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Judgment
[Per: Bench]
The Present Application is filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "IBC, 2016") r/w Rule 6 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for IRP for Personal Guarantors to Corporate Debtor) Rules, 2019.
This Tribunal vide order dated 30/05/2022 appointed Mr. Rajendra Jain having Reg. No. IBBI/IPA-002/IP-N00732/2018-19/12353 as IRP in the matter with direction to the IRP to file his report within 10 days.
IRP filed his report through IA 1055/2022 on 09/11/2022 which was taken on record vide order dated 7/12/2022 and the said IA was disposed off.
Subsequently vide order dated 28/11/2023, IA 1055/2022 was restored on the file of this Tribunal.
The IRP has recommended for acceptance of the petition on the following grounds :-
i.The Corporate Debtor has availed the working loan facility for its business requirement and the Financial Creditor had sanctioned the loan facility of Rs. 1,50,00,000/- and as on the default date i.e. NPA date of 31.3.2021, the loan outstanding was Rs. 1,65,54,866.21.
ii.The Financial Creditor issued a demand letter cum action notice under SARFAESI Act on 12.04.2021.
iii.The Corporate Debtor has defaulted in repayment of the outstanding loan, amount as demanded vide notice dated 12.4.2021. Simultaneously, the Debtor or Personal Guarantor also defaulted in repayment of the said outstanding loan amount for which the Debtor had executed Guarantee letters and other documents. The debtor has been unable to repay the demanded loan amount.
iv.The Debtor has complied all the provisions of Section 94 and 99 as stated in Part-VII herein above.
v.The Financial Creditor has registered loan default in the Information Utility i.e. Transunion-CIBIL hence, default is established. The relevant certificate copies w.r.t. the Corporate Debtor and the Debtor are being enclosed along with this report.
vi.Last but not the least, the way the Financial Creditor has acted in a fast manner to recover outstanding loan amount by redeeming the securities mortgaged with him and not allowing breathing time to the Corporate Debtor or the Debtor for alternative restructuring solution, it would be unjust and unfair to the Debtor if a chance to settle or reschedule the outstanding is not provided, hence Application filed u/s 94 need to be accepted.
It is further stated in the Report that :-
a)The debtor herein is one of the directors of Devkrut Engineers Pvt. Ltd., which was incorporated on 29/05/2017 under CIN No. U29308GJ2017PTC097605 and has registered office at 88, Gurukrupa Row House-2, Panchvati Apartment, Adajan Gam, Surat-395009.
b)Tamilnad Mercantile Bank Ltd. (Financial Creditor) having branch at No. 2, Shree Complex, Plot-D, Block No. 180, Suart – Navsari Road, Sachin GIDC, Naka, Sachin-394230 sanctioned working capital loan in the form of cash credit limit of Rs. 1,50,00,000/- to the said Devkrut Engineers Pvt. Ltd. The loan was disbursed. The loan was renewed from time to time and last renewal was on 28.01.2020.
c)The said loan was secured against primary securities in the form of inventories and book debts and was additionally/collateral secured by way of Personal Guarantee of the Debtor herein and Equitable Mortgage of Plot no. 87 & 88 at Gurukrupa Society on R. S. No. 14/1, Paikey Moje Adajan, Near Croma Showroom, LP Savani Road, Adjan Gam, Surat. The said property is jointly owned by the debtor herein and his wife Mrs. Umaben Rakeshkumar Shah.
d)The Corporate Debtor never applied for renewal of the loan facility and continued to overdraw. The loan facility was recalled and a demand notice dated 12.04.2021 was issued. The Corporate Debtor did not pay the stipulated amount of Rs.1,65,54,866.21 and the loan account was declared as NPA and notice u/s 13 (2) of SARFAESI Act, was issued by the Financial Creditor on 12.04.2021.
e)The present petition (CP 125/2022) was filed on 06.05.2022.
IA 515 of 2022 This IA was filed by the Financial Creditor seeking the following prayers :-
i)Your Lordships may be pleased to allow the captioned application.
ii) Your Lordships may be pleased to recall the order dated 30/05/2022
iii) Such other relief/s be granted, as the Hon’ble Tribunal may deem fit and proper, in the interest of justice.
In the said IA the Financial Creditor has confirmed that:-
a. Loan was disbursed to the Corporate Debtor.
b. Securities were provided as detailed above by the Corporate Debtor and the Debtor herein.
c. Loan account of the Corporate Debtor turned NPA on 31.03.2021.
d. Demand Notice was issued on 12.04.2021 for a sum of Rs. 1,65,54,866.21/- under the SARFAESI Act.
e. Corporate Debtor and Debtor have since not paid the amount.
f. Financial Creditor took symbolic possession of the mortgaged property on 28.06.2021 under Section 13 (4) of the SARFAESI Act.
g. OA No. 899 was filed by the Financial Creditor before Hon’ble DRT-II, Ahmedabad seeking recovery of Rs.1,79,05,482.51/-which is pending.
h. SA No. 418 of 2021 was filed by the Debtor before DRT-II, Ahmedabad challenging the measures undertaken by the Financial Creditor.
i.Upon an application of Financial Creditor filed Under Section 14 of SARFAESI Act, 2002, Ld. Distt. Magistrate passed an order dated 04.04.2022 whereby it was directed to provide the physical possession of the mortgaged property to the Financial Creditor. A copy of the said order is attached as Annexure-E.
j. On 11.05.2022, Mamlatdar on directions of Ld. Dist. Magistrate took the physical possession of the mortgaged property and handed it over to the Financial Creditor.
k. As such it is the contention of the Financial Creditor (Applicant herein) that the present application is filed with a fraudulent and malicious intention, to enjoy moratorium and to thwart the recovery proceedings initiated by the Financial Creditor.
The Ld. Counsel for the applicant in IA 515 of 2022 was explained that power of recalling a reasoned order is not available with this Tribunal, to which the Ld. Counsel requested this Tribunal to consider the same as objections to the report of RP.
Reply was filed by the Debtor vide Inward Diary No. D4873 dated 04.10.2023 which is summarized as under:-
a. Report of IRP may be accepted.
b. Financial Creditor has no locus standi to object the initiation of resolution process of the debtor.
c. The basis whether the application is filed to defraud the creditors is to be made on the basis of report filed by the resolution professional.
d. Present application is not filed to scuttle the recovery proceedings.
e. It is stated that plan, if any, will be presented before the secured creditors only after order u/s 100.
IA 514 of 2022 This IA was filed seeking the following prayers:-
Your Lordships may be pleased to allow the captioned application;
Your Lordships may be pleased to hold and declare that the captioned application bearing CP(I.B.) No. 125 of 2022 is filed with fraudulent or malicious intention and hence, reject the captioned application with costs;
Pending hearing and final disposal of the captioned application, this Hon’ble Tribunal may be pleased to not proceed with the captioned petition;
An ex-parte interim relief in terms of para (C) may be granted;
Such other relief/s be granted, as the Hon’ble Tribunal may deem it fit and proper, in the interest of justice;
The facts in this IA are similar to the facts in IA 515 of 2022. Hence, for the sake of brevity, we are not repeating the same.
Reply was filed under Inward Diary No. 4874 dated 04.12.2023. The grounds taken in reply are almost identical to the objections taken in the IA 515 of 2022 and for the sake of brevity, we are not discussing the same here.
We have heard counsels for the applicant in the main CP, Respondent/objector and the RP. The following are the undisputed facts in this matter-
The debtor is one of the directors of M/s. Devkrut Engineers Pvt. Ltd.
Financial Creditor – Tamilnad Mercantile Bank Ltd. has given loan by way of working capital of Rs.1.50 Crores to the said Devkrut Engineers Pvt. Ltd.
As a security the debtor has extended his personal guarantee and has even mortgaged immovable property in favour of the Financial Creditor.
The main borrower i.e., Devkrut Engineers Pvt. Ltd., failed to repay the Financial Creditor. Pursuant to which the loan account turned N.P.A and the Financial Creditor has taken the steps to recall the loan, issued a demand notice, issued notice under Sections 13(2) and 13(4) of the SARFAESI Act. Pursuant to the order dated 04.04.2022 of the Learned District Magistrate, Mamlatdar took physical possession of the property mortgaged by the debtor herein and all challenges by the debtor before the DRT failed.
It appears from the report of the RP that the debtor was unable to pay his debts and ultimately the RP has recommended for acceptance of the report.
However, when we read part IX (B)(f) of IA 1055 of 2022 (report of RP) which is reproduced in para 5(vi) of this order, we get other inferences. RP is appointed by this Tribunal to assist the Tribunal and his duty is limited to check the application and not to comment upon the conduct of the Financial Creditor or the debtor. The scope of RP’s report is limited to the extent of fact-finding. However, in the present matter, it appears after reading Part IX(B)(f) of the recommendation of RP, that the RP was totally biased and has leaned on the shoulders of the debtor especially when he comments “Financial Creditor has acted in fast manner to recover outstanding loan amount by redeeming the securities…..”. We wonder who authorized the RP to draw this conclusion and which section of IBC empowers him to state so.
Post the order of Learned District Magistrate passed on 04.04.2022 as well as post the physical possession dated 11.05.2022, this application was filed vide Inward Diary No. E734 on 12.05.2022, cleared from scrutiny only on 17.05.2022 and numbered as CP (IB)/125/NCLT/AHM/2022.
It is clearly established from IA 514 of 2022 and IA 515 of 2022 that the present application was filed by the debtor herein to thwart the recovery proceedings initiated by the sole Secured Financial Creditor who has obtained physical possession of the secured assets (co-owned by the debtor herein) and to frustrate other proceedings under SARFAESI Act, the debtor came running and filed this application.
It appears to us that the sole intention of the debtor herein is to enjoy the moratorium as contemplated under Section 96 of the IBC, 2016 which commences from the date the application is declared defect-free by the Registry of this Tribunal. The second reason which comes to our mind at this stage is the order under Section 94(1) of the IBC, 2016 was issued by this Tribunal on 30.05.2022. Nearly one and half years have passed in further proceedings in the matter due to the stay by Hon’ble Supreme Court in the matter of Dilip B. Jiwrajka vs. Union of India & Ors. in WP(Civil) No. 1281 of 2021 and in case the debtor was inclined towards any settlement of his debt with the Secured Financial Creditor, he had enough time to pay by way of restructuring plans, or otherwise, if any. No document has been placed before us by the debtor herein to show that he has taken any effective steps for settling the dues of the Secured Financial Creditor.
It will be a travesty of justice if we allow the application i.e. CP(IB) No. 125 of 2022 and the consequential report of the IRP filed in IA 105 of 2022 is accepted at this stage.
In terms of the above discussion, C.P. (I.B.) No. 125 of 2022 and IA 1055 of 2022 are hereby rejected and disposed off.
So far as IA 515 of 2022 is concerned, we are not able to recall the order dated 30.05.2022 and, hence, this IA is dismissed.
As regards IA 514 of 2022, prayer (B) is hereby allowed and the present application is disposed off with the above direction.
A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.