Punjab National Bank vs M/s. Basukinath Food Processors Limited

Per: Harish Chander Suri, Member (Technical)

This petition (C. P) (IB) No. 1674/KB/2019 has been filed by Punjab National Bank, a Body Corporate, through Mr. Saroj Kumar Hembrom, its Senior Manager authorized vide authorization letter dated 9th August 2019 and General power of Attorney executed on 5th March 2002, seeking Corporate Insolvency Resolution process (CIRP) in respect of M/S. Basukinath Food Processors Limited, a corporate entity having its registered office at, 4. BBD Bag, Stephen House 5th floor room No. 87-A, Kolkata 700001. It is submitted in the petition that the corporate debtor is a public company registered under the Companies Act 1956, and is engaged in the business of agricultural trading and food processing. It is further submitted that on 30th November 2010, the corporate debtor requested the financial creditor for sanction of cash credit facilities to the tune of Rs. 10,00,00,000/- to meet its working capital requirements. The Financial Creditor sanctioned cash credit limit of Rs. 10,00,00,000/- to the corporate debtor subject to the terms and conditions of sanction letter dated 23rd December 2010 in accordance with the terms and conditions therein. A copy of the sanction letter dated 23rd December 2010 is annexed as annexure 1-A to the petition.

It is submitted that in consideration of sanction of cash credit limit of Rs. 10,00,00,000/-, the corporate debtor executed a number of documents in favour of the Financial Creditor which are enumerated as under:-

a. An agreement on hypothecation of goods and book debts to secure cash credit facility dated 24th December 2010.

b. Letter of consent clause dated 24th December 2010.

c. Supplementary agreements dated 24.12.2010 to the agreement on hypothecation of goods and book debts to secure cash credit facility dated 24.12.2010. The aforesaid documents are annexed to the petition as annexure 1-B, 1-C and 1-D.

It is further submitted in the petition that to secure the cash credit facility, the financial creditor, corporate debtor and West Bengal Industrial Development Corporation Limited executed a tripartite inter se agreement dated 25/01/2012, wherein mortgage and/or hypothecation of the loan and building and other fixed assets including the plant and machinery etc. Of the corporate debtor's business, both present and future, comprised in the West Bengal Industrial Development Corporation Limited's securities fully described in Schedule B in favour of the financial creditor by way of second charge has been created. A copy of the tripartite agreement dated 25/01/2012 is annexed as annexure 1-E, and as regards the security documents created by the corporate debtor for cash credit limit of Rs. 10,00,00,000/-, the charge has been modified accordingly with the Registrar of Companies. A copy of form No. 8 is annexed as annexure 1-F. Subsequently as per the request of the corporate debtor the said cash credit facility was enhanced to Rs. 15,00,00,000/- from the original facility of Rs. 10,00,00,000/- vide sanction letter dated 04/05/2013 (Annexure 1-G). In respect of the aforesaid enhanced cash credit facility, the corporate debtor executed various documents in favor of the financial creditor.

It is further submitted in the petition that the corporate debtor although enjoyed the entire loan limit of Rs. 15,00,00,000/- but failed to serve interest in the loan account as per the terms of the sanction. In spite of several reminders requesting the corporate debtor to regularize the said account but in spite of that, the corporate debtor has failed to adhere to the said reminders. Therefore, the said account was classified as a Non-Performing Asset (NAP) with effect from 02/04/2014 as per RBI guidelines. In view of the irregular condition of the loan account, the financial creditor issued the Demand Notice (Annexure 1-J) through its advocate on 31/12/2015 calling upon the corporate debtor to pay the financial creditor an aggregate sum of Rs. 13,80,80,843.33/- within 10 days from the date of notice failing which the financial creditor would be constrained to take legal action against the corporate debtor, but in spite of the notice even, the corporate debtor failed to liquidate the dues payable to the financial creditor. It is further submitted that the corporate debtor has filed the balance sheet before the Registrar of Companies wherein the corporate debtor has acknowledged that a sum of Rs. 32,43,10,832 is due and payable by the corporate debtor to the financial creditor on 31/03/2016. A copy of the balance sheet for the year 31/03/2017 is annexure 1-K to the petition. The financial creditor has further submitted that total outstanding as on 31/07/2019 is Rs. 31,72,88,544.47/-.

Which is inclusive of-CASH CREDIT ACCOUNT NO. 0350008700003509

The statement of Account containing details of computation of amount of default has been annexed as Annexure 1-L to the petition.

It is submitted that the said account has been classified as Non-Performing Asset as on 02/04/2014. It is further submitted that the Financial Creditor thereafter filed O.A. No. 180 of 2016 under section 19 of the Recovery of Debts due to Bank and Financial Institutions Act, 1993 on 29.02.2016, and the same is still pending before the DRT-II Kolkata. And the corporate debtor has filed a SARFAESI application against the SARFAESI account taken by the financial creditor. The financial creditor states that the pendency of the said applications are not a hindrance for admission of the present application.

The Financial Creditor has also proposed the name on Mr. Sanjay Kumar Agarwal, Address: "Draupadi Mansion"3rd Floor, 11, Braboure Road, Kolkata, Pin-700001, E-Mail address: [email protected] Registration No. IBBI/IPA-001/IP-P00062/2017-18/10140, to act as an Interim Resolution Professional a copy of the consent given by Sanjay Kumar Agarwal in form 2 and registration are also accentuated to the petition.

In reply to the petition, the corporate debtor filed an affidavit in reply sworn by Mr. Santosh Kumar Jha, duly authorized by the Corporate Debtor Basukinath Food Processors Limited, who submitted in the reply affidavit that each and every allegation made in this petition is denied and disputed and the said application is barred by the Laws of limitation.

It is submitted in the reply affidavit that the present proceedings initiated by the financial creditor under section 7 of the Code is not maintainable in law and on facts and should be dismissed. The Corporate Debtor in its affidavit has given various dates which need to be considered from point of view of limitation. it is further submitted that the winding up application against the Corporate Debtor has been admitted by the Hon'ble High Court at Kolkata in CP No. 564 of 2014 and the said order dated 13/01/2019 is annexed with the petition and marked as P-I. It is submitted that no application under section 7 of the Code is maintainable against the corporate debtor as on date. The Corporate Debtor has submitted that letter of authority does not authorise the officer of the Bank to file the present application and that the allegation made in part II, III and IV of the petition are denied. It is further submitted that the documents relied on by the financial creditor would clearly show that the claim of the bank is barred by the laws of limitation. It is submitted that the classification of the account as NPA is erroneous and the steps taken by the bank in classifying the account as NPA and filing of the instant suit is bad in law. It is submitted that the application should be dismissed in limine as it is not maintainable.

While dealing with the reply affidavit, the Financial Creditor in its rejoinder submitted that the Saroj Kumar Hembrom who is the Senior Manager of the Financial Creditor, was duly authorized and is competent to depose the present affidavit in reply on behalf of the petitioner. It is submitted that the Financial Creditor in its section 7 application has enclosed balance sheet for the year 2016-17 wherefrom it will be found that on running page 122 of the said section 7 application, the Corporate Debtor has admitted that the said corporate debtor is banking with two banks namely Axis Bank and Punjab National Bank. It is submitted that on page 123 of the said balance sheet, the Corporate Debtor admitted the long term and short term borrowing from the bank and the said loan account has turned NPA. On page 164, in the column of borrowings, the Corporate Debtor has stated in table of classification of borrowing that Rupee term loan from banks and working capital loans from bank, the Punjab National Bank therein which has given working capital in form of cash credit and the said corporate debtor has acknowledged the liability of Rs. 20,42,61,010/-. The financial creditor has in the case of Jignesh Shah and another versus Union of India and another, in paragraph No. 19 the Hon'ble Court stated as follows:-

Therefore, as per the observation of the Hon'ble Court, Section 18 of the Limitation Act shall apply to extend the limitation period in proceedings initiated under the IB Code 2016. It is stated that as per section 18 of the Limitation Act the period of limitation has been extended till 30/03/2020 and the present Section 7 application has been filed on 12/09/2019, that is well within the period of limitation and therefore Section 7 petition is very much maintainable in law.

While summing up his arguments, Ld. Senior Counsel appearing for the Financial Creditor submitted that from the table on page 3 of the affidavit in reply, the Corporate Debtor has clearly and categorically admitted the debt outstanding and due to the Financial Creditor. It is further submitted that the Corporate Debtor has acknowledged the debt even in the balance-sheet of 31^st march 2017 (Page 163 of the petition).

In this regard, the Ld. Counsel has relied on ASSET RECONSTRUCTION COMPANY (INDIA) Vs. BISHAL JAISWAL& ANR. 2021 SCC Online SC 321.

In para 14 of the Judgment, the Hon’ble Court, referred to Section 18 of the Limitation Act, dealing with the effect of acknowledgement in writing. Section 18(1) envisages that where, before the expiration of the prescribed period for a suit or application in respect of any property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his tile or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

The Hon’ble Court in Para 15 observed that in an illuminating discussion on the reach of Section 18 of the Limitation Act, including the reach of the Explanation to the said section, this Court in Khan Bahadur Shapoor Freedom Mazda v. Durga Prasad Chamaria referring to Section 19 of the Limitation Act, 1908, which corresponds Section 18 of the 1963 Act held as under:-

The Hon’ble Court observed in para 16 , which are as under:-

The Ld. Counsel has further argued that the Corporate Debtor has taken the objection with regard to the present petition affirming the petition and is authority to do so.

In the supplementary affidavit para 3 would meet the aforesaid objection of the Corporate Debtor, which are as under:-

As regards the 3^rd objection of the Corporate Debtor that a winding up petition ( CP 564/2014) is pending before the Hon’ble High Court of Calcutta, for winding up of the Corporate Debtor, the Ld. Counsel for the Financial Creditor submitted that the copy enclosed with the reply by the Corporate Debtor itself would show that CP No. 564/2014 has been permanently stayed by the Hon’ble High Court of Calcutta. The relevant portion of the said order is extracted hereinbelow:-

It is further submitted by the Ld. Counsel that the date of NPA is 2^nd April,2014 ( page 10 of the petition) and since the balancesheet dated 31^st March 2017 acknowledges the debt, the only ground earlier available to the Corporate Debtor has become unavailable, and a far cry for the Corporate Debtor.

The Ld. Counsel appearing for the Corporate Debtor has more or less conceded that there is no defence available at present to the Corporate Debtor because the only ground earlier available to the Corporate Debtor with regard to the limitation is not available due to the judgment passed by the Hon’ble Supreme Court of India in the matter of ASSET RECONSTRUCTION COMPANY (INDIA) Vs. BISHAL JAISWAL& ANR. 2021 SCC Online SC 321

Ld. Counsel for the Corporate Debtor submitted that since named IRP Mr. Sanjay Kumar Agarwal cannot be appointed in this matter because according to the Ld. Counsel, disciplinary proceedings are already pending against him and in view of the pre-requisite of the proceedings under section 7(3)(b) IBC, which are under:-

The name of the IRP shall be proposed by the Financial Creditor. Hence, the Financial Creditor has not proposed name of any Insolvency Resolution Professional. Therefore, as per the provisions of Section 16(3) (a) of the IBC, we appoint Mr.Rajesh Lihala , IRP having Reg. No. IBBI/IPA-001/IP-P00525/2017-18/10950, to act as Interim Resolution Professional (IRP). He shall file Form-2, and that no disciplinary proceedings are pending against him with the Board.

We have considered all the pleadings and documents placed on record by the parties, we are satisfied that this is a good case for admission of the petition because the Corporate Debtor has defaulted in payment of the outstanding amount of the Financial Creditors.

In view of the aforesaid facts, the case of the Financial Creditor seeking admission of the petition and for initiation of CIRP in respect of the Corporate Debtor is fully proved and after going through and considering all the record and pleadings, we admit the petition and pass the following orders:-

ii) We hereby declare a moratorium and public announcement in accordance with Sections 13 and 15 of the I & B Code, 2016.

iii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The I.R.P. shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15. The public announcement referred to in clause (b) of sub-section (1) of Section 15 of Insolvency & Bankruptcy Code, 2016 shall be made immediately.

iv) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following:

vi) 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 sector regulator.

vii) The order of moratorium shall have effect from the date of admission till the completion of the corporate insolvency resolution process.

viii) Provided that where at any time during the Corporate Insolvency Resolution Process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of the corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

ix) Mr.Rajesh Lihala , IRP registered with Insolvency and Bankruptcy Board of India, having Registration IBBI/IPA-001/IP-P00525/2017-18/10950, Email [email protected] is hereby appointed as Interim Resolution Professional for ascertaining the particulars of creditors and convening a Committee of Creditors for evolving a resolution plan subject to production of written consent within one week from the date of receipt of this order.

xi) The Financial Creditor/Applicant is directed to deposit Rs. 3,00,000/- (Rupees Three Lakhs. only ) with the IRP appointed hereinabove within three days from this order. IRP can claim the preliminary expenses and fees subject to the approval by the CoC and after constitution of CoC.

xii) Registry is hereby directed to communicate the order to the Financial Creditor, the Corporate Debtor, the I.R.P. and the jurisdictional Registrar of Companies by Speed Post as well as through email.

xiii) List the matter on 21/03/2022 for filing of the progress report.

xiv) Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.