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Judgment
ORDER
Per:- Justice P.N. Deshmukh, Member Judicial
This is a Company Petition filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) seeking to initiate Corporate Insolvency Resolution Process (“CIRP”) against Aaishni Pharmaceuticals Pvt. Ltd., ("the Corporate Debtor") alleging default in payment of a Financial Debt.
The Respondent Company is incorporated on 17.01.2014 under the Companies Act, 1956. The Nominal Share Capital of the Respondent/Corporate Debtor Company is Rs. 10,00,000/-.
The present petition is filed before this Adjudicating Authority on the ground that the Corporate Debtor failed to make payment of outstanding financial Debt of Rs. 6,86,67,000/- (Rupees Six Crores Eighty-Six Lakhs Sixty-Seven Thousand Only) being the Principal amount and Interest Rs. 1,93,50,000/- (One Crore Ninety-Three Lakhs Fifty Thousand Only aggregating to Rs. 8,80,17,000/- (Rupees Eight Crores Eighty Lakhs Seventeen Thousand Only) as on 28.02.2018. The date of Non-Performing Asset was on 30.06.2016.
The Applicant herein is an assignee of New India Co-operative Bank Limited under the Assignment Agreement dated 31,.03.2018. the Petition reveals that New India Co-operative Bank, had sanctioned a Term Loan and Cash Credit facility for Rs. Seven Crores to the Corporate Debtor with rate of interest on Cash Credit facility 13.75% p.a. and on term loan 14% p.a. The Applicant has enclosed the following documents to show the existence of Debt :-
a. Copy of Sanction Letter dated 14.10.2014 issued by New India Cooperative Bank Limited.
b. Copy of Memorandum of Sanction dated 02.09.2014 issued by new India Co-operative Bank Ltd.
c. Copy of Demand Promissory Note dated 04.02.2015 for Rs. 5,50,00,000.
d. Copy of Registered Mortgage Deed dated 26.03.2015 executed by Mr. Nanubhai N. Desai in favour of New India Co-operative Bank Ltd.
As the Corporate Debtor failed to serve the interest, New India Co-operative Bank Limited initiated Arbitration proceedings wherein the Arbitrator has passed a Consent Award dated 12.08.2016 in Arbitration Application No. 483 of 2016 for a sum of Rs. 8,00,44,953 payable with interest @ of 14 p.a. and penal interest @ 2% p.a. without compounding from the date of award i.e. 12.08.2016 till the date of realisation.
The Applicant also on 29.06.2018 sent Demand Notice calling upon the Corporate Debtor to clear the outstanding amount in default with New India Co-operative Bank.
The Corporate Debtor filed its reply dated 07.05.2019 contending that the Corporate Debtor had failed to disclose the execution proceedings filed by the New India Co-operative Bank Limited in District and Sessions Court, Valsad bearing No. 60/2017 wherein the said bank sought attachment on the properties of the Corporate Debtor. Further, it is submitted that the said Bank initiated execution proceedings in the Hon’ble High Court of Judicature, Bombay in Execution Application No. COMEX-13/2017 for attachment and sale of property belonging to the Corporate Debtor situated at Mumbai. The Corporate Debtor contends that the non-disclosure of execution proceedings is an abuse of process of Tribunal and misuse of provisions of Code. The Corporate Debtor further submits that the Petitioner cannot avail two remedies simultaneously based on one cause of action and hence the present proceedings is not maintainable and is liable to be dismissed.
FINDINGS
We have heard the submissions of the Counsel appearing for the Financial Creditor and Counsel appearing for the Corporate Debtor.
It is seen from the records available that an Arbitral award was passed on 12.08.2016 whereby the Corporate Debtor had agreed and confirmed that on the date of execution the Corporate Debtor will be liable to pay Rs. 8,00,44,953 along with 14% and penal interest @ 2%. Hence the Corporate Debtor has itself failed to repay the amount even till date as against the date of 30.11.2016 as contemplated in the Consent Arbitration Award. The Applicant are well within the limitation period and there exist a clear debt and default on the part of the Corporate Debtor.
Further, reliance is placed on Judgement passed by National Company Law Appellate Tribunal in Nanubhai Nicchabhai Desai V/s Omkar Assets Reconstruction Pvt. Ltd wherein it was held that –
“Reference to Clause – 11 of the Award, it is submitted that in case of default of payment, the Respondent can sell the property of the “Corporate Debtor”, therefore, instead of filing application u/s 7 of the Insolvency & Bankruptcy Code (I&B) code, 2016 it was open to the Respondent to sell the property and to recover the amount.
However, such submission cannot be accepted as admittedly, the “Corporate Debtor” committed default on 30.11.2016 in not making payment to the extent of Rs. 17,81,54,000/- including interest as per amount. For the said reason, we are not inclined to interfere in the impugned order. In absence of any merit, the appeal is dismissed. No cost.”
Further, the Corporate Debtor has submitted that the Financial Creditor has the remedy to realize the property and recover the debt. The sale of the mortgaged properties is itself the consequence of default on the part of the Corporate Debtor.
Hence, it is seen from the records available that the Financial Creditor has established that the various term loans/Credit facilities were duly disbursed to the Corporate Debtor by New India Co-operative Bank and the said debt was assigned to the Applicant herein vide Deed of Assignment. There is no payment of Debt on the part of the Corporate Debtor also after the Consent term and Arbitral Award dated 12.08.2016. Hence, owing to the inability of the Corporate Debtor to pay its dues, this is a fit case to be admitted u/s 7 of the I&B Code.
Further, it is worth to reproduce sub-Section of (5) of S. 7 of the Code as follows:
(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.
Hence, accordingly We, have perused this Petition/Application filed under Section 7 of the Code r.w. Rule 4 of the Rules and come to conclusion that, pursuant to S. 7 (7) (5) (a) of the Code this Application is complete under sub-section (2) of S. 7 of the Code.
Considering the above facts, we come to conclusion that the nature of Debt is a “Financial Debt” as defined under section 5 (8) of the Code. It has also been established that there is a “Default” as defined under section 3 (12) of the Code on the part of the Debtor. The two essential qualifications, i.e. existence of ‘debt’ and ‘default’, for admission of a petition under section 7 of the I&B Code, have been met in this case.
As a consequence, keeping the afore said facts in mind, it is found that the Petitioner has not received the outstanding Debt from the Respondent and that the formalities as prescribed under the Code have been completed by the Petitioner, we are of the conscientious view that this Petition deserves ‘Admission’.
For the foregoing reasons, the above Company Petition is liable to be admitted, and accordingly the same is admitted by passing the following:
ORDER
a. The above Company Petition No. (IB) -4059 (MB)/2018 is hereby admitted and initiation of Corporate Insolvency Resolution Process (CIRP) is ordered against Aaishni Pharmaceuticals Pvt. Ltd.
b. This Bench hereby appoints Mr. Vinod Kumar Ambavat, Registration No: IBBI/IPA-001/IP-P00420/2017-18/10743 as the Interim Resolution Professional having address at 40,9/15 Morarji Velji Bldg, 1st Floor, Dr. M.B. Velkar Street, Kalbadevi Road, Mumbai – 400002, Maharashtra, to carry out the functions as mentioned under the Insolvency & Bankruptcy Code, 2016.
c. The Financial Creditor shall deposit an amount of Rs. 3 Lakhs towards the initial CIRP cost by way of a Demand Draft drawn in favour of the Interim Resolution Professional appointed herein, immediately upon communication of this Order.
d. That this Bench hereby prohibits 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 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.
e. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.
f. That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
g. That the order of moratorium shall have effect from the date of pronouncement of this order till the completion of the 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.
h. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code.
During the CIRP period, the management of the Corporate Debtor will vest in the IRP/RP. The suspended directors and employees of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP/RP.
j. Registry shall send a copy of this order to the concerned Registrar of Companies for updating the Master Data of the Corporate Debtor.
Accordingly, this Petition is admitted.
The Registry is hereby directed to communicate this order to both the parties and to IRP immediately.