S. Uma Devi vs M Visvesvaraya Co-Operative Bank Ltd.

This Appeal has been filed by the Appellant/S. Uma Devi Shareholder/Director of the Corporate Debtor M/s Ind-lab Equipments Pvt. Ltd. against impugned order dated 19th February, 2020 which was passed by Adjudicating Authority, NCLT Bengaluru in C.P. (IB) No. 319/BB/2019. The Application under Section 7 of Insolvency and Bankruptcy Code, 2016 was filed by the Respondent No. 1/Financial Creditor (Sir M. Visvesvaraya Co-operative Bank Ltd). The Bank filed Application under Section 7 claiming that there was debt due of Rs. 3,03,82,953/- which was in default as on 30th June 2019 along with further interest. The Respondent/Corporate Debtor defended the action and after hearing the parties, the Adjudicating Authority admitted the Application and initiated the 'Corporate Insolvency Resolution Process' proceedings by the Impugned Order hence the present Appeal.

The Appellant claims that the Corporate Debtor was approached by the Bank Authorities offering loans and that there would be ease of doing business. The Corporate Debtor was granted two term loans, one on 25th September, 2014 of Rs. 2,27,00,000/- and second on 16th November, 2016 of Rs. 48,00,000/-. The Appellant claims that with regard to the second term loan only Rs. 33,46,000/- was released. The Appeal shows averments that amount released by the Bank is Rs. 2,60,46,000/- and Corporate Debtor has paid Rs. 1,08,11,399/- as on 23rd September, 2019. The Appellant has made grievances in the Appeal that in spite of request, the Bank did not release remaining loan.

It is also stated that in 2018-19 the Corporate Debtor was facing certain business Implementation Issues. It is claimed that the Bank Charged Exorbitant Interest contrary to the representations made. The Appellant claims that Corporate Debtor did not want to continue with the Respondent No. 1 Bank and so wanted to enter into 'One Time Settlement' to clear all dues without prejudice to the rights of the Corporate Debtor. The Appellant claims that the Bank however filed application under Section 7 on 11th September, 2019. Even before the Adjudicating Authority, effort was made at settlement but in spite of the directions of the Adjudicating Authority, the Bank did not respond to the offer made.

The Learned Counsel for the Appellant is referring without prejudice offer which was made during pendency of the proceedings copy of which is at Page 222. It is stated that the Corporate Debtor made offer to pay even more than what was claimed by the Bank but the Bank Authorities did not respond in spite of earlier directions of the Adjudicating Authority.

The Learned Counsel for the Appellant has referred to the Statement of Objections which was filed by the Appellant. Copy of the same is at Page 225 of the Appeal Paper Book. In Para 3 and 4 of the said Statement of Objections, the Corporate Debtor claimed as follows:

"3. The Petition is liable to be rejected under Section 7(2) of the IBC, because the application is incomplete. The Petitioner has failed to provide a complete form 1, including failure to provide all the particulars in Part II and Part V of the Form 1.

Further, the Petitioner has also failed to provide particulars of amount claimed to be in default and the date on which the default occurred through workings containing the computation of amount and days of default in tabular form as required in Part IV of Form 1. It is relevant to note that the Respondent has paid more than Rs. 1,08,11,399/- as on 23.09.2019 which has not been accounted properly. Further, the Respondent is unable to understand as to how the alleged claim of debt is made by the Petitioner-in particular how the money paid by the Respondent is treated, what amount is charged as interest and at which rate, etc. It is relevant to note that the petitioner, is bound by law to provide correct particulars of the debt, to enable the Respondent to provide its objections and submissions. In the absence of these material particulars, the Respondent is unable to provide its complete defence. Hence, the Petition is liable to be rejected for being incomplete. In the event, that the Petitioner rectifies that defects, the Respondent humbly craves leave of this Hon'ble Tribunal to provide additional objections.

Without prejudice to the above, it is submitted that the Petition is also liable to be rejected a there is no debt and default as alleged. Admittedly, the Petitioner has based its claim on the basis of two term loans-first term loan sanctioned for Rs. 2,27,00,000/-, on 25/09/2014 (released in phase and released till 21/06/2016) and released Rs. 2,27,00,000/- and second term loan sanctioned for Rs. 48,00,000/- on 16/11/2016. (released in phase and released till 25/01/2017) and released Rs. 33,46,000/-. The Respondent has paid more than Rs.1,08,11,399/- as on 23.09.2019. A copy of all the payments made by the Respondent are attached as per Annexure-A. From these payments, it is clear that Rs. 58,08,574/- has been paid post the sanction of the second loan on 16.11.2016. Without prejudice to above, even assuming that the second term loan was fully disbursed in part and parcel until 25.01.2017, then too in so far as the aforementioned term sheet is concerned the Respondent has duly discharged its dues. The Petitioner has not provided any details about how the payments made by the Respondent is appropriated nor are there any details about the mode and manner in which the Petitioner has calculated the dues. Therefore, there is no debt or default in respect of the 2nd term loan dated 16.11.2016. The Petitioner cannot club petitions pertaining to two different loan agreements."

Now, the Learned Counsel for the Appellant is making averments on similar lines as above.

The Learned Counsel claims that the Form which was submitted under Section 7 (2) was incomplete and the Bank had failed to provide all the particulars as required. The Bank failed to provide particulars of amounts claimed to be in default and the dates on which the defaults occurred through workings, containing the computation of amounts and to give particulars of the days of defaults in tabular format.

The Learned Counsel for the Appellant has referred to the Written Submissions filed by the Appellant vide Diary No. 22202 and has raised various issues including the issue that the Reserve Bank of India Circular dated 24th April, 2009 directed the Co-operative Banks that when data stored in computer systems is produced before Court of Law, it should be accompanied by the certificate prescribed under Section 2A (a) and (b) of the Bankers Books Evidence Act, 1891. The Learned Counsel has referred to the Statement filed before Adjudicating Authority copy of which is on record at Page 160 to 166. It is claimed that the figures are not matching and the data submitted was not certified and not supported by certificate. The Learned Counsel states that the debt due was thus not proved by the Financial Creditor.

Having gone through the material on record, where the Appeal itself shows that out of Rs. 2.6 Crore and odd which was released to the Corporate Debtor only Rs. 1 Crore and Odd have been paid, on the face of record there is default of more than Rs. 1 Lakh (As at the relevant time) established. This being so, we do not find any reason to hold that there is no debt due or no default. The technical aspects being raised regarding incomplete form stated by the Learned Counsel for the Appellant for Corporate Debtor are not material in the context of facts as appearing from record. The essential particulars appear to have been incorporated.

With regard to disputes raised, in para 9 to 11 of the Impugned Order, the Adjudicating Authority observed as under:

"9. In the light of the above ratio as laid down by the Hon'ble Supreme Court and as per the provisions of the Code, it is necessary to examine whether the Debt in question is established; the Application is filed in accordance with Law or not; a qualified Resolution Professional is suggested as IRP etc. As stated supra, the Petitioner has addressed a letter dated 25.09.2014 to the Respondent by informing that the Central Loan Committee in its meeting held on 25.09.2014, has sanctioned a Term Loan of Rs. 227.00 Lakhs (Rupees Tow Hundred Twenty-Seven Lakh Only) for the purpose of purchase of KIADB Industrial land at Doddaballapur and construction of industrial building, purchase of machinery & DG set subject to Security towards Primary Security and Collateral Security, Personal Guarantee of all the three Directors of the Company. Accordingly, the parties have entered into Term Loan Agreement dated 01.10.2014 wherein various terms and conditions were mentioned including payment of interest @ 15.50 % per annum. Subsequently, the Memorandum of Deposit of Title Deeds to secure Credit facilities; Guarantee Bond dated 01.10.2014 was executed by M/s. Indlab Equipments Private Limited, and three other Guarantee Bonds dated 01.10.2014 are executed by Smt. S. Uma Devi W/o Dr. Vasantha Kumar, Smt. B.V. Shivamma W/o Late S.V. Siddappa, Dr. Vasantha Kumar S/o Keshava Rao Respectively and the Term Loan agreement dated 23.11.2016 in question was also executed between the parties.

Therefore, there is no dispute with regard to sanction of loans in question by the Bank. Moreover, it is not the case of Respondent that the Loans in question were not sanctioned and has committed its defaults. Payment of some part of instalments of loan, not accepting its proposal of settlement by the Bank etc. are not tenable grounds in a petition filed U/s 7 of Code. And requesting the Bank for settlement of claim in question itself show that the debt in question is established and default of Account of Respondent is not in dispute.

In view of pleas raised by the Respondent claims that it is a solvent Company and trying to resolve the issue in question, the Adjudicating Authority, therefore, has extended several opportunities to the Respondent, and also suggested to the Petitioner-Bank to extend requisite cooperation to resolve the issue. Therefore, though the instant Company Petition is filed on 11.09.2019, the case was adjourned on several viz., 29.10.2019, 21.11.2019, 26.11.2019, 09.12.2019, 20.12.2019, 20.01.2020, 27.01.2020. The Respondent, though officially accepting notice on 24.10.2019, has not filed any reply till 18.02.2020. It is prerogative of the Bank whether to accept settlement of the issue or not. However, the Respondent, without availing opportunity granted by the Adjudicating Authority, is raising mere technical grounds in their reply and also threatening the Bank with proceedings U/s 65 of Code. By perusing the Financial statements, as annexed to the Boards report placed on record in the Memo filed by the Appellant dated 19.02.2020, it is seen that in the Balance Sheet under the head Current Liabilities its Liabilities from Short term borrowings have increased from Rs. 3,59,52,305/- as at 31.03.2018 to Rs. 3,79,28,638/- as at 31.03.2019 and its other current liabilities have also increased from Rs. 54,67,389/- as at 31.03.2018 to Rs. 1,36,38,012/- as at 31.03.2019. Further, the Profit and Loss Account Statement also shows that as against the Profit of Rs. 3,82,956/- declared for the year ended 31.03.2018, the Respondent has earned a loss of Rs. (89,97,077)/- for the year ended 31.09.2019. It is thus seen that the Respondent has been showing inactive results as far as its business financials are concerned. Therefore, the contention of the Respondent that it is solvent Company is not born out of record."

We find that the Adjudicating Authority has duly considered the matter which was before the Adjudicating Authority and there does not appear to be any error in admission of the application under Section 7 of I & B Code when debt due and in default was of more than Rs. 1 Lakh.

There is no substance in the Appeal. The Appeal is dismissed.