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Judgment
Per: R. SUCHARITHA, MEMBER (JUDICIAL)
This Application has been filed by one RBL BANK LIMITED (hereinafter referred to as 'Financial Creditor') on 22.07.2021 under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, against KKN HOLDINGS PRIVATE LIMITED (hereinafter referred to as 'Corporate Debtor'). The relief sought is to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (IRP).
From Part-I of the Application, it is seen that the Financial Creditor / Applicant is a Bank. The present Application is executed by one Mr. Anil Kumar Dalmia, in the capacity as the Vice President of the Financial Creditor duly authorized by the power of Attorney dated 04.09.2019 which is placed as Annexure No. 2 in the typeset filed along with the Application.
Part II of the Application lays down the details of the Corporate Debtor. It can be seen that the Corporate Debtor is a private limited company incorporated under the Companies Act, 1956 on 22/03/2013 with CIN: U72900TN2013PTC090206. The registered office of the Corporate Debtor as per the Application is stated to be situated at 37, T.T.K Road, C.I.T Colony, Alwarpet Chennai Tamil Nadu-600018.
From Part-III of the Application, it is seen that the Financial Creditor has proposed the name of one Ms. J. Karthiga, Reg. No. IBBI/IPA/-001/IP-P00752/2017-18/11284 as the Interim Resolution Professional (IRP).
From Part-IV of the Application, it is seen that the Financial Creditor has claimed a sum of Rs.4,65,68,200.37/- as on 31.05.2021 together with 9.55% p.a. along with penal interest of 2%, debt which is due and payable by the Corporate Debtor. The detailed computations of the debt is placed at Annexure 23 of the Application typeset filed by the Financial Creditor. The date of default as averred in Part-IV of the Application is 07.12.2019.
Part V of the application describes the particulars of Financial Debt, documents, records and evidence of default and the same is placed as Annexure 21 of the Application typeset filed by the Financial Creditor.
It is submitted by the Ld. Counsel for the Financial Creditor that M/s. Vector Projects (India) Private Limited (hereinafter referred to as the "Principal Borrower"), had requested the Financial Creditor to grant financial assistance to the tune of Rs.71.00 crores so as to enable it to meet its working capital requirements. Subsequently the Financial Creditor vide sanction letter bearing reference no's CAD/MUM/0354/2018-19 dated 22.10.2018, RBL/CAD/MU1V1/Q354-A/2018-19 dated 22.11.2018, CAD/MUM/0804/2019-20 dated 29.11.2019 and CAD/MUM/0866/2019-20 dated 19.12.2019 approved the same and provided Rs.71,00,00,000/- to the principal borrower.
Further the Ld. Counsel for the Financial Creditor submitted that both the parties agreed on the interest at 10.85% per annum (linked to one year MCLR), along with penal interest of 2.00% per annum in respect of the Cash Credit Facility.
The Ld. Counsel for the Financial Creditor, submitted that the Principal Borrower executed a Working Capital Agreement dated 05.12.2018 evidencing the granting of the Facility of Rs.70,00,00,000, which is placed as "Annexure No. 10' of the Application typeset and consequently in favour of the Financial Creditor and also executed a Demand promissory note for Rs.70,00,00,000 and a Letter of continuity for demand promissory note, both dated 05.12.2018, which is placed as "Annexure Nos. 11 and 12, of the Application typeset.
The Ld. Counsel for the Financial Creditor submitted that the Corporate Debtor herein in consideration of the amount of Rs.70,00,00,000 financial assistance rendered by the Financial Creditor to the principal borrower, executed an unconditional, continuing and irrevocable Deed of Guarantee dated 05.12.2018, which is placed as "Annexure No.13", in favour of the Financial Creditor, securing the obligations of the Principal Borrower for a sum of INR 70,00,00,000/-(Rupees Seventy Crore Only) ("Guaranteed Sum") together with interest, costs, charges, expenses due to the Financial Creditor on demand. The Ld. Counsel further stated that the same can be evidenced from the Board resolutions placed as Annexure 14, 15 and 16 of the Application typeset.
The Ld. Counsel for the Financial Creditor submitted that, the Corporate Debtor based on the Deed of Guarantee dated 05.12.2018 agreed to any such demand made by the Financial creditor shall be final, conclusive and binding and the Corporate Debtor shall without any demur or protest, forthwith discharge all the secured obligations to the extent of the Guaranteed Amount and in all respects as may be required to be paid or discharged by the Principal Borrower under the said Working Capital Agreement stated supra.
In the meantime the Ld. Counsel also submitted that the Corporate Debtor also created an equitable mortgage by deposit of title deeds in favour of the Financial Creditor, for securing the obligations of the Principal Borrower under the above-mentioned sanction letter and other loan documents by executing a Memorandum of deposit for creation of equitable mortgage dated 27.08.2019 and also by way of registered Deed of Mortgage dated 06.12.2019 over Units No. 01, 201, 501, 101, 301 and 401 in the building known as "Vector House" bearing CTS No. 287 and 287 / 1 of Village Bhandup (West), Mumbai 400078.
Consequently, it was submitted that the money have been discharged to the principal borrower by the Financial Creditor only based on the abovementioned security documents and compliances on the terms agreed on, regularly from 12.12.2018 and the principal borrower have duly acknowledged the receipt of the said amounts and have been making repayments regularly till November, 2019. Further the Ld. Counsel also submitted that from the minutes of meeting held between the parties on 03.12.2019 and the confirmation from the Corporate Debtor vide its email dated 12.12.2019, placed at Annexure Nos. 17 and 18, of the Application typeset, wherein the Principal Borrower and the Corporate Debtor promised to repay the entire amount outstanding on or before 13.02.2020, which undertaking was defaulted.
The Ld. Counsel for the Financial Creditor submitted further that the Principal borrower Account was classified as an NPA on 31.03.2020 in accordance to the RBI Guidelines and circulars. Consequently, the Financial Creditor vide its loan recall and invocation of guarantee notice dated 27.02.2020, recalled the entire facility declaring the unpaid principal amount and interest and all other amounts payable under the loan documents as due and payable to the Financial Creditor. The Ld. Counsel stated that the Corporate Debtor refused to comply with the Loan Recall notice dated 27.02.2020 and the notice have been duly served to the Corporate Debtor by the Financial Creditor and the same can be evidenced from the postal receipts and tracking reports placed as Annexure 19 of the Application typeset.
Subsequently the Ld. Counsel further submitted that, the Financial Creditor filed an application under the Recovery of Debts and Bankruptcy Act, 1993 before the Hon'ble Debts Recovery Tribunal - II at Mumbai, bearing reference number O.A. No. 171 of 2020, against the Principal Borrower, the Corporate Debtor and the other Guarantors, and the same is placed at Annexure No.20 for recovery of outstanding dues of Rs. 42,45,65,462.94/- as of 30.06.2020 together with further interest and expenses as per the executed loan and security documents.
The Ld. Counsel for the Financial Creditor submitted that, during the pendency period of the O.A. before the DRT-II Mumbai, a settlement was arrived at between the Financial Creditor, the Principal Borrower, the Corporate Debtor and the other Guarantors in the month of December 2020, and the same is placed at Annexure No. 21 whereby a sum of Rs. 44,06.84,254.19/- was agreed to be paid, on or before 31.01.2021, to the Financial Creditor. The Ld. Counsel further submitted that based on the Consent terms placed at Annexure 21 of the Application typeset the Financial Creditor released the charge over the mortgaged immovable properties belonging to the Corporate Debtor. However, the Principal Borrower and the Corporate Debtor made part and belated payment of INR 39,68,65,641/- as of April 08, 2021 as against the agreed amount of Rs. 44,06,84,254.19/- much beyond the aforesaid agreed date of 31.01.2021. The said amount so paid was duly adjusted as against the outstanding dues.
In light of the above-mentioned, the Ld. Counsel for the Financial Creditor submitted that, the Financial Creditor filed an Application before the DRT, Mumbai for recovery of the pending dues and the same is pending on the file of the DRT for adjudication.
The Ld. Counsel for the Financial Creditor submitted that, the last notice was issued to the Corporate Debtor on 16.04.2021 for the repayment of the outstanding dues, however the same was not complied by the Corporate Debtor, hence they have no other option rather to approach this Tribunal under Section 7 of the IBC, 2016 to initiate Corporate Insolvency Resolution Process proceedings against the Corporate Debtor.
Heard the submissions of the Ld. Counsel for the Financial Creditor. This Application is filed under Section 7 of the IBC, 2016 on 22.07.2021 and on perusal of the proceeding before this Tribunal it can be seen that, Respondent/Corporate Debtor had not entered appearance in the said matter irrespective of repeated notices being issued to the Corporate Debtor.
It can be seen from the Affidavit of Service (AoS) vide SR No 6078, that notices issued to the Corporate Debtor had been returned with the endorsement 'no such person' and further newspaper publication was effected in the 'Dinamani' (Tamil) and the 'Indian Express' (English) by the Financial Creditor. This Tribunal finds it highly unfortunate that the Corporate Debtor had not responded and entered appearance in the said matter. In a similar matter, section 7 Application is pending on the file of this Tribunal against Uniply Decor Limited, whose Registered office Address is similar to the address of the Corporate Debtor herein.
However, the Tribunal takes notice of the abovementioned and concludes that sufficient notice had been given to the Corporate Debtor. In this regard it is relevant to refer to the decision of the Hon'ble NCLAT in the matter of Shri Bijay Pratap Singh –Vs- Unimax International and another in Company Appeal (AT) (Insolvency) No. 1273 of 2019, wherein at para 37 it has held as follows;
'37. One of the essential features for consideration of an Application under Section 9 of I & B Code is service of notice. A mere perusal of the paragraph 11 of the Impugned Order passed by the Adjudicating Authority patently indicates that a perusal of the pleadings showed that the proper 'service' was effected on the registered office of the 2nd Respondent/ Corporate Debtor situated at D-410, Pocket 16, Sector VII, Rohini, New Delhi – 110085. Also, it was observed by the Adjudicating Authority that there was no change in the address of the 'Corporate Debtor' in the 'Ministry of Corporate Affairs Record' which also shows the same address. Even the Resolution passed by the 'Corporate Debtor' on 27.03.2019 had shown the same 'Registered Office' address. Therefore, the Adjudicating Authority had very rightly adverted to Section 27 of the General Clauses Act and Section 20 of the Companies Act, 2013 read with Rule 35 of the Companies (Incorporation) Rules, 2014 in and by which the 'service' is to be effected on the 'Registered Office' address and that process was carried out. Therefore, this Tribunal holds that it was 'Sufficient service' of the 'Demand Notice'. As such, the plea taken on behalf of the Appellant that there was no service affected upon the 'Corporate Debtor' is not acceded to by this Tribunal. The other plea taken that there was no service by hand or electronic mail service to the 'Corporate Debtor' relegates to the background and it pales into insignificance because of the fact that failure/omission to effect service by hand or electronic mail service is not fatal to the instant case."
Further, it is also pertinent to note that the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor.
This Tribunal places on record the Consent terms before the DRT-II, Mumbai, December 2020 as placed in Annexure 21 of the Application, entered into between the Financial Creditor, Principal Borrower and the Corporate Debtor on record from which a clear case of debt and default can be made out.
Apropos, the Hon'ble Supreme Court in the case of Innoventive Industries Limited v. ICICI Bank Limited, where it has discussed extensively the scope of the Adjudicating authority under section 7 of the IBC is limited to assessing the records provided by the financial creditor to satisfy itself that the default has occurred.
28.When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor – it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.
30.On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.
In view of the facts as stated supra and also in view of the 'financial debt' which is proved by the Financial Creditor and the 'default' being committed on the part of the Corporate Debtor, this Tribunal is left with no other option than to admit the present Application and initiate Corporate Insolvency Resolution Process in relation to the Corporate Debtor, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed.
The Financial Creditor has proposed the name of Ms. J. Karthiga Reg. No. IBBI/IPA/-001/IP-P00752/2017-18/11284 (email id: [email protected]), as the Interim Resolution Professional (IRP) who has also filed her consent in Form 2 and also upon verification from the IBBI website, it is seen that the Authorization for Assignment is granted to the said IRP till 20.02.2023. The proposed IRP who is appointed shall take forward the process of Corporate Insolvency Resolution of the Corporate Debtor. The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15,17,18 of the Code and file his report within 20 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.
As a consequence of the Application being admitted in terms of Section 7 of the Code, moratorium as envisaged under provisions of Section 14(1) and as extracted hereunder shall follow in relation to the Corporate Debtor;
a. The institution of suits or continuation of pending suits or proceedings against the respondent 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 respondent 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 respondent 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 respondent.
Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license or a similar grant or right during moratorium period;
However, during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;
(2)The supply of essential goods or services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(2A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the Corporate Debtor and mange the operations of such Corporate Debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.
(3)The provisions of sub-section (1) shall not apply to
(a)such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;
(b)a surety in a contract of guarantee to a corporate debtor.
The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;
(4)The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process: 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 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.
The IRP is directed to take charge of the Corporate Debtor's management immediately. The IRP is also directed to cause public announcement as prescribed under Section 15 of the IBC, 2016 within three days from the date the copy of this Order is received, and call for submissions of claim by the creditors in the manner as prescribed under Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
The IRP appointed shall take in this regard such other and further steps as are required under the Statute, more specifically in terms of Section 15, 17, 18 of the IBC, 2016 and file his report within 30 days before this Bench. The powers of the Board of Directors of the Corporate Debtor shall stand superseded as a consequence of the initiation of the CIRP in relation to the Corporate Debtor in terms of the provisions of IBC, 2016.
The IRP shall comply with the provisions of Sections 13 (2), 15, 17 & 18 of the Code. The Directors of the Corporate Debtor, its Promoters or any person associated with the management of the Corporate Debtor are/is directed to extend all assistance and cooperation to the IRP as stipulated under Section 19 of IBC, 2016 for the purpose of discharging his functions under Section 20 of IBC, 2016.
The IRP shall conduct the Corporate Insolvency Resolution Process in respect of the Corporate Debtor as stipulated under Chapter VIII of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Based on the above terms, the Petition stands admitted in terms of Section 7 of the Code and the Moratorium shall come into effect as of this date. A copy of the Order shall be communicated to the Financial Creditor as well as to the Corporate Debtor above named by the Registry. In addition, a copy of the Order shall also be forwarded to IBBI for its records. Further, the Interim Resolution Professional above named shall also be furnished with copy of this Order forthwith by the Registry, who will communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.
The IRP is directed to file the 1st Progress Report before this Tribunal on or before the 45th day of initiation of CIRP by this Adjudicating Authority.
Post this CP/IB/169/CHE/2021 for hearing on 28.04.2022.