Reliance Commercial Finance Limited vs Medybiz Private Limited

The present Company Petition is filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by Reliance Commercial Finance Limited ("Financial Creditor") in the matter of Celebrita Mediahouse Private Limited ("Corporate Debtor") for default totalling Rs. 822,25,17,739/- (Rupees Eight Hundred Twenty Two Crore Twenty Five Lakh Seventeen Thousand Seven Hundred and Thirty Nine Only) (Principal amount is Rs. 323,02,25,333/- plus interest as per the terms of the loan agreement amounting to Rs. 196,20,12,766/- as on 30.09.2023, plus penal interest as per the terms of the loan agreement amounting to Rs. 303,02,79,640/- as on 30.09.2023). The date of default as specified in Part IV of the petition are as follows:

The Financial Creditor formerly known as Reliance Gilts Limited, was incorporated on 17.08.2000 with the Registrar of Companies (RoC), Maharashtra, Mumbai. Subsequently, on May 21, 2009 the Financial Creditor was registered as a Non- Banking Financial Institution with Reserve Bank of India, as defined under Section 45- IA of the Reserve Bank of India Act, 1934; Certificate of Registration No. N-13.01933.

Sanctioned amount by Relaince Home Finance Limited (“RHFL”):-

Sanctioned amount by Reliance Commercial Finance Limited ( the present Financial Creditor:-

Accordingly, the Corporate Debtor entered into Facility cum Hypothecation Agreement dated 30.09.2018, 30.09.2018 and 25.10.2018 and executed other documents with the Financial Creditor.

That, the Corporate Debtor paid the Principal amount along with its interest in following manner in the loan account bearing number RLCSOR000450629 to the Financial Creditor:

After the above payment, the Principal amount due with respect to the Financial Creditor is Rs. 118,00,00,000/- (Rupees One Hundred Eighteen Crore Only) Interest accrued as on 30.09.2023 is Rs. 67,65,40,274/- (Sixty Seven Crore Sixty Five Lakh Forty Thousand Two Hundred and Seventy Four Only) and the penal interest as on 30.09.2023 is Rs. 113,73,90,685/-(Rupees One Hundred Thirteen Crore Seventy Three Lakh Ninety Thousand Six Hundred and Eighty Five Only). Hence, the total outstanding due with respect to the Financial Creditor amounts to Rs. 299,39,30,959/-(Rupees Two Hundred Ninety Nine Crore Thirty Nine Lakh Thirty Thousand Nine Hundred and Fifty Nine Only).

That, the Corporate Debtor paid the Principal amount along with its interest in following manner in the loan account bearing number RHWCCOR000073122 to the RHFL:

After the above payment, the Principal amount due with respect to the RHFL is Rs. 205,02,25,333/- Interest accrued as on 30.09.2023 is Rs. 128,54,72,492/- and the penal interest as on 30.09.2023 is Rs. 189,28,88,955/-. Hence, the total outstanding amounts is Rs. 522,85,86,780.

The Corporate Debtor acknowledged the debt owed to Financial Creditor which is reflected in its Audited Financial Statements for the year ending 31.03.2022. The financial Statements were signed by the Directors and the Auditors of the Corporate Debtor.

Accordingly, RHFL sent Loan Recall Notices/Termination of Agreement Notice via Registered Post dated 30.11.2021 and requested the Corporate Debtor to make the outstanding payment but the Corporate Debtor failed to give any response.

That later on, RHFL got into a financial stress and pursuant to the Resolution Plan implemented in terms of the RBI Circular No. RBI/2018-19/203, DBR.No.BP.BC.45/21.04.048/2018-19 dated 07.06.2019 Prudential on Framework for Resolution of Stressed Assets and the order of Hon'ble Supreme Court of India dated 03.03.2023; the Financial Creditor acquired the Business Undertaking of RHFL on a slump sale and going concern basis. The loan advanced by Relaince Home Finance Limited (“RHFL”), was assigned to the Reliance Commercial Finance Limited i.e the Financial Creditor by way of Assignment Deed dated 31.03.2023.

On 03.08.2023 , Reliance Commercial Finance Limited i.e. the present Financial Creditor sent Loan Recall Notices/Termination of Agreement Notice via Registered Post and requested the Corporate Debtor to make the outstanding payment but the Corporate Debtor failed to give any response.

Pursuant to the same, the Financial Creditor now claims Rs.822,25,17,752/- as a total amount of debt from the Corporate Debtor (the Principal amount of Rs. 323,02,25,333/- plus interest as per the terms of the loan agreement amounting to Rs. 196,20,12,766/- as on 30.09.2023, plus penal interest as per the terms of the loan agreement amounting to Rs. 303,02,79,640/- as on 30.09.2023.)

The Corporate Debtor submits that, the Financial Creditor (Formerly known as Reliance Gilts Ltd.) has advanced following working loan facilities to Corporate Debtor:-

Out of total above mentioned Financial Debt, one entity viz. Reliance Home Finance Limited, has advanced following working capital loan facilities to Corporate Debtor:-

That due to certain unforeseen and unexpected circumstances owing to the downturn in the business environment which was further compounded by the world wide Covid-19 Pandemic, the Corporate Debtor faced severe financial stress and liquidity crunch due to which it was unable to repay the aforementioned working capital loan facilities extended by Financial Creditor and Reliance Home Finance Limited (RHFL). However, there was no deliberate intention on the part of the Corporate Debtor to default on repayment and in fact Corporate Debtor made several efforts to negotiate a settlement with Financial Creditor and Reliance Home Finance Limited but the same did not materialise.

That despite the advanced level negotiations between Corporate Debtor on the one hand and Financial Creditor and Reliance Home Finance Limited (RHFL), to the shock and surprise of Corporate Debtor, Reliance Home Finance Limited (RHFL) issued loan recall notices all dated 30.11.2021 calling upon the Corporate Debtor to pay the outstanding financial debt in respect of the working capital facilities extended by RHFL tο Corporate Debtor.

It appears that the said RHFL has executed an assignment deed dated 31.03.2023 pursuant to which the subject loan facilities extended by Reliance Home Finance Limited to Corporate Debtor alongwith all its rights and securities attached thereto was assigned to the Petitioner i.e. Financial Creditor without any intimation to the Corporate Debtor and without obtaining consent of Corporate Debtor and subsequently the Financial Creditor issued Loan recall/termination notice dated 03.08.2023 calling upon Corporate Debtor to repay financial debt arising out of loan facilities extended by Financial Creditor and RHFL.

That in respect of the loan facilities advanced by the Financial Creditor to Corporate Debtor, the same is barred by limitation.

This bench has perused the documents and pleadings available on record and considered the arguments of both the sides.

The following facts are not in dispute:

Based on the documents placed on record it is clearly evident, that the Corporate Debtor has acknowledged its liability in respect of dues payable to the Financial Creditor in its affidavit in reply. Therefore, this bench is of the considered view that the Corporate Debtor has not disputed the loan facility which was provided by the Financial Creditor and this itself shows that debt is established and there is an admission of liability on part of the Corporate Debtor.

The Corporate Debtor further contented that the present petition is barred by limitation. This bench takes note of the Audited Financial Statements as on 31.03.2022 of the Corporate Debtor, where the debt is reflected, accordingly a fresh period of limitation commences from the said date. Considering the aforesaid the limitation period stands extended.The captioned petition is therefore fit for admission. Therefore, this bench is of the considered view that plea raised by the Corporate Debtor has no substance and finds no merits in the contentions of the Corporate Debtor.

We are of the considered view that the present Application under Section 7 of the Code is within the limitation and is maintainable. It is a settled law that the pre-requisites for an application under Section 7 of the Code are the existence of 'financial debt ' and a 'default' . The Corporate Debtor owes the Financial Debt in excess of Rs.1 Crore, which is in default, this bench is of the view that in such circumstances, it is imperative that the Corporate Insolvency Process be initiated in the matter of the Corporate Debtor. The petition is complete in all aspects. In the light of the above facts and circumstances, the existence of debt and default is reasonably established by the Applicant as a major constituent for admission of the Application under Section 7 of the Code.

The Petition bearing CP (IB) No.116/MB-IV/2024 filed under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) by Reliance Commercial Finance Limited ("Financial Creditor") seeking initiation of Corporate Insolvency Resolution Process (CIRP) in the matter of Medybiz Private Limited ("Corporate Debtor") (in its capacity as guarantor) is Admitted.