to admit the application, unless it is incomplete, in which case the Corporate Applicant is to be granted time to rectify the defects.
22.Section 10 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information as required to be submitted in Form 6 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 subject to ineligibility prescribed under Section 11. If all information are provided by an applicant as required under Section 10 and Form 6 and if the Corporate Applicant is otherwise not ineligible under Section 11, the Adjudicating Authority is bound to admit the application and cannot reject the application on any other ground. 23. Any fact unrelated or beyond the requirement under I & B Code or Forms prescribed under Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or pleaded. Non-disclosure of any fact, unrelated to Section 10 and Form 6 cannot be termed to be suppression of facts or to hold that the Corporate Applicant has not come with clean hand except the application where the 'Corporate Applicant' has not disclosed disqualification, if any, under Section 11. Nondisclosure of facts, such as that the 'Corporate Debtor' is undergoing a corporate insolvency resolution process; or that the 'Corporate Debtor' has completed corporate insolvency resolution process twelve months preceding the date of making of the application; or that the corporate debtor has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under the said Chapter; or that the corporate debtor is one in respect of whom a liquidation order has already been made can be a ground to reject the application under Section 10 on the ground of suppression of fact/ not come with clean hand. xxx xxx xxx
25.Similarly, if any action has been taken by a 'Financial Creditor' under Section 13(4) of SARFAESI Act, 2002 against the Corporate Debtor or a suit is pending against Corporate Debtor under Section 19 of DRT Act, 1993 before a Debt Recovery Tribunal or appeal pending before the Debt Recovery Appellate Tribunal cannot be a ground to reject an application under Section 10, if the application is complete."
With regard to the Objector No.2's contention that Corporate Applicant is not in default as per the records of the Objector No.2, we find that the Corporate Applicant had placed on record the list of document in Part III of Form 6 of the Petition to prove the existence of financial debt and the amount of default. We further find that the proceedings under Section 13(2) of the SARFAESI Act, 2002 were also initiated by Aditya Birla Finance Limited (Objector No.2) pursuant to the default in repayment of Loan
In the case Leo Duct Engineers & Consultants Limited Vs. Canara Bank [Company Appeal (AT) (Insolvency) No. 100 of 2017 ] and Unigreen Global Pvt. Ltd. Cited supra, the Hon'ble NCLAT held that if any action has been taken by the financial creditor under SARFAESI Act, 2002 against the Corporate Debtor or a suit is pending against the corporate debtor under Section 19 of DRT ACT before a Debt Recovery Tribunal or appeal pending before the Debt Recovery, that cannot be a ground to reject an application under Section 10 of I&B Code. In the present case the Objector No.2 has initiated proceedings under SARFAESI Act, 2002 against the Corporate Applicant and therefore the pendency of the proceedings of the SARFAESI Act cannot be a ground to prevent the Corporate Applicant to present the application under Section 10 of the Code or to consider the filing of the application as filed with an ulterior motive.
With regard to the Objector No.2's contention that the Corporate Applicant had not disclosed the directorship held in other companies by the directors of the Corporate Applicant, we inferred from the ratio of the Judgement of Unigreen Global Pvt. Ltd. (supra) where the issue arising for consideration was whether non-disclosure of facts beyond the statutory requirements under the IBC read with relevant forms prescribed under IBC can be a ground for dismissal of Application for initiation of CIRP. The Hon'ble NCLAT held that the moment the Adjudicating Authority is satisfied that there is a debt and a default has occurred, the application must be admitted unless it is incomplete. We are of the view that Section 10 of the Code, 2016 does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 of the Code, 2016 and the information as required to be submitted in Form 6 of Adjudicating Authority Rules.
As per the facts of the present case before us, we find no force in the contention of the Objector No.2 that the Corporate Applicant with an ulterior motive had not disclosed the directorship held by the directors of the Corporate Applicant in the other companies and hold that this fact is unrelated and beyond the requirement of the Code, 2016 or forms prescribed under the Adjudicating Authority Rules.
The Corporate applicant in Part-II of Form 6 has proposed the name of Mr. Gulshan Gaba, for appointment as Interim Resolution Professional having registration number IBBI/IPA-001/IP-P00548/2017-18/10978, office at GH-13/882, Paschim Vihar, New Delhi-110087 with email – id [email protected]. Mr. Gulshan Gaba has submitted his consent for 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. Further, there is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or elsewhere.
We are of the view that the existence of debt and default is established and no winding up proceedings are pending against the Corporate Applicant and Corporate Applicant is not covered by the ineligibilities provided under Section 11 of the Code, 2016. We are satisfied that the Corporate Applicant is entitled to move an application under Section 10 of the Code in view of the admitted outstanding financial debt and default of the same by the Corporate Applicant. As a sequel of the above discussion and in terms of Section 10(4) of the Code, 2016, we hereby admit the instant Petition (C.P.(IB) 115/(ND)/2020) in terms of Section 10 of the Code. Consequently, IA No. 4096/ND/2021 in C.P. No.(IB) 115/(ND)/2020 stands dismissed with no order to costs.
Mr. Gulshan Gaba having registration number IBBI/IPA-001/IP-P00548/2017-18/10978, office at GH-13/882, Paschim Vihar, New Delhi-110087 with email – id [email protected] is hereby appointed as an Interim Resolution Professional for Corporate Debtor.
We direct that public announcement in pursuance of Section 13 (2) of the Code shall be made by the Interim Resolution Professional immediately (3 days as prescribed by Explanation to Regulation 6(1) of the IBBI Regulations, 2016) with regard to admission of this application under Section 10 of the Insolvency & Bankruptcy Code, 2016.
We direct the Corporate Applicant to deposit a sum of Rs. 2 Lakhs with the Interim Resolution Professional namely Mr. Gulshan Gaba 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 needful shall be done within three days from the date of receipt of this order by the Corporate Applicant. The said amount however is subject to adjustment towards Resolution Process cost as per applicable rules.
We also declare moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) & (d) of the Code. Thus, the following prohibitions are imposed:
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;
Transferring, encumbering, alienating or disposing of by the corporate debtor 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 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;
The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the corporate debtor.”
Notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period.
It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period. In addition, as per the Insolvency and Bankruptcy Code (Amendment) Act, 2018 which has come into force w.e.f. 06.06.2018, the provisions of moratorium shall not apply to the surety in a contract of guarantee to the corporate debtor in terms of Section 14 (3) (b) of the Code.
The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the Code, Rules and Regulations. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day to day affairs of the ‘Corporate Debtor’. In case there is any violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing a appropriate orders. The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code, Rules and Regulations.
The office is directed to communicate a copy of the order to the Corporate Debtor/ Corporate Applicant, Financial Creditors, the Interim Resolution Professional and the Registrar of Companies, NCT of Delhi & Haryana at the earliest possible but not later than seven days from the pronouncement of this order.