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Judgment
[Per: Mr. Harihar Prakash Chaturvedi, Member (J)]
The present Application is filed by Ms. Parulben Pankajbhai Tejani, being a Financial Creditor, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "I & B Code)" read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ["Adjudication Rules" for short] for initiating Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") against M/s. Tirupati Balaji Polymers Pvt. Ltd. [hereinafter called as "Respondent/Corporate Debtor"].
The applicant, viz., Mrs. Parulben Pankajbhai Tejani is an individual person, having resident at B-56, Radhakrishna Society, Khodiyar Nagar Road, Varachha, Surat-395 006, Gujarat.
The respondent-corporate debtor, M/s. Tirupati Balaji Polymers Pvt. Ltd., is a Company, bearing CIN: U24134GJ2011PTC064442, incorporated on 15.03.2011, under the provisions of the Companies Act 1956, having its Registered Office at Block No.274, Kanyanshi Road, Pipodara, Surat-394 110, Gujarat.
The Authorized Share Capital of the corporate debtor is Rs.2,60,00,000/- (Rupees Two Crore Sixty Lakhs only) divided into 26,00,000 nos. of Equity Shares of Rs.10/- each. The issued, subscribed and paid up share capital of the company is Rs.2,58,33,120 (Rupees Two Crore Fifty Eight Lakhs Thirty Three Thousand One Hundred Twenty only) divided into 25,83,312 nos. of Equity Shares of Rs.10/- each.
It is the case of the financial creditor that she advanced unsecured financial loan of Rs.8 lakhs (Rupees Eight Lakhs only) to the Corporate Debtor company, viz., M/s.Tirupati Balaji Polymers Pvt. Ltd., for its purpose to discharge existing repayment liability towards loan of Bank of India under One Time Settlement (OTS). It is submitted that the corporate debtor company duly signed and executed a loan agreement dated 01.09.2017 in favour of the applicant, such agreement contains the terms and conditions, rate of interest and repayment schedule of the said credit facility. The petitioner has annexed a copy of the loan agreement dated 01.09.2017 entered between the Corporate Debtor company and the Financial Creditor as Annexure-B to the present IB Petition. That apart, the corporate debtor company has executed a Promissory Note dated 01.09.2017 (copy of the same has been annexed with the application as Annexure-C), the contents of the same reads as under;
Promissory Note
Surat, Gujarat
Date: 01/09/2017
Tirupati Balaji Polymers Private Limited, agrees and promises to pay to Mrs. Parubiben Pankajbhai Tejani the sum of Rs.8,00,000/- for value received, with interest at the annual rate of 9% p.a. payable monthly at the end of each month.
If this note is in default and is placed for collection, Tirupati Balaji Polymers Private Limited shall pay all reasonable costs of collection and attorneys' fees.
FOR, TIRUPATI BALAJI POLYMERS PVT LTD.
Sd/-
Director
Sd/-
Tirupati Balaji Polymers Private Limited
(Borrower)
Sd/-
Mrs. Parulben Pankajbhai Tejani
(Lender)
Sd/-
(Witness)
The petitioner has stated that as per clause no.2 of the loan agreement, the corporate debtor had agreed to repay the said loan amount within 15 days from the date of demand made by the applicant. Further, as per clause no.3, if such demand is not made by the applicant, then the corporate debtor was required to repay the entire outstanding amount along with interest and cost latest by 31.12.2017.
It is stated that the Petitioner did not make any demand prior to 31.12.2017, hence, the corporate debtor was required to repay the said amount on or before 31.12.2017 as per the terms and conditions of the loan agreement, but the corporate debtor had failed to repay the entire outstanding amount to the petitioner/financial creditor.
It is stated that thereafter the petitioner had issued Demand Notice dated 03.01.2018 to the corporate debtor and had called upon to pay the entire outstanding amount together with the accrued interest and cost as per the loan agreement. (A copy of the Demand Notice is annexed with the application as Annexure-D). Even after issuance of Demand Notice, the Corporate Debtor failed to pay the outstanding amount to the petitioner. The applicant further sent a reminder letter on 08.02.2018 to the corporate debtor by making demand of repayment of loan as per the terms and conditions agreed therein. The petitioner has further annexed a copy of the second reminder/demand notice dated 08.02.2018 with the present IB Petition as Annexure-E.
The Financial Creditor has furnished all the requisite details of the amount of loan disbursed to the Corporate Debtor company in terms of the provisions contained in the I & B Code, i.e., Part-IV of the application in prescribed Proforma under Rule-4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code, which are described as under;
| Particulars of Financial Debt | ||
|---|---|---|
| 1 | Total amount of debt granted date(s) of disbursement | Rs.8,00,000/- |
| 2 | Amount claimed to be in default and the date on which the default occurred. | Rs.8,00,000/- + Simple interest at the rate of 9 per cent (9%) per annum. |
Upon the notice, being issued and in response to the present IB Petition, Respondent-Corporate Debtor company appeared through its Counsel and filed its affidavit in reply through the director of the corporate debtor company, viz., Mr.Bhadreshbhai Ramjibhai Lakhani, by admitting its loan liability and expressing its no objection for initiation of Corporate Insolvency Resolution Process against the corporate debtor company. The relevant paragraph of affidavit in reply as filed by Mr. Bhadreshbhai Ramjibhai Lakhani is reproduced hereinbelow;
"2.I humbly submit that the amount of Rs.8,00,000/- is due and payable to the Petitioner pursuant to the loan agreement dated 01.09.2017. The Corporate Debtor could not pay the aforesaid amount due to loss in business and bad market conditions. I submit that there is no intention to defraud the Petitioner-creditor. The Corporate Debtor has no objection against admission of Petition, if found complete in all respects as per the Insolvency and Bankruptcy Code, 2016."
In view of the above given facts and circumstances of the present case, we examined the relevant provisions of Section 7 of the I & B Code and Rules Applicable. Section 7 of the Code reads as under;
7. Initiation of Corporate Insolvency Resolution Process by Financial Creditor.
(1)A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. Explanation.-For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.
(2)The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.
(3)The financial creditor shall, along with the application furnish
(a)record of the default recorded with the information utility or such other record or evidence of default as may be specified;
(b)the name of the resolution professional proposed to act as an interim resolution professional; and
(c)any other information as may be specified by the Board.
(4)The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).
(5)Where the Adjudicating Authority is satisfied that—
(a)a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
(b)default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.
(6)The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
(7)The Adjudicating Authority shall communicate—
(a)the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;
(b)the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be.
By considering the above referred statutory provisions, we examined the contents of the present IB Petition and perused the documents annexed therewith. It is found that the amount of loan advanced to the corporate debtor company falls within the category of financial debts. Further the corporate debtor has committed default, which meets the requirement of Section 3(1) and (12) of the Code to initiate the CIRP in respect of the Corporate Debtor company. The relevant provisions of Section 3(11) and 3(12) of the I& B Code speaks as under;
3(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;
3(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be.
Further the petitioner in the present application has proposed name of Mr.Kashyap Shah, at A-1, Sejal Park, Opp. Nathiba Nagar No.2, Harni Road, Vadodara-390 022, E-mail; [email protected], Registration No.IBBI/IPA-002/IP-N00367/2017-18/11035. The Petitioner has annexed a Written Communication (Annexure-G) received from the proposed Interim Resolution Professional by giving consent to act as IRP in case he is appointed. Further declaring that there is no disciplinary proceeding pending against him. He also furnished his IB Registration number as mentioned above and the requisite information in the prescribed Format, which satisfies the requirement of Section 7 (3) (b) of the I & B Code.
As the default of debts is established for a sum of Rs.8,00,000/- + simple interest @9% per annum (as on 01.04.2018), the petition is found complete in terms of the provisions of the I & B Code.
In the present matter, the corporate debtor has already admitted its debt liabilities to the extent of Rs.8.00 lakh (Rupees Eight lakhs only) pursuant to a loan agreement dated 01.09.2017 and, thus, expressed its inability to discharge such debt liability due to loss suffered in the business and bad market conditions. Hence, in order to ascertain the current financial position of the corporate debtor Company restricted its loan liability only towards present Petitioner but in respect of the other creditors also, this Court felt appropriate to call for certain information/clarification vide its order dated 07.06.2019 from the corporate debtor to furnish details of its other unsecured creditors with amount outstanding in addition to the current debts due to the present financial creditor.
In response to the above stated direction for providing requisite information, the Respondent counsel submitted a list of secured and unsecured creditors of the Corporate Debtor Company and further explained that there is no specific bank loan outstanding against the company. Hence, there is no financial creditor except to the present petitioner in the category of the secured creditors. Therefore, the corporate debtor was advised to supply such information by way of a supplementary affidavit. In compliance thereof, the corporate debtor, through its director Mr.Bhadreshbhai Lakhani has filed a supplementary affidavit dated 20.06.2019 filed on 25.06.2019 and provided requisite list. Thereafter, the learned counsel appearing for the respondent further submitted on the date of hearing i.e. on 25.06.2019, that requisite information and clarification as sought for from the corporate debtor has now been provided through an affidavit and available in record, hence, this Adjudicating Authority may proceed to hear and dispose of the case on its merits. We perused the supplementary affidavit and list of the creditors/unsecured loans, as per such list, there is outstanding debts towards unsecured loan of Rs.18,40,57,750.00. However, there is nil amount towards unsecured loan. Such list is duly authenticated and signed by its Director. Hence, it can be taken into record and acted upon for its consideration. In view of the above, we perused the court proceedings dated 25.06.2019 and noticed that some typographical error occurred, which is rectified suitably.
We examined the merits of the present IB Petition in the light of the decision of the Hon'ble Supreme Court in the matter of M/s. Innoventive Industries Ltd. vs. ICICI Bank & Anr. [Civil Appeal Nos.8337-8338 of 2017] wherein Their Lordship has pleased to prescribe the criteria and minimum requirement for initiation of CIRP, if such conditions are satisfied, the Adjudicating Authority is expected to admit such petition.
For the sake of convenience, the relevant extract of the Judgment is reproduced hereinbelow;
*27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5 (21) means a claim in respect of provision of goods or services.
28.When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor – it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. 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. Under subsection (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be".
By following the above stated judicial precedents and having heard the oral submission of learned counsel for both parties, i.e., Mr. Akshat Khare, Advocate, for the Financial Creditor and Mr. Karan Sanghani, Advocate for the Corporate Debtor, we find that the present IB Petition is complete as filed in conformity of the prescribed procedure under the I&B Code, hence, it deserves for admission.
Therefore, the present company petition is hereby admitted under Section 7 of the I & B Code, with certain consequential order/directions stated as under;
This Adjudicating Authority hereby appoints Shri Kashyap Shah, as "Interim Insolvency Resolution Professional" having address at A-1, Sejal Park, Opp. Nathiba Nagar No.2, Harni Road, Vadodara-390 002, E-mail: [email protected] and having Registration No.IBBI/IPA-002/IP-N00367/2017-18/11035 under Section 13 (1) (c) of the Code.
That the order of Moratorium under Section 14 of the Code shall have effect from 12.07.2019 till the completion of Corporate Insolvency Resolution Process or until this Bench approves the Resolution Plan under Sub-section (1) of Section 31 or passes an order for Liquidation of Corporate Debtor under Section 33 as, the case may be.
That the Bench hereby prohibits the institution of suits or continuation of pending suit 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 SARFAESI 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.
That the supply of essential goods or services to corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the Moratorium period. The Corporate Debtor to provide effective assistance to the IRP as and when he takes charge of the Corporate Debtor.
That the provisions of Section 14 sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
The IRP so appointed shall make public announcement of Corporate Insolvency Resolution Process be made immediately as specified under Section 13 of the Code and by calling for submissions of claim under Section 15 of the Code.
The Interim Resolution Professional shall perform all his functions strictly which are contemplated, inter alia, by Sections 17,18,20, 21 of the Code. It is further made clear that all the personnel connected with Corporate Debtor, its promoter or any other person associated with Management of the Corporate Debtor are under legal obligation under Section 19 of the Code extend every assistance and co-operation to the Interim Resolution Professional. Where any personnel of the corporate debtor, its promoter or any other person required to assist or co-operate with IRP, does not assist or co-operate, IRP would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order.
The IRP shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor company' and manage the operations of the Corporate Debtor company as a going concern as a part of its obligation imposed by Section 20 of I & B Code, 2016.
The Financial Creditor is directed to communicate a copy of this order to the Interim Resolution Professional, the Respondent Corporate Debtor and the Registrar of Companies, Gujarat.
The Registry is directed to communicate a copy of this order to the Applicant-Financial Creditor, Respondent-Corporate Debtor, Interim Resolution Professional and to the concerned Registrar of Companies, after completion of necessary formalities.
The Corporate Insolvency Resolution Process is commenced from the date of this order.