Punjab National Bank vs Damara Gold Private Limited

PER: BENCH

This is an Application filed by the M/s. Punjab National Bank (hereinafter referred to as (“Financial Creditor”) against Damara Gold Private Limited. (hereinafter referred to as (“Corporate Debtor”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking to initiate the Corporate Insolvency Resolution Process (‘CIRP’) against the Corporate Debtor, to appoint IRP and to initiate moratorium.

From Part I of the Form No. 1 of the Application it is seen that the Applicant was incorporated on 23.08.1973 and is having PAN No. AAACP0165G. The registered office of the Applicant is situated at Plot No. 4, Sector-10, Dwarka, New Delhi- 1100757 Branch office: Jay Apartments, Linking Road, Santacruz (West), Mumbai-400 054.

The Application is affirmed by one Mr. Swapnil Shashikant Kekare, acting as a Manager, who is Authorized officer of the Financial Creditor.

Perusal of Form 1 Part II of the Application reveals that the Corporate Debtor is one M/s. Damara Gold Private Limited having CIN No. U74990MH2009PTC193131. The Corporate Debtor was incorporated on 09.06.2009 and its Registered office address is 12, Ellora Co-operative Housing Society, 4th Road, Khar (West), Mumbai, Maharashtra, India, 400052. The Applicant has attached the MCA Master data of the Corporate Debtor at page Nos. 73 and 74.

A perusal of Part III of the Application reveals that the Applicant has named Mr. Sumit Shukla, as IRP. The IRP’s Registration number is IBBI/IPA-003/IP-N00064/2017-18/10550, who has issued Form-2 which is dated 29.11.2024 (Page No. 69) and his AFA is valid till 31.12.2025 (Page No. 72).

Perusal of the Part IV of the Application reveals that on being approached by the Corporate Debtor, the Financial Creditor sanctioned the Term Loan of Rs. 5,70,00,000/-, Fund Based Working Capital is not sanctioned and Bank Guarantees (Non-Fund Based) amounting to Rs. 21,50,00,000/- through its sanction letter dated 17.03.2011.

For availing the facilities, the Corporate Debtor executed the following documents:

It is stated that the Directors of the Corporate Debtor executed the Agreement of Guarantee dated 13.06.2011.

It is stated that the Financial Creditor obtained the mortgaged of the following properties as security by deposit of title deeds vide letter dated 13.06.2011.

The Said facilities were disbursed to the Corporate Debtor on various dates and were also renewed from time to time. The last such renewal was conveyed to the Corporate Debtor through the sanction letter of the Financial Creditor dated 17.03.2022. The said letter reveals that following are the credit facilities:

Sometimes in 2023, the Bank Guarantees issued by the Applicant were invoked by the beneficiaries thereunder for a total amount of Rs. 54,34,00,000/- and the Financial Creditor has duly charged the amount invoked under the said Guarantees to the Cash Credit Account of the Corporate Debtor.

The Corporate Debtor became irregular in making payments in respect to the cash credit Account and the Financial Creditor on multiple occasions, called the Corporate Debtor to regularize the Cash Credit Account. However, despite the attempts of the Financial Creditor, the Corporate Debtor failed to regularize its account and eventually on 30.06.2023 the account of the Corporate Debtor was classified as an NPA in terms of the extant RBI guidelines.

The Financial Creditor is claiming the following amounts in the Cash Credit Facility:

The Financial Creditor is claiming the following amounts in the Term Loan Agreement:

The total amount claimed in the Application is Rs. 39,19,52,518.04/-. The date of default is mentioned as 30.06.2023.

It is stated that notice under Section 13(2) OF SARFAESI Act was issued by the Financial Creditor on 10.08.2023, however, the Corporate Debtor has failed and neglected to pay the dues.

It is stated that the Corporate Debtor has executed the balance and security confirmation letter, which is dated 27.05.2022, acknowledging its dues. The Applicant has attached/relied upon the following documents:

xxviii. Copy of the Sanction Letter dated 17.03.2022 at Page No. 454 of the Application.

xxxiii. Copy of the possession Notice dated 04.11.2023 at Page No. 526 of the Application.

xxxvii. Certificates as per Section 2-A of the Bankers’ Books Evidence Act, 1891 at Page No. 496 of the Application.

xxxviii. Copy of letter of the Corporate Debtor dated 02.09.2024 (in rejoinder)

xl. Copy of notice of the EOW dated 13.08.2024 (Marathi Original and English translation) (in rejoinder)

xli. Notice dated 15.11.2024 (in rejoinder)

xlii. Copy of relevant extract of the audit report along with the copy of the Circular of the Reserve Bank of India dated 01.07.2013 (in rejoinder)

xliii. Copy of trail of emails between the Financial Creditor and the Corporate Debtor. (in rejoinder)

xliv. Financial results for the quarter ended 30.06.2023 (in additional rejoinder)

Notice was issued by this tribunal on 11.03.2025, pursuant to which the Corporate Debtor/Respondent has filed a reply through an affidavit dated 14.04.2025, which is affirmed by one Mr. Jagdish Pahuja, being authorized representative of the Corporate Debtor/Respondent.

The summary of the various objections raised in reply are as under:

a. Which specific bank(s) invoked the said guarantees;

b. The underlying transaction or purpose for which each guarantee was invoked; and

c. The Contractual obligation of the Applicant to honor such invocations.

The only documents placed on record in support of this claim appear at Annexure 38 to the Application, which consist of certain invocation letters allegedly issued by the respective beneficiary banks.

It is stated that these invocation letters have been issued by multiple banks, ostensibly in connection with loan facilities granted by them directly to the Corporate Debtor. However, the Applicant has not produced any tripartite agreement or inter-creditor arrangement executed between:

a. The said lending banks (beneficiaries of the guarantees),

b. The Applicant (as the issuing bank), and

c. The Corporate Debtor (as the principal obligor), to establish that the Applicant was legally bound to honor these guarantees. It is stated that without prejudice to the forgoing, the total amount of such invoked guarantees is not exceeding Rs. 41,65,00,000/-

The Applicant has since liquidated Fixed Deposit of the Corporate Debtor, amounting to Rs. 19,24,75,137/- towards the obligation of the Corporate Debtor. It is stated that the Key Managerial Personnel (KMPs), independently deposited a sum of Rs. 2,47,47,085.9/- from his/her own resources towards such obligation.

It is stated that the Applicant is claiming a sum of Rs. 87,43,192.86/-under the Term Loan facilities, which is below threshold limit prescribed under Section 4 of the IBC and, the Corporate Debtor thereafter has pleaded non-disbursement of the various Term Loans, higher EMI and interest amounts regarding the Terms.

The Corporate Debtor is disputing the levying of various charges, processing fee and commissions and it is stated that the same are in excess of the prescribed charges by Reserve Bank of India through its circular dated 01.07.2014. It is stated that the Applicant has unauthorizedly frozen the current account of the Corporate Debtor, which has resulted into severe hardship to the Corporate Debtor.

The Applicant disputes the NeSL record of default by stating that one of the guarantors stated therein i.e. Ms. Tejashri Rajil Pahuja is a minor and incompetent to contract.

The Corporate Debtor is disputing the date of default and states that the Applicant cannot rely on the date of default as mention in the Form-D issued by NeSL.

The Corporate Debtor has challenged the NPA classification and states that such classification was not correct and that no restructuring under the COVID-19 package or otherwise was extended to the Corporate Debtor.

It is further stated that this is in violation to the RBI circular dated 06.08.2020. It is further stated that coercive measures were used with respect to the various mortgaged properties by the Bank officials, which resulted into additional infusion of Rs. 7,50,00,000/- by promoters of the Corporate Debtor.

It is stated that the Corporate Debtor herein is an MSME, and the Applicant has not given the COVID-19 package relief to the Respondent.

The Applicant is using the present forum for the purpose of recovery.

a. The Corporate Debtor has made repeated efforts to rectify discrepancies;

b. Pay dues under protest, communicate disputes and seek reconciliation;

c. Challenge the arbitrary charges and account freezes. The Communications, letters, and emails reflect a bonafide debtor, and not a willful defaulter

The Applicant may be relegated to file a civil suit instead of preferring the present Application. In light of the above, the Corporate Debtorsought dismissal of the present Application.

Rejoinder was filed by the Applicant through an affidavit dated 02.05.2025. The salient points in the rejoinder are as under:

a. The Letter by the Respondent, who by their own hand, have stated that the Financial Creditor had to freeze the account of the Corporate Debtor on account of a directive by the Inspector of Police, Economic Offences Wing (hereinafter referred to as “EOW”). They themselves have accepted this fact and are now appearing before this Hon’ble Tribunal creating this farce and false narrative that the Financial Creditor of its own volition froze the bank account of the Respondent, which could not be further from the truth and which fact the Corporate Debtor has very blatantly tried to hide so as to completely misguide this Hon’ble Tribunal.

b. The Notice of the EOW dated 13^th August 2024 (Marathi Original and English translation adduced as Annexure ‘C’), Notice dated 15^th November 2024 (Annexure ‘D’) to defreeze the bank account of the Corporate Debtor, which was frozen under the directions of the EOW, are attached with the Rejoinder. Thus, there has been no act by the Financial Creditor to freeze the account of the Corporate Debtor on its own volition and such an act, under the directions of the EOW, was not unauthorized, and thus, is not in violation of any guidelines or circulars issued by the Reserve Bank of India.

The Applicant has filed IA 3009 (MB) of 2025 seeking besides other prayers to place on record amended Form – 1. Vide order dated 13.08.2025 prayers in IA were allowed and amended Form-1 was taken on record and Corporate Debtor was to be served the amended Form-1.

The Applicant thereafter amended the Company Petition and opportunity was given to the Corporate Debtor to file his reply to amended petition vide order dated 12.09.2025.

Some inconsistencies in the date of default were pointed out by the Corporate Debtor during hearing on 18.09.2025 and at the request of the counsel for the applicant matter was relisted on 22.09.2025.

During the hearing held on 22.09.2025, Counsel for the Applicant again sought permission to amend Form-1. For the reasons recorded in the order dated 22.09.2025 this Bench permitted the Applicant to modify the Form-1 one last time subject to deposit of cost of Rs. 50,000/- in the Prime Minister National Relief Fund within a period of 7 days from the date of the order with further directions to serve the amended Form-1 on the Corporate Debtor giving liberty to the Corporate Debtor to file his say on the amended Form-1 within a period of 7 days from the date of receipt of the amended Form-1.

Order dated 13.10.2025 records the compliance regarding the cost and that additional affidavit in reply was filed by the respondent.

Written submissions have been filed by both the sides and the same have been considered by us.

We have since heard both the sides and have perused the documents as were placed before us.

Applicant has placed before us necessary documents to prove that on the request of the applicant they have sanctioned and disbursed various credit facilities.

Corporate Debtor has not denied obtaining the credit facilities from the Applicant.

Applicant has placed before us the various loan documents, security documents and account statements to prove the credit facilities, disbursements etc.

Applicant has also placed before us the record of default issued by NeSL which is under “authenticated” status.

A major chunk of the amount outstanding as per the applicant is consisting of the bank guarantee which were invoked and paid by the applicant. These bank guarantees according to the applicant were issued by them at the request of the Corporate Debtor with beneficiaries nominated by the respondent.

Upon invocation of the bank guarantees the applicant has debited the amounts paid to the cash credit account of the respondent.

Corporate Debtor has challenged such debit to cash credit account stating that the debits were not authorized by them and exceeds the limit of cash credit. It is the contention of the applicant that cash credit account was the operating account of the Corporate Debtor and as such applicant has debited the same to the operating account. We are of the view that objections in this regard as raised by the Corporate Debtor cannot be sustained. In view of the explanation given by the Applicant.

Another objection by the Corporate Debtor pertains to the charges and interest levied by the applicant. Applicant has relied on the judgment by Hon’ble NCLAT in Mrs. Madhubala (supra) wherein it was held that the Adjudicating Authority is required to see whether the debt and default are proved without adjudicating on whether the rate of interest was unreasonable or inflated. We agree with the contentions of the applicant.

The applicant in the rejoinder has placed the authority letter of the person who has affirmed the present petition and we are satisfied with the same that application was affirmed with proper authorization.

It is seen that the Corporate Debtor had approached the applicant with a letter dated 02.09.2024 (rejoinder annexure-A) for restructuring of working capital limit being the cash credit facility and convert the same to a working capital term loan. In the said letter Corporate Debtor has acknowledged the invocation of bank guarantees and non payment by the respondent.

The letter dated 02.09.2024 proves beyond doubt that their existed a debt which was in default and that the debt was for more than Rs. 1 Crores being the minimum threshold as prescribed under IBC, 2016.

In our view the other objections raised by the respondents are moon shine and the same cannot sustain considering the explanation offered by the Applicant it its rejoinder.

In view of the above discussions, we are of the view that: -

a. Applicant has proved that they have sanctioned and disbursed financial debit.

b. The debt is in default.

c. Amount of default exceeds Rs. 1 Crores

d. The application is within limitation.

e. The application is complete.

The Hon’ble Supreme Court in M/s. Innoventive Industries Ltd. v. ICICI Bank & Anr. (vide Judgment dated August 31, 2017 in Civil Appeal Nos. 8337-8338 of 2017) has inter-alia, held as follows:

In view of the foregoing findings, analysis and discussions, we conclude that the Corporate Debtor has committed a default in repaying the financial debt to the Financial Creditor for a sum well beyond Rupees One Crores. Thus, the present petition satisfies the minimum threshold of default of INR 1 crore prescribed u/s 4 of the Code for initiating the CIRP of the Corporate Debtor. It is trite to say that the Adjudicating Authority need not ascertain the exact amount of default committed by the Corporate Debtor for the purpose of admitting the application u/s 7 of the Code, as the same is the duty of the IRP/RP while verifying and collating the claim of the Applicant during the course of the CIRP of the Corporate Debtor. We are further satisfied that the application filed under Section 7 of the Code is complete in all respects and based on the undertaking of the IRP, we believe that there are no disciplinary proceedings pending against the proposed Interim Resolution Professional. Hence, in light of the law laid down by the Hon’ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank (supra), the present application is bound to be admitted under Section 7(5)(a) of the Code. Accordingly, we pass the following order:

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 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 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;

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

Accordingly, CP (IB)/294(MB)2025 stands admitted. A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.