Mr. Mayank Harshad Talati & Anr. vs M/s. Greens Farm Tech Private Limited

CP(IB) 304/2019 is admitted by separate order.

Post the Case on 20.03.2020 for IRP Report.

Per: Ashutosh Chandra, Member (Technical)

This Petition has been filed by Mr. Mayank Harshad Talati & Anr. (hereinafter referred to as 'Petitioners/Financial Creditors') U/s 7 of the IBC, 2016 R/w Rule 4 of the I&B (Application to Adjudicating Authority) Rules 2016, by inter-alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of M/s. Greens Farm Tech Private Limited (hereinafter referred to as 'Respondent/Corporate Debtor') on the ground that it has committed default for a total outstanding amount of Rs.1,15,53,882/- (Rupees One Crore Fifteen Lakh Fifty Three Thousand Eight Hundred and Eighty Two Only) which includes principal amount and interest.

Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows:

Mr. Mayank Harshad Talati & Anr. (hereinafter referred to as 'Petitioners/Financial Creditors') are Debenture Holders in the Respondent/Corporate Debtor.

M/s. Greens Farm Tech Private Limited (hereinafter referred to as 'Respondent/Corporate Debtor') is a Private Limited Company incorporated on 02.02.2009 under the provisions of Companies Act, having CIN: U01403KA2009PTC049017, and having its registered office at 325/1, RMV Extension, 5th Cross, 14th Main, Sadashiva Nagar, Bengaluru-560080. The Authorised Share Capital of the Company is Rs.1,50,00,000/- (Rupees One Crores Fifty Lakhs only) and Paid-up Capital of Rs.1,29,61,000/- (Rupees One Crores Twenty Nine Lakhs Sixty One Thousand only). The main object of the Company is to be engaged in the business of growing and selling of Agricultural produces.

It is stated that in June 2014 the Corporate Debtor, who is engaged in the business of Coffee Production and Development of Housing Societies, issued a Product note inviting interested persons to invest in the Company vide subscription to Non-Convertible Debentures (hereinafter referred to as "NCD"). The purpose for issuance of the NCDs was to fund the Acquisition and development of Coffee Estate and Purchase and Development of land parcels into Residential Plots. As per the Term Sheet the total size of the NCD Issue was to be Rs.17 Crores. As per the product note each NCD was worth Rs.10,000/- (Rupees Ten Thousand only). Each Debenture Holder was entitled to payment of interest @ 20.5% per annum, to be paid quarterly. The term of the NCD was to be 48 months. The debenture holder was to be paid the principal amount in 11 quarterly instalments starting from the 18th Month.

It is stated that as per the said Product Note the Debenture Holder's Representative and Calculating Agent was to be M/s. Karvy Capital Ltd. Further, the Debenture Trustee and Escrow Agent was to be one M/s. Milestone Trusteeship Services Pvt. Ltd. On 24.12.2014 a Debenture Trust Deed was entered into between the Corporate Debtor and Milestone Trusteeship Services Private Ltd., whereby the latter was appointed the Debenture Trustee. As per the said Agreement Karvy Capital Limited was to be the Debenture Holders Representative.

It is stated that Karvy Private Wealth division of M/s. Karvy Stock Broking is a Financial Management firm and was handling the investment portfolio of the Petitioner. The Corporate Debtor allotted all the units of the Debenture Issue, i.e. 3090 units in favour of M/s.Karvy Capital. Further, M/s. Karvy Capital in turn advised the Petitioners to invest their money with the Corporate Debtor. In furtherance of the said advice on 19.06.2015, Petitioner No.1 invested INR 25,19,658/- into the NCD's. Karvy Capital Ltd., transferred 250 NCDs in favour of Petitioner No.1. The said NCDs were to be mature on 08.06.2019.

Similarly, Petitioner No.2 invested INR. 25,73,849/- on 18.06.2015, and was issued 250 NCDs, which were to mature on 08.06.2019. Furthermore, Petitioner No.2 invested INR.26,04,212/- on 16.07.2015, and was issued 250 NCDs, which were to mature on 15.07.2019. The aforesaid holdings were accordingly reflected in the Demat account statement of the Petitioners. The subscription of the NCDs was also reflected in the Wealth Statement as prepared by Karvy Private Wealth division of M/s. Karvy Stock Broking in relation to the investment portfolio of the Petitioner No.1.

It is further stated that as per the terms and conditions of the subscription of the NCDs the Petitioner herein was entitled to an interest on the Principal Amount, as invested, @ 20.5% per annum. The said payment was to be made to the Petitioner herein on a quarterly basis. Furthermore, the Petitioner was also entitled to repayment of Principal Amount in Eleven quarterly instalments starting from the 18th Month. On 12.12.2016, a Letter came to be issued by the Respondent in favour of Karvy Capital Ltd., whereby a request was made by the Respondent to extend the time for repayment of Principal Amount by additional 12 to 18 months starting January 2017 Quarter. The reason for delay in the repayment was stated to be economic conditions and challenges being faced by the Respondent.

It is also stated that a letter came to be issued by M/s. Karvy Capital Ltd., in favour of the Petitioners on 03.01.2017, whereby they were informed that after the voting of all the Investors the decision has been taken to extend the repayment schedule and the same was to commence from December 2017. Initially, till 31.10.2016, the payment of Interest was made as per schedule. However, post December 2016, the Respondent has been continuously defaulting in making the scheduled payment of the Interest or the Principal Amount. Even though as per the letter dated 03.01.2017, the repayment of the principal was to commence from December 2017, the repayment has not yet commenced. Further, on 22.11.2017 a letter came to be issued by the Respondent/Corporate Debtor in favour of M/s. Milestone Trustee Services; whereby it accepted that the repayment has not commenced yet and explanation was sought to be given for the delay in repayment.

It is further stated that on 03.05.2018, a letter came to be issued by M/s Milestone Trustee Services, whereby the Debenture Holders were informed about the actions that could be taken against the Respondent for the Default as committed. Furthermore, the letter also communicated that a letter was received from the Respondent whereby it again requested for an extension for repayment of the Principal as well as payment of the Interest. M/s Karvy Capital Limited were informing the Petitioner about the replies received from the Respondent and the assurances being given with respect to repayment of the dues. Since the payment was not coming forth steps were taken under the Negotiable Instruments Act against the Respondent. Even after the assurance by the Respondent, that the payments will be promptly made, till date the dues have not been cleared by the Respondent. As on date the total payment outstanding in favour of the Petitioner No.1, from the Respondent is INR. 38,47,000/-. The said amount also includes the interest to be paid as per the terms of the subscription.

Similarly, the payment outstanding in favour of Petitioner No.2, from the Respondent for the Investment dated 18.06.2015 is INR 38,47,000/-. Furthermore, under the Investment dated 16.07.2015, the payment outstanding in favour of Petitioner No.2 is 38,59,882/-. Therefore, the total payment outstanding in favour of Petitioner No.2, from the Respondent is INR 77,06,882/-. The said amount also includes the interest to be paid as per the terms of the Subscription.

The Petitioner/Financial Creditor has also relied upon the judgment of the Hon'ble Supreme Court of India in the matter of Innovative Industries Ltd., Vs. ICICI Bank Ltd., reported in (2018) 1 SCC 407, para 28) in support of its case.

It is stated that as per the Annual Return filed by the Corporate Debtor before the Ministry of Corporate Affairs for the Financial Year 2017-18, the Total debt as owed by the Company to all its creditors is Rs.63,34,80,737/-. Out of the said amount Rs.48,09,60,000/- is the amount owed to debenture holders.

In the light of the foregoing the total outstanding amount of INR 1,15,53,882/- in favour of both the Agreements, as per the terms of NCD subscription, is a financial debt under Section 5(8)(c) of the Insolvency and Bankruptcy Code, 2016.

Heard Mr. Srijan Sinha, learned Counsel for the Petitioners/Financial Creditors. We have carefully perused the pleadings of the party and extant provisions of the Code and Rules made thereunder.

The instant Company Petition was filed on 20.08.2019. On 30.09.2019, Mr.Srijan Sinha, learned Counsel for the Petitioners was heard. Notice was issued to the Respondent. The case was posted for 23.10.2019. On 04.10.2019, Notice was issued to the Respondent to appear in person or through an Authorized Representative before this Tribunal on 23.10.2019. On this date, learned Counsel for Petitioners appeared. Ms. Shashikala Hemanth, learned Counsel for the Respondent appeared and accepted the notice for the Respondent and requested time to file a reply. The case was posted for 20.11.2019. On this date Mr. Srijan Sinha, learned Counsel for the Petitioners appeared but none appeared for the Respondent even though the earlier Counsel had accepted the notice. The case was again posted for 03.12.2019, with the directions that no further adjournment shall be granted. On 03.12.2019 while Mr. Srijan Sinha, learned Counsel for the Petitioners appeared but again none appeared for the Respondent even though earlier they had appeared and submitted that they were going to file reply. No reply was also filed. In view of this position, we are constrained to take a view that the Respondent has no reply to offer on the default committed by it and has no objection to the admission of the Petition under the Code. The facts of the case, as presented in the Petition are therefore examined on merits, to see if this is a fit case for initiation of CIRP in respect of the Respondent/Corporate Debtor.

The undisputed facts of the case are that on 19.06.2015, Petitioner No.1 invested INR 25,19,658/- in the Non Convertible Debentures issued by the Corporate Debtor M/s. Greens Farm Tech Private Limited and 250 NCDs, of Rs.10,000/- each, were transferred in favour of Petitioner No.1. The said NCDs were to mature on 08.06.2019. Similarly, Petitioner No.2 invested INR. 25,73,849/- on 18.06.2015, and was issued 250 NCDs, which were also to mature on 08.06.2019. Petitioner No.2 further invested INR.26,04,212/- on 16.07.2015, and was issued 250 NCDs, which were to mature on 15.07.2019. Interest was also payable to the Petitioners @ 20.50%, paid on quarterly basis, as per the Agreement. The term of the NCDs was 48 months and the principal was to be paid in 11 quarterly instalments from the 18th month. The Debenture Holder's Representative was to be M/s Karvy Capital Ltd. and the Debenture Trustee and Escrow Account Agent was to be M/s Milestone Trusteeship Services Pvt. Ltd. All correspondence between the Petitioners and the Respondent are made through them. These NCDs were issued by the Corporate Debtor to fund its Acquisition and Development of Coffee Estates and development of parcels into residential plots and are reflected in the Demat account statement and also in their investment portfolios and wealth statements.

Till 31.10.2016 payment of interest was made by the Corporate Debtor as per schedule. No payments were made after December 2016, and the default has been continuing since then. The Corporate Debtor requested extension of time for repayment by 12 to 18 months. The Petitioners were informed vide letter 03.01.2017 that the repayments schedule had been extended so as to commence from December 2017. No payment commenced even after this date. We may mention here that in seeking such extensions for payment to the Financial Creditors, the Corporate Debtor admitted to the debt. This was further accepted by the Corporate Debtor in its letter of 22.11.2017. Correspondence between the Corporate Debtor and the representatives of the Petitioner also indicates towards the continued default. As a result, the total amount of outstanding debt owed to the two Petitioners was Rs 38,47,000 in respect of Petitioner No. 1, and Rs 38,47,000 and Rs 38,59,882 respectively to Petitioner No. 2 in respect of his two investments. The total debt works out to Rs 1,15,53,882/-. The same has not been opposed before us and clearly amounts to a debt u/s 5(8)(c) of the Code.

The Hon'ble Supreme Court in the case of Innoventive Industries Ltd. Vs. ICICI Bank Ltd., reported in (2018) 1 SCC 407 held that the scope of enquiry of an Adjudicating Authority in an Application made under Section 7 is very limited. The moment the Adjudicating Authority is satisfied that a

"Default" has occurred, the Application must be admitted. The Adjudicating Authority has to merely satisfy itself that a default has occurred, even if the default is disputed so long as it is due, unless interdicted by some law. Although Section 7(5) of the Code says that the Adjudicating Authority "may" admit or "may" dismiss a petition, looking at the facts of the case we are of the view that the petition needs to be admitted.

A perusal of the Financial Statements of the Corporate Debtor for the FYs 2015-16, 2016-17 and 2017-18 gives the following picture: i) Its Liabilities increased from Rs 55,55,96,184 as on 31.03.2016 to Rs 62,79,11.936 as on 31.03.2017. ii) It earned a meagre profit of Rs 1,25,983 as on 31.03.2017 and a loss of Rs 15,87,734 as on 31.03.2016, from its operations; iii) Its cash flow statement showed a decrease in cash/cash equivalent of Rs 2,59,11,523 as on 31.03.2017 over the preceding FY; iv) Its interest liability on Debentures alone as on 31.03.2017 was Rs 2,19,18,544; v) As on 31.03.2018 (as per the information available on the MCA website) it had a negative Net Worth of 2,99,55,490; and total debts of Rs 63,34,80,737 including the debt on account of NCDs. It is clear therefore, that the financial status of the Corporate Debtor is not healthy and indicates that it is not in a position to repay its debts. Apparently for this reason it has not come forward to oppose the Petition.

In view of the foregoing, we are of the view that this is a fit case for initiation of CIRP in respect of the Corporate Debtor M/s. Greens Farm Tech Private Limited.

The Applicant has suggested a qualified Insolvency Professional namely Mr.Jugraj Singh Bedi having Regn.No.IBBI/IPA-001/IP-P00731/2017-2018/11208, who has also filed his written consent in Form 2 dated (05^{\text{th}}) August, 2019 by inter alia affirming that he is eligible to be appointed as Interim Resolution Professional / Resolution Professional in respect of the Corporate Debtor herein, and certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professionals of ICAI.

In the result, by exercising powers conferred on the Adjudicating Authority, under Section 7(5)(a) and other extant provisions of the Code, Company Petition bearing C.P. (IB) No.304/BB/2019 is hereby admitted by initiating CIRP in respect of Corporate Debtor, M/s. Greens Farm Tech Private Limited, with the following consequential directions:

We hereby appoint Mr.Jugraj Singh Bedi with Regn.No.IBBI/IPA-001/IP-P00731/2017-2018/11208 as the Interim Resolution Professional (IRP) to conduct the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor namely M/s.Greens Farm Tech Private Limited and to carry out the functions as mentioned under the I&B Code, 2016 and the Rules framed by the IBBI from time to time.

The following moratorium is declared, prohibiting all of the following, namely:

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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

d. recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor;

e. supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period;

f. The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial regulator, and a surety in a contract of guarantee to a corporate debtor.

g. The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process.

The IRP is directed to follow all extant provisions of the IBC, 2016 and the Rules including fees rules as framed by the IBBI from time to time.

The Board of Directors and all the staff of the Corporate Debtor are hereby directed to extend full co-operation to the IRP, in carrying out his functions as such, under the Code and Rules made by the IBBI.

The IRP is directed to file his progress reports to the Adjudicating Authority from time to time about the steps taken in pursuant to the CIRP. The IRP is further directed to take expeditious steps so as to complete the process of CIRP within the stipulated time.

Post the case for report of the IRP on 20th March, 2020.

ASHUTOSH CHANDRA MEMBER, TECHNICAL

RAJESWARARAO VITTANALA MEMBER, JUDICIAL

Shruthi