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Judgment
ORDER
Under consideration is an Insolvency & Bankruptcy Application filed U/s. 10 of the Insolvency & Bankruptcy Code, 2016 (“Code”) by RKKR Holdings Private Limited (in short, “Corporate Applicant”) for initiation of Corporate Insolvency Resolution Process (CIRP) under Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity, I&B Rules 2016), following a default in meeting the financial obligations to its Financial Creditors (Secured / Unsecured Creditors) and Operational Creditors and other Creditors as shown in the Company Petition filed in Form-VI.
In Part-I of the petition, it is stated that the Corporate Applicant is a Private Limited Company incorporated on 23.06.1989 having the Registered Office of the Corporate Applicant as per the application is situated at No.6/13, Park Avenue, Kesavaperumalpuram Off Greenways Road, Chennai – 600 028.
In Part-II of the petition, it is stated that the Corporate Applicant has proposed one Mr. S.S.Ravichandran as IRP and has also filed his written consent in Form-2. However, since Mr. S.S.Ravichandran had withdrawn his consent with a memo dated 27.09.2023 and nominated Mr.Gopinath as IRP. However, the said Mr. Gopinath also withdrew his consent vide another Memo dated 04.01.2024 which was filed nominating Mr.S.Kangayan as IRP. Subsequently, Mr. Kangayan also withdrew his consent and Mr.G.Ramachandran with Registration No. IBBI/IPA-002/IP-N00167/2017-2018/10437 has been nominated as IRP vide Memo dated 31.07.2024 and the AFA is valid till 31.12.2025.
Part-III of the petition reveals the details of the total amount of default with respect to Financial Creditors as Rs.662,98,62,343.45/- (Rupees Six Hundred and Sixty-Two Crores Ninety-Eight Lakhs Sixty-Two Thousand Three Hundred and Forty-Three and Fort- Five paise only) and the total amount of default with respect to Operational Creditors as Rs.2,38,85,044.96 /- (Rupees Two crores thirty-eight lakhs eighty five thousand and forty four and ninety six paise only).
The list of documents to prove the existence of Financial /Operational Debt are as follows:
1.Notice dated 22.09.2014 u/s 13 (2) of SARFAESI Act issued by Punjab National Bank to the Corporate Applicant in its capacity as Corporate Guarantor of M/s. SBQ, Steels Ltd.
2.Notice dated 11.02.2015 u/s 13(2) of SARFAESI Act issued by State Bank of India to the Corporate Applicant in its capacity as Corporate Guarantor of M/s. SBQ Steels Ltd.
3.Application u/s 19(1) of RDBFI Act in OA No.40 of 2015 filed by SBI.
4.Application filed by Edelweiss Asset Reconstruction Co. Ltd. in OA No.40 of 2015 seeking substitution of SBI.
5.Application u/s 19 of RDBFI Act in OA No.,216 of 2015 filed by PNB and UBI.
6.MA/200/2019 in IA Sr. No.5635 (subsequently numbered as MA/12/2021 of 2018 in OA No.400 of 2015 (subsequently renumbered as TA/72/2022) filed by BOB.
7.Note on BOB cases before DRT with orders dated 09.11.2022 and 30.11.2022 passed by DRT Chennai in TA/72/2022.
8.Note on details of Corporate Guarantee given by Corporate Applicant with respective case statuses before DRT.
9.Copy of relevant books of accounts of the Corporate Debtor evidencing default to creditors.
10.Copies of audited financial statements of the Corporate Debtor for the last two financial years and provisional unaudited financial statement for the period from 31.03.2022 upto 23.01.2023.
11.Updated statement of affairs as on 23.01.2023.
It is stated that the Corporate Applicant was incorporated on 23.06.1989 with main object to purchase and invest in Capital Goods and giving them on rent to Group Companies; to arrange for services required by Group Companies on chargeable basis either from own existing facilities and / or hiring technical know-how and skilled /unskilled labour from outside; to invest in Shares and Debentures of Group Companies; and to alter/improve/exchange the capital goods given to Group Companies on rental basis. The entity was not in operation since past decade and the only asset is in the form of investments in SBQ Steels Limited and shares in companies which also made investments in SBQ Steels Limited.
It is averred that, the audited financial statements for the year ended 31.03.2022 and the unaudited provisional financial statement for the period from 31.03.2022 to 23.01.2023 along with copies of relevant books of accounts of the Corporate Debtor has been placed on record evidencing the default to creditors and inability of CD to comply with annual statutory compliances.
The Board resolution of the Corporate Debtor was passed on 15.12.2022 approving for initiating Corporate Insolvency Resolution process (CIRP) under Section 10 of the Code against the Corporate Applicant. Apart from this, the Corporate Applicant has filed a Resolution passed in Extraordinary General Meeting (EoGM) dated 15.12.2022, approved by the Members/Shareholders to initiate the CIRP against the Corporate Applicant.
We have heard Ld. Counsels appeared on behalf of Corporate Applicant and the Bank of Baroda.
The relevant provisions of IBC, 2016 is as under:
Section 10. Initiation of Corporate Insolvency Resolution Process by Corporate Applicant.
1)Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority.
2)The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed.
3)The corporate applicant shall, along with the application furnish,
(a)the information relating to its books of account and such other documents relating to such period as may be specified;
(b)the resolution professional proposed to be appointed as an interim resolution professional.
(c)the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application.
4)The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order—
(a)admit the application, if it is complete; [and no disciplinary proceeding is pending against the proposed resolution professional]; or
(b)reject the application, if it is incomplete: [or any disciplinary proceeding is pending against the proposed resolution profession.
Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority.
During the hearing on 05.01.2024, the Applicant counsel stated that, the petition has been served on the Creditors and has filed an affidavit to that effect. The Affidavit of Service is placed on record evidencing the effect of service to the Financial Creditors viz., Bank of Baroda and Edelweiss Asset Reconstruction Co Ltd. This petition was listed in batch matter along with CP(IB)/152(CHE)/2023 & CP(IB)/154(CHE)/2023 which deals with Section 10 petition of other two connected Corporate Applicants namely, Gugnani Leasing & Hire Purchase Private Limited and Growell Hire Purchase & Finance Private Limited, which have common director and also gave Corporate Guarantee to the same Principal Borrower viz. SBQ Steels Limited involved in this case. The said SBQ Steels Limited underwent CIRP and was dissolved under Section 54 of IBC, 2016 by this Tribunal vide order dated 11.02.2022 in MA/5/2021 in CP/IB/2017.
It is observed from the Master Data submitted, the registered office of the corporate Applicant is located within the territorial jurisdiction of this Tribunal, specifically within Chennai limits as detailed in the cause title above.
From the list of annexures and documents filed along with the type set and more particularly with Demand Notice and the documents pertaining to DRT proceedings, it is seen the Corporate Applicant has given corporate guarantee to the Principal Borrower, SBQ Steels Limited and subsequently committed ‘default’ in repayment of amount to Financial Institutions.
It is observed that Corporate Applicant has submitted its statement of Affairs as on 23.01.2023 as extracted below:
The details of creditors of the Corporate Applicant submitted by it is extracted as below:
15A. Therefore, the foregoing makes it clear that there is debt and default fulfilling the requirements of Sec 10 of IBC.
In view of the same, we are of the view that this Company Petition is required to be admitted U/S 10 of the Code. We order accordingly.
The Corporate Applicant had proposed the names of Mr.S.S.Ravichandran, Mr.Gopinath, Mr.S.Kangayan and Mr. G.Ramachandran at different point of proceedings. However, we appoint Mr.P.Balasubramanian, (karurbalaw@gmail.com) (9944430703) having IBBI Registration, IBBI/IPA-001/IP-P-02867/2024-2025/14404 with valid AFA till 31.12.2025, as the IRP in the present petition. IRP appointed shall take forward the process of Corporate Insolvency Resolution of the Corporate Debtor.
The IRP appointed shall taken 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 10 of the Code, moratorium as envisaged under the 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 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 occupies 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 in force, a license, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regular 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 manage 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 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 Corporate Applicant is directed to pay a sum of Rs.2,00,000/-(Rupees Two Lakhs Only) to the Interim Resolution Professional to meet out the expenses and to perform the functions assigned to him in accordance to Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Based on the above terms, the Petition stands ADMITTED in terms of Section 10 of the Code and Moratorium shall come into effect as of this date. A copy of the Order shall be communicated 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.