Srei Equipment Finance Limited vs Arrowline Organic Products Private Limited

Per: SAMEER KAKAR, MEMBER (TECHNICAL)

This Application has been filed by SREI EQUIPMENT FINANCE LIMITED (hereinafter referred to as 'Financial Creditor') on 06.05.2022 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 ARROWLINE ORGANIC PRODUCTS PRIVATE LIMITED (hereinafter referred to as 'Corporate Debtor'). The prayer made is to admit the Application, to initiate the Corporate Insolvency Resolution Process (hereinafter referred to as 'CIRP') against the Corporate Debtor, declare moratorium and appoint Interim Resolution Professional (hereinafter referred to as 'IRP').

In Part - I of the Application, it is stated that the Applicant Company is a Financial Creditor which is undergoing CIRP before the Kolkata Bench of this Tribunal and is represented by the Administrator (Mr. Rajneesh Sharma) appointed in terms of IBBI (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019. The registered office address as per the Application is at 'Vishwakarma', 86C, Topsia Road, Kolkata, West Bengal - 700 046.

Part - II of the Application lays down the details of the Corporate Debtor. As per Part - II, the Corporate Debtor is a Private Limited Company incorporated under the Companies Act, 2013 on 06.04.2015 with CIN: U15122TN2015PTC099926. The registered office of the Corporate Debtor as per the 'MCA master data' is situated at No. 101, Tower 8, Unitech, Uni World City, Nellikuppam Road, Nallambakkam Kandigai, Chengalpattu, Kancheepuram Tamil Nadu - 600 127. The Authorised Share Capital of the Corporate Debtor and Paid-up Share Capital is Rs.24,00,00,000/- and Rs. 17,30,59,300/- respectively.

Part - III of the Application states that the Financial Creditor proposed the name of the Interim Resolution Professional (IRP) viz., Mr. Tharuvai Ramachandran Ravichandran, Reg. No. IBBI/IPA-002/IP-N00241/2017-18/10692.

Part - IV of the Application, states that the Financial Creditor has advanced to the Corporate Debtor a sum of Rs.8,36,00,000/- (Rupees Eight Crore Thirty-Six Lakh only). The total debt amount is Rs. 11,41,87,052/- (Rupees Eleven Crore Forty-One Lakh Eighty-Seven Thousand and Fifty-Two only) which became due and payable by the Corporate Debtor as on the date of default, i.e. 24.09.2021.

Part - V of the Application enlists the documents, records and evidences of debt and default which are filed in support of the present Application.

It is stated that the Financial Creditor and the Corporate Debtor had commercial relations since the year 2016. On 04.12.2019, the Financial Creditor sanctioned a credit facility to an extent of Rs. 8,36,00,000/- to the Corporate Debtor and pursuant to the same, the 'Loan cum Hypothecation Agreement' dated 15.12.2019 was entered and executed by the parties. Copy of the said agreement is placed on record as Annexure I (5) from page nos. 85 – 110. It is stated that the disbursement was made in two tranches, i.e. Rs.50,00,000/- and Rs.7,86,00,000/- on 17.12.2019 and 19.12.2019 respectively.

It is stated that the contractual terms of the 'Loan cum Hypothecation Agreement' set forth monthly instalments along with interest by the Corporate Debtor. Due to the non payment of instalments, the Financial Creditor, was constrained to issue the demand notice dated 16.09.2021 recalling a total sum of Rs. 5,11,17,711/-. The said notice is placed on record as Annexure I (10) from page nos. 145 – 146. Thereafter, the present application came to be filed before this Tribunal recalling the entire dues from the Corporate Debtor. The bifurcation of the debt claimed under the present application is reproduced as below:

The Financial Creditor has stated that an amount to the tune of Rs. 1,07,48,400/- (Rupees One Crore Seven Lakh Forty-Eight Thousand and Four Hundred only) out of the of the total unpaid instalment amounts due as on 16.09.2021, falls outside the scope of the period under Section 10A of the Code. i.e., 25.03.2020 – 31.03.2021. To substantiate the same, the Financial Creditor has formulated a table in the application for the purpose of satisfying the default falling outside the 10A period. The Financial Creditor also furnished the statement of account as on 19.08.2021 for the specific contract no. i.e. 182990. The said table is reproduced below:

On getting notice of the present application, the Corporate Debtor filed its reply vide SR 3787 dated 22.06.2022 before this Tribunal. The contention of the Corporate Debtor is two-fold, the first one being that the Corporate Debtor had discharged the borrowing on 19.12.2019 itself, i.e., on the same date of the disbursement of the second tranche of the principal borrowing and as a consequence, the default pertaining to the 'Loan cum Hypothecation Agreement' dated 15.12.2019 therefore stood discharged by the Corporate Debtor. The other contention was that the default under the present application fall within the period stipulated under Section 10A of the Code.

The Financial Creditor, with the leave of this Tribunal, has filed its rejoinder vide SR 4810 dated 01.08.2022 wherein the objection of the Corporate Debtor as to its discharge of its liability is vehemently disputed. The Financial Creditor, by referring to the to the charge of Rs. 8,60,00,000/- which is reflecting against the Corporate Debtor on the 'MCA Masterdata', submitted that the said contention is contrary to facts and record. The Financial Creditor has formulated a table to stating that the disbursement alleged to have been made by the Corporate Debtor on 19.12.2019 does not pertain to the loan facility for consideration under the present application. The said table is extracted from the rejoinder as under:

We have heard the submissions for both the parties and have perused the pleadings and documents on record. The undisputed fact remains that the borrowing emerged out of the 'Loan cum Hypothecation Agreement' dated 15.12.2019 and the disbursement of the facility were made in two tranches, i.e. Rs.50,00,000/- and Rs.7,86,00,000/- on 17.12.2019 and 19.12.2019 respectively.

The contention of the Corporate Debtor that the discharge of its liability with respect to the said facility holds no water since the Financial Creditor has sufficiently clarified that the repayment made by the Corporate Debtor on 19.12.2019 pertains to other earlier loan accounts of the Corporate Debtor and not the loan account in question in the present application. The contention of the Corporate Debtor that the debt was discharged on the very same date it was disbursed from the Financial Creditor does not hold good. The objection in light of the applicability of the period covered under Section 10A of the Code is clearly distinguished by the Financial Creditor at para 9 supra. Therefore, the Financial Creditor for the purpose of satisfying the threshold contemplated under Section 4 has clearly made out a case.

Apart from the above, on a question posed by this bench as to the treatment of the said amount in the books of the Corporate Debtor, learned Counsel for the Corporate Debtor has fairly submitted that figures appearing in the below extracted 'Notes to Borrowings' from the Financial Statement of the Corporate Debtor as on 31.03.2021 & 31.03.2020, pertains to the loan facility which is under consideration in the present application.

A perusal of the above would indicate that amount of Rs.9,98,41,295/- which is stated to be entered with respect to the loan facility under consideration by this Tribunal. Thus, in view of the ratio of the Hon'ble Supreme Court in the matter of Asset Reconstruction Company (India) Limited -Vs- Bishal Jaiswal & Anr. (Civil Appeal No. 323 of 2021) wherein it was categorically held that the entries made in the balance sheet would amount to acknowledgment of debt, the present case is also a clear instance of an admitted debt. That apart, contrary to the stand taken by the Corporate Debtor, perusal of the table reproduced at para 11 supra would indicate that no payments were made against the Loan Account No. 182990 on 19.12.2019.

Thus, owing to the above facts and circumstances of the present case, we are satisfied that it is a clear case of an admitted debt by the Corporate Debtor and that the existence of the same is not disputed. The Financial Creditor has made out a prima facie case proving debt and default warranting intervention of this Tribunal. Thus, this Tribunal deems it a fit to admit the Corporate Debtor into the CIR Process contemplated under the Code.

As a consequence of above discussion in light of facts of the present case, the Application is 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;

However during the pendency of moratorium period in terms of Section 14(2) and 14(3) as extracted hereunder;

The duration of period of moratorium shall be as provided in Section 14(4) of the Code which is reproduced below for ready reference;

The Financial Creditor has proposed the name of one Mr. Tharuvai Ramachandran Ravichandran (Email ID: [email protected]), Reg. No. [IBBI/IPA-002/IP-N00241/2017-18/10692] as the Interim Resolution Professional (IRP) who, has also filed their consent in 'Form - 2' and also upon verification from the IBBI website, it is seen that the said insolvency professional hold valid Authorization for Assignment till 06.12.2023.

Mr. Tharuvai Ramachandran Ravichandran is appointed as the IRP who 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 Financial Creditor is directed to remit a sum of Rs. 2,00,000/- (Rupees Two Lakh Only) to and in favour of the IRP for meeting out the initial expenses in relation to the CIR Process of the Corporate Debtor. The said amount shall be adjusted and ratified on account of the Financial Creditor.

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. 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 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.

Based on the above terms, the Application stands admitted in terms of Section 7(5) of IBC, 2016 and the moratorium shall come in to 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 who is figuring in the list of Resolution Professionals forwarded by IBBI be also furnished with copy of this Order forthwith by the Registry, who will also communicate the initiation of the CIRP in relation to the Corporate Debtor to the Registrar of Companies concerned.

Pending consideration of the main application filed by the Financial Creditor, the Corporate Debtor has preferred to the present interlocutory application under Section 65 of the Code seeking this Tribunal to impose penalty on the Financial Creditor and to consequently dismiss the application preferred by the Financial Creditor. However, the Financial Creditor has proved its case and Corporate Debtor is admitted into CIR Process. Thus, IA(IBC)/35(CHE)/2023 stands dismissed and disposed of.