Punjab National Bank vs Vindhya Cereals Private Limited

[Per: Mr. Prasanta Kumar Mohanty, Member (T)]

The present I.B. Petition is filed by the Financial Creditor Punjab National Bank 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, Vindhya Cereals Private Limited for the default committed by the Corporate Debtor in making repayment of the Term Loans and CC facility availed from the Bank. The Applicant (FC), Punjab National Bank is a Body Corporate constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 having registered office at 7, Bhikhaji Cama Place, Africa Avenue, New Delhi. The application has been filed by the duly authorised officer, Mrs. Anita Hatvalne, Chief Manager of Punjab National Bank, New Market Branch, Bhopal – 462 003 M.P.

The Respondent Corporate Debtor (CD) Company, namely Vindhya Cereals Private Limited was incorporated on 04/08/2009 with CIN: U01403MP2009PTC22226.

The nominal share capital of the Respondent (CD) Company is INR.5,50,00,000/- (Rupees Five Crores Fifty Lakhs Only) and the paid-up share capital of the company is INR.3,02,24,000/- (Rupees Three Crores Two Lakhs Twenty Four Thousand Only). The registered Office of the Corporate Debtor Company is situated at: E-5/68, Area Colony, Bhopal, M.P. - 462 016.

It is submitted that the Corporate Debtor applied for various Loan facilities including Term Loan-I of Rs.93,00,000.00, Term Loan-II of INR.4,07,00,000.00 and Cash Credit Account No.1276008700010323 for Cash Credit Limit of INR.32,00,000.00 and same were sanctioned on 30/03/2012, 30/07/2012, 07/03/2013 & 19/06/2014 by the Petitioner Bank with certain terms and conditions including Hypothecation of goods, Book Debts, other movable assets and collateral securities of properties. The Corporate Debtor availed the Loans executing various documents and some documents with mortgagors/guarantors binding themselves as liable to repay the loan facilities availed by them.

It is submitted that the present Application is filed under Section 7 of the Code, for the purpose of initiating Corporate Insolvency Resolution Process against Vindhya Cereals Private Limited since it has lost its substratum and is unable to repay outstanding amount of INR.45,55,47,326.00 including interest till 30/11/2017 plus further interest till date of repayment which is admittedly owed to Punjab National Bank.

It is submitted that the Respondent Company i.e. Borrower and other Guarantors have failed to honour the terms and conditions of the credit facilities granted by the Bank and hence, the Petitioner Bank classified the account of the Respondent Company as "Non Performing Account" (NPA) on 31/12/2016.

It is submitted that the Petitioner Bank issued a Notice under Section 13(2) of the SARFAESI Act on 03/01/2017 demanding the amount outstanding with interest against the Principal Borrower.

It is submitted that the Petitioner Bank filed O.A. No. 502 of 2017 on 05/06/2017 for claim of INR.42,13,70,632.00 with further interest before the Hon'ble Debts Recovery Tribunal-I at Jabalpur.

The Corporate Debtor defaulted in repayment of the loan facilities and the date of default is 31/12/2016 as stated by the Petitioner Bank. CIBIL Report (page no.653 to 673 of the paper book) has been filed by the Petitioner Bank which confirms that the Account is in default.

The statement of accounts of the Corporate Debtor has been filed and the Petitioner Bank has submitted a Certificate to this effect under Banker's Books of Evidence Act, 1891 (Page no. 674 to 687 of paper book). The Petitioner Bank has claimed their dues of Rs.45,55,47,326.00 (Rupees Forty Five Crores Fifty Five Lakhs Forty Seven Thousand Three Hundred Twenty Six Only) as on 31.12.2016 as computed at page no. 5 of the paper book which is given below:

The Petitioner Bank in support of its contentions has annexed the details of Financial Debt, Records and evidence of default including copies of all the sanctions letters, the workings, showing the amount claimed to be in default and its calculation in tabular form as on 31/12/2016.

The present application has been filed by the Financial Creditor under Section 7 of the Code, read with Rule 4 of the Insolvency and Bankruptcy before this Adjudicating Authority to initiate the Corporate Insolvency Resolution Process against the Corporate Debtor.

The Petitioner Bank has submitted copies of the following documents in support of its claim:-

In addition to about the Petitioner Bank has submitted other documents in support of its claim.

In the present matter, this Tribunal, vide its order dated 15/01/2018 directed the Petitioner Bank to serve the notice of date of hearing to the Corporate Debtor and file the proof of service of notice before this Tribunal. Thereafter, the Corporate Debtor appeared before this Tribunal on 05/02/2018 and sought time to file objections within two weeks.

In response to the present I.B. Petition filed by the Petitioner Bank, the Respondent filed Reply/Objections on 10/05/2018.

The Respondent has stated that the operation of the factory and the premises is under the control of lease holders who have not been noticed by the Hon'ble Tribunal and in consonance with the principles of natural justice, they have to be noticed. If the lease holders who are in possession of the property and hence are a necessary party to the instant case. The Application as such suffers from non-joinder of necessary parties.

The Respondent has objected to the proposed appointment of Mr. Ambrish Shukla as the Resolution Professional. The Respondent has proposed the name of Mr. Pramod Kumar Rai who, the Respondent, believes to be the competent person to deal with the industry.

The Respondent has alleged that when the account of the Respondent was declared as NPA, the amount of debt owed to the Financial Creditor was INR.35.00 crores whereas in the application under Section 19 of the RDDB Act filed before the Hon'ble DRT, Jabalpur, the amount of debt is mentioned at INR.45.00 crores.

The Respondent has alleged that the Financial Creditor has failed to demonstrate the default of the entire INR.45.00 crores and has only been able to show the default for the part amount of the debt. 15.5 The Financial Creditor has been non-cooperative with the debtor in all the situations. 15.6 It is stated by the Respondent that the Financial Creditor has already filed an application before DRT Jabalpur and now has initiated the process before NCLT Ahmedabad without even withdrawing the application preferred before the DRT Jabalpur.

In reply to the objections raised by the Respondent, the Petitioner Bank filed its replies: 16.1 The Petitioner Bank has submitted that the Respondent Company i.e. Borrower and other Guarantors have failed to honour the terms and conditions of the credit facilities granted by the Bank and hence, the Petitioner Bank classified the account of the Respondent Company as "Non Performing Account" NPA on 31.12.2016. 16.2 The Applicant bank issued a Notice under Section 13(2) of the SARFAESI Act on 03.01.2017 demanding the amount outstanding with interest against the Principal Borrower.

The Petitioner Bank filed O.A. No. 502 of 2017 on 05.06.2017 for a claim of INR.42,13,70,632.00 (Rupees Forty Two Crores Thirtee Lacs Seventy Thousand Six Hundred Thirty Two only) with further interest before the Hon'ble Debts Recovery Tribunal-I at Jabalpur.

It is submitted that the Respondent company that the factory and premises are under the control of leaseholder and hence, the leaseholders are necessary parties to the instant case. It is submitted that no third party can be heard in Section 7 Petition. Further, it is submitted that the lease holder has filed an application being I.A. No.69 of 2018 and I.A. No.61 of 2018. It is submitted that both the I.A. have been dismissed for non-prosecution vide order dated 28/02/2018.

It is submitted that in the matter of Neesa Leisures Limited, the Hon'ble NCLT, Ahmedabad has held in Para 20.8 of the Judgment that third party is not offered the right to be heard and/or to intervene in the proceedings initiated under Section 7 of the Code.

It is submitted that the Respondent Company has proposed the name of Shri Pramodkumar Rai as an IRP. In reply to this, it is submitted by the Petitioner Bank that the discretion and prerogative of the Petitioner Bank in Section 7 Petition to recommend the name of the IRP.

It is submitted that the Respondent Company has raised an objection that there are parallel proceedings pending before various Courts and hence this petition should be dismissed.

It is submitted that there are various rulings wherein it has been held that parallel proceedings are no bar to section 7 Application. It is submitted that in the matter of Deegee Cotsyn Private Limited, it is held by the Hon'ble NCLAT that parallel proceedings do not amount to forum shopping. It is further held that Financial Creditor is not guilty of forum shopping as the pendency of parallel proceeding is no bar to Section 7 of IBC Petition.

It is submitted that even in the matter of Neesa Leisures Limited, the Adjudicating Authority in Para 11(a & b) has held that pendency of proceedings for Winding-up, SARFAESI Act, RDDB Act or even pendency of a Civil Suit, is no bar to maintain proceedings under Code.

It is submitted that this Hon'ble Tribunal vide Order dated 19.07.2019 has passed an order which is challenged by way of an Appeal before the Hon'ble National Company Law Appellate Tribunal (NCLAT) being Appeal No.854 of 2019. The said appeal is pending. However, the Hon'ble Appellate Tribunal has not stayed the proceedings in respect of the present Petition and hence, the Hon'ble National Company Law Tribunal, Ahmedabad Bench, Ahmedabad can proceed with the merits of the matter.

It is submitted that time and again, the Respondent Corporate Debtor has given offer for settlement which is rejected by the Financial Creditor and communicated to the Corporate Debtor.

It is submitted that the Petitioner has filed an Additional Affidavit dated 18/12/2019 wherein it is contended that the Respondent Corporate Debtor has sold the stocks mortgaged to the Bank and the Financial Creditor has filed police complaint to this effect. It is further contended that the Corporate Debtor has threatened the Officer of the Bank in the past and the incident has been reported in the newspaper on 25/12/2016. It is further submitted that the Corporate Debtor is a wilful defaulter and has diverted the funds and hence this Hon'ble Adjudicating Authority is prayed to admit the petition and appoint the IRP to take over the charge of the Corporate Debtor.

The Learned Lawyer of the Petitioner Bank(FC) clarified its positions and put forth its arguments relying on the documents submitted by them, which were executed by the Corporate Debtor and the Mortgagors/Guarantors. They have also referred the CIBIL report filed with the application which confirms the debt is in default.

The matter was taken up and heard both sides by this Bench on 15.01.2018, 05.02.2018, 21.02.2018, 16.03.2018, 16.04.2018, 11.05.2018, 20.06.2018, 10.07.2018, 14.08.2018, 17.09.2018, 29.10.2018, 17.09.2018, 29.10.2018, 06.12.2018, 11.01.2019, 28.02.2019, 22.03.2019, 26.04.2019, 19.07.2019, 09.08.2019, 19.08.2019, 13.09.2019, 25.10.2019, 15.11.2019, 05.12.2019, 19.12.2019, 17.01.2020 & 31.01.2020. The counsels of the Petitioner and the Respondent were present and put forth their submissions before this Adjudicating Authority.

It is a settled legal position that the pendency of SARFAESI proceeding or other disputes do not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is “Remedy in Rem” in respect of the CD.

The Petitioner Bank has suggested the name of Insolvency Professional to be appointed, if this petition is allowed and the proposed I.R.P. has also given his affirmation/consent in writing, which is annexed with the present I.B. Petition.

The Petitioner Bank has submitted the documents duly executed by the Corporate Debtor and guarantors along with a Certificate under the Banker’s Book of Evidence Act, 1891 in support of its IB Petition for initiation of C.I.R.P.

The Cash Credit and Term Loan facilities were sanctioned by the Petitioner Bank and the same were availed by Corporate Debtor, Vindhya Cereals Private Limited. 24.2 The Corporate Debtor has defaulted in making repayment of term loans/credit facilities to the Petitioner Bank and the date of default is 31.12.2016. The Statements of accounts and the CIBIL Reports submitted by the Petitioner Bank confirm that the debt is due and default has been committed by the Corporate Debtor.

The Petitioner Bank has filed the petition within the period of limitation, as the last credit has come to the account on 20.04.2017 wherein this application has been filed on 22.12.2017 which is within 3 years of last payment. In addition to that the Corporate Debtor and the guarantors have signed Balance and Security confirmation letter on 06.03.2016. 24.4 The present I.B. Petition is filed by the duly authorised official of the Petitioner Bank in a prescribed format under Section 7 of the Code annexing copies of loan documents confirming the existence of debt due and defaulted and proposed the name of a Resolution Professional to act as an Interim Resolution Professional (IRP)

Considering the material papers filed by the Petitioner Bank, arguments of the counsels of both parties and the facts mentioned in the Para No.23, 23.1, 23.2, 23.3 & 24.4 this Adjudicating Authority is satisfied that,

Hence, the present IB Petition is admitted with the following Directions/observations. The date of admission of this petition is 13.03.2020

This Adjudicating Authority hereby appoints, as proposed, Mr. Amresh Shukla, having Insolvency Professional Registration No. IBBI/IPA-001/IP-P00120/2017- 18/10255, Mobile No.09425007441, Email ID: insolvencyprofessionalsindhi@gmail.com, Address: F- 05, Jaideep Complex, 112, Zone-II, M.P. Nagar, Bhopal - 462011, Madhya Pradesh, India as an Interim-Resolution Professional. The Interim Resolution Professional is further directed to make public announcement of moratorium in respect of Corporate Debtor soon after the receipt of an authenticated copy of this order IRP has to act further as per the order/direction issued by this Adjudicating Authority and to follow the provisions under Section 13 and 14 and other relevant provisions of the Insolvency and Bankruptcy Code.

As per the provisions of Section 13 and 14 of the Code on the date of commencement of insolvency, this Adjudicating Authority declares moratorium with effect from today for prohibiting all of the following, namely: -

The IRP is hereby advised to adhere to the time limit as stipulated for completion of the Corporate Insolvency Resolution Process ("CIRP" in short) and perform the duties as specified Under Section 17, 18, 20, & 21 of 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 functions strictly in accordance with the provisions of the Code, Rules and Regulations.

It is also observed that the Petitioner Bank has claimed total outstanding amount INR.45,55,47,326.00, i.e. ledger balance of INR.38,57,03,636.00 + Unpaid Interest of INR.6,98,43,690.00. One of the prime objectives of the Insolvency and Bankruptcy Code, 2016 is to find out an Insolvency Resolution Plan in time for the Corporate Debtor and in order to have a Resolution Plan Viable, feasible and implementation successful, in the era of Minimum Cost of funds based Lending Rate ("MCLR" in short)/Repo Linked Interest Rate/Interest Rate falling Regime and Competitive market condition, the Committee Of Creditor(s) (COC) may explore, while finalizing the Resolution Plan for the Corporate Debtor, the possibility of loading maximum interest at the rate of Petitioner Bank's One Year MCLR or One Year MCLR + 1% without any penal /overdue interest from the date of NPA to the date of Resolution Plan is approved.

The Registry is hereby directed to communicate the authenticate copy of this order to the Financial Creditor, Corporate Debtor, the I.R.P and also to the Registrar of Companies, Madhya Pradesh immediately through speed post / registered post immediately.

Thus the present I.B petition filed Under Section 7 of the IBC stands admitted with the above direction and observations.