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Judgment
[Per: Mr. Prasanta Kumar Mohanty, Member (T)]
The Petitioners, Mr. Pradyumankumar Dwarkadas Patel, Smt. Jyotsnaben Pradyumankumar Patel & Mr. Hardik Pradyumankumar Patel, claiming as 'Financial Creditors', filed this Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as a "Code"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP" in Short) against the Corporate Debtor Company namely, Polygold Pre-Cured Systems Limited, for the default committed by the Corporate Debtor Company in making repayment of the unsecured loans availed from the Financial Creditors i.e. Applicant no.1 to 3. The Applicant no.1 to 3 (FCs), are individuals residing at 31, Vishwaketu Flats Part - 1, Near Premchand Nagar, Vastrapur, Ahmedabad. The application has been filed by the duly authorised representative of the Financial Creditors, Shri HardikPradyumankumar Patel.
The Respondent Corporate Debtor Company, namely Polygold Pre-Cured Systems Limitedwas incorporated on 15.05.1998 with CIN: U25110GJ1998PTC034100.
The nominal share capital of the Respondent Corporate Debtor Company is Rs.2,00,00,000/- and the paid-up capital of the Respondent Corporate Debtor Company is Rs.1,54,49,400/-. The Registered Office of the Respondent Corporate Debtor Company is situated at:205, Adity, Near Urvasi Apartment, Navrangpura, Mithakhali Six Road, Ahmedabad – 380006, Gujarat
It is gathered from the records that the Applicant no.1, 2 & 3 joined the Respondent company as Directors on 01.07.2002, 01.11.2000 & 10.04.2014 respectively and due to personal reasons resigned from the Board of Directors on 14.04.2017 by tendering resignation.
The Applicants state and submit that for the growth and development of the Respondent Corporate Debtor Company and against the consideration for the time value of money, the remuneration entitled to each Director was not drawn and credited to respective Directors as Unsecured Loan towards the Respondent Corporate Debtor Company and Directors could withdraw the amount as and when there was any need. The Applicants state that in 2017, the entire amount towards remuneration came to be converted into Unsecured Loans and the Respondent Corporate Debtor Company assured interest at the rate of 10% per annum and the same is evident by way of evidences i.e.
The debt has been reflected in the Balance Sheets for the Financial Years 2017-18, 2016-17, 2015-16, 2014-15, 2013-14 and all previous Balance Sheets of the Respondent Corporate Debtor Company as UNSECURED LOANS.
TDS Certificates (Income Tax 26AS) in the name of applicants wherein the Respondent Corporate Debtor Company has made payment of interest at the aforesaid rate towards Unsecured Loans for the period from 01.04.2016 to 31.03.2017, attached at Pg. No. 31 to 33A of the Application.
During the course of the arguments on 30.08.2019, the Ld. Counsel for the Respondent Corporate Debtor Company conceded that the books of account clearly depict the debt as Unsecured Loan and that the Respondent Corporate Debtor Company has also paid interest at the rate of 10% as assured on the said Unsecured Loan. For period when the Applicants were directors of the Respondent Corporate Debtor Company and the period after Applicants' resignation as directors, the TDS certificates, the demand notice dated 07.02.2019 issued by the Applicants recording the entire transaction and the balance sheet has not been controverted or denied by the Respondent Corporate Debtor Company.
It is further stated by the Applicants that in addition to their remuneration as Directors being invested as Unsecured Loan advanced to the Respondent Corporate Debtor Company, the Applicants made additional payment of (Pradyumankumar D Patel INR 16,74,000/-, Jyotsnaben P Patel INR 17,37,000/-, Hardik P Patel INR 16,18,644/-during the period FY 14-15, FY 15-16 and FY 17-17) towards Unsecured Loan.
It is submitted that after resignation, the Applicants being erstwhile Directors of the Respondent Corporate Debtor Company, had been asking payments for the Unsecured Loans, however, the Respondent Corporate Debtor Company failed to make any payment towards principal and interest since August' 2017 and also failed to provide the details of the interest credited to their accounts and TDS deducted on the same. It is also submitted that the Respondent Corporate Debtor Company started making payments to current Directors on the Board of the Respondent Corporate Debtor Company, but not clearing the dues of the Applicants.
The details of the unsecured loans given by the Applicants are as shown in tabular form annexed at Annexure C at page no.22 of the Application. Respondent Corporate Debtor Company admitted the debt and deducted 'TDS' on the interest payable on the debt. Applicant filed copy of Form No. 26AS showing the interest amount and TDS amount as annexed as Annexure E at page no.31 to 33 A of the Application and also filed copy of Computation of the amount of interest due and particulars of the principal amount due as on 31.10.2019 at page no. 22 of the Application.
Inspite of repeated reminders, Respondent Company failed to pay an amount of Rs. 2,83,12,283.50/- from the date of default i.e. August, 2017. Respondent Corporate Debtor Company never disputed the outstanding amount due and payable to the Applicants. The details of the outstanding amount as on 31.01.2019 are shown at 'Annexure C' annexed with the application.
Thereafter, the Applicants issued a legal notice dated: 07.02.2019 recalling the entire outstanding dues as on 31.01.2019. Respondent Corporate Debtor Company having received the said notice did not choose to give reply. The copy of the said notice and postal proof are marked as 'Annexure F' at page no.34 to 38 of the Application. According to the Applicants as on 31.01.2019 the total outstanding amount was Rs.2,83,12,283.50 as shown in Annexure C.
Further, according to the Applicants, Respondent Corporate Debtor Company is unable to pay the outstanding financial debt and therefore, the Applicants have chosen to initiate the Corporate Insolvency Resolution Process against the Respondent Corporate Debtor Company. To substantiate its claims, the Applicants have attached the documents being Form 26AS Annual Tax Statement of the Applicants and copy of the transaction details in Pass Book of the Applicants by BOI for the period from 14.04.2017 till date. The Registered Office of the Respondent Corporate Debtor Company is in Ahmedabad. It is stated that the Application is within time. Applicant proposed the name of Shri Parag Sheth, as 'Interim Resolution Professional'.
Applicant despatched the copy of the Application to the Respondent Corporate Debtor Company on 20.02.2019. This Application has been filed on 19.02.2019 and the same was listed before this Adjudicating Authority for the first time on 04.03.2019. This Adjudicating Authority directed the Applicants to serve notice of date of hearing upon the Respondent Corporate Debtor Company and file proof of service. Applicants filed proof of service of notice of the date of hearing upon the Respondent Corporate Debtor Company. Respondent Corporate Debtor Company appeared through a Counsel and filed Objections on 08.07.2019, which were accepted with a cost of Rs.5,000/-, since beyond stipulated time.
The following are the Objections filed by Shri Bhupendrabhai Patel, Director of the Respondent Corporate Debtor Company.
It is submitted that the petition is filed on behalf of three persons and signed by only one person. Hence, the petition is not maintainable.
It is submitted that the petitioners have suppressed the factum of execution of settlement deed dated 20.06.2018 between the petitioners and the directors of the Corporate Debtor and the Petitioners have received their share as per the settlement deed. It is submitted that as per clause 5 of the settlement deed, the Petitioners are not entitled to raise any claim from the Corporate Debtor much less the claim of so-called unsecured loan and also bound to withdraw any pending legal proceedings/restrain from initiating any fresh proceedings against the Corporate Debtor.
It is also submitted that the present dispute also forms part of subject matter of CP No.56 of 2018 pending before this Adjudicating Authority by the same Petitioners against the Corporate Debtor and Directors of Corporate Debtor i.e. Bhupendrabhai D.Patel and Kirtibhai D. Patel, brothers of Applicant no.1 and their family members alleging acts of oppression and mismanagement. Further, during the pendency of CP No.56 of 2018, the Petitioners and the Directors of the Corporate Debtor arrived at settlement by virtue of a Deed of Settlement amongst the brothers with consensus dated 20.06.2018. It is submitted that the said Settlement Deed has been signed by all the three brothers including their respective family members.
It is submitted that in pursuance to the execution of settlement deed, the Corporate Debtor Company including the factory, land, building, machinery, raw materials, finished stock, receivables, payments, cash, bank balance, FP mutual fund and entire properties in the name of the company along with liabilities except the payment of MSRTC, has come to the share of Bhupendrabhai D. Patel and Kirtibhai D. Patel, brothers of Applicant no.1 and their family members and Petitioners have also received various assets and properties and also control of one Run Well Private Ltd.
The Applicants/Financial Creditors also filed their written submissions and reiterated the contents made in the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016. It is submitted that reported MOU dated 20.06.2018 has no bearing on admission of present application and this Adjudicating Authority has jurisdiction to entertain and admit the application, if amount of admitted financial debt is above Rs.1.0 Lakh. The Applicants have cited various judgements passed by the Apex Court to substantiate their claim.
Respondent Corporate Debtor Company in its written submissions pleaded that the Petitioners are not financial creditors within the meaning of Section 5(7) of the IBC, 2016, as no financial debts in terms of Section 5(8) of the IBC, 2016 is owed by the Corporate Debtor in favour of the Petitioners and the Petitioners have also not shown any agreement or document showing consideration for the time value of money.
Heard the learned counsel for the Applicant and the learned counsel for the Respondent Corporate Debtor Company. In view of the objections raised by the Respondent Corporate Debtor Company, this Adjudicating Authority has to first decide whether the amount claimed from the Respondent Corporate Debtor Company by the Applicants is a financial debt or not. "Financial Debt", to the extent relevant for the purpose of this case, is defined in Clause (a) of sub-section (8) of Section 5 of the Code. It says, "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes money borrowed against the payment of interest.
17.Observations:
This Adjudicating Authority is not going to look into any settlement agreement entered into between the parties while disposing of the present petition filed under section 7 of the Code. 17.2 Respondent Corporate Debtor Company admitted the debt and deducted TDS on the interest payable on the Debt advanced to the Respondent Corporate Debtor Company by the Applicants. 17.3 The Respondent Corporate Debtor Company has been continuously maintaining in their Balance Sheets right from the F.Y. 2013-14 to 2016-17 Unsecured Loans from Directors and their relatives under the head "Long Term Borrowings". The Balance Sheet for the Respondent Corporate Debtor Company for the F.Y 2016-17 Note No. 4 under the head “Long Term Borrowings”, the amount received as Unsecured Loan from the Directors and their relatives at Rs. 5,62,84,700.00 which stood at Rs. 3,94,88,174.00 as on 31.03.2016.
ORDER
Considering the material, papers filed by the Petitioner on record and the facts mentioned hereinabove along with the Points 17.1, 17.2 and 17.3, this Adjudicating Authority is satisfied that,
Existence of debt is above Rs. One Lac;
Debt is due and defaulted;
Default has occurred on 31st August, 2017;
Petition has been filed within the limitation period as the date of default is 31st August, 2017 and the petition has been filed on 09.09.2019 i.e. within three years of the default.
Copy of the Application filed before this Tribunal has been sent to the Corporate Debtor. The application filed by the Petitioner under Section 7 of Code is found to be complete for the purpose of initiation of Corporate Insolvency Resolution Process against the Respondent Corporate Debtor Company.
Therefore, the present IB petition is admitted on 16.03.2020 with the following Directions:
As per the provisions of Section 13 and 14 of the I.B. Code on the date of commencement of insolvency, this Adjudicating Authority declares moratorium for prohibiting all of the following, namely: -
I.(a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, 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 (54 of 2002);
(d)The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
II. The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during the moratorium period.
III. The provisions of sub-section (1) shall not apply to (a) such transactions as may be notified by the Central Government in consultation with any financial sector regulator.
IV. The order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process.
The Petitioner/Financial Creditor has suggested the name of Mr. Parag Sheth as the Resolution Professional in the present Petition. Mr. Parag Sheth, with Registration No. IBBI/IPA-002/IP-N00142/2017-18/10381 is having his office at 404, Sachet 2, Opp. GLS University, Maradia Plaza, C.G. Road, Ahmedabad - 380 006 with email id : pksheth@hotmail.com. Mr. Parag Sheth has submitted his written consent in Form 2.
Hence, this Adjudicating Authority hereby appoints Shri . Parag Sheth as the Resolution Professional in the present Petition. Mr. Parag Sheth, with Registration No. IBBI/IPA-002/IP-N00142/2017-18/10381 is having his office at 404, Sachet 2, Opp. GLS University, Maradia Plaza, C.G. Road, Ahmedabad - 380 006 with email id : pksheth@hotmail.com.
The Interim Resolution Professional is further directed to make public announcement of moratorium in respect of the Respondent Corporate Debtor Company soon after receipt of an authenticated copy of this order and to act further as per the order/direction issued by this Adjudicating Authority and to follow the provisions Section 13 and 14 and relevant provisions of the Insolvency and Bankruptcy Code. The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, in Sections 15, 17, 18, 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 persons 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, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. 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 function strictly in accordance with the provisions of the Code, Rules and Regulations.
An authentic copy of this order to be communicated by this Registry to the Operational Creditor, Corporate Debtor, as well as to the Interim Resolution Professional and the Registrar of Companies by Speed Post/Registered Post at the earliest.
Hence, this CP(IB) No. 161/7/NCLT/AHM/2019 is admitted on 16.03.2020 with the above Observations and Directions.