Srei Equipment Finance Limited vs Coronation Infrastructure Private Limited

ORDER

i.

The application has been filed without due authorisation from the applicant and is founded on unstamped/insufficiently stamped loan agreements.

ii.

The default alleged in the application could occur during the period mentioned in Section 10A of IBC, 2016 and for such default no application under section 7 of the code would lie.

iii.

The respondent sold its secured property being Land admeasuring 8 Bigha and 3 Biswas (approx. 1.70 acres) out of entire land 13 Bigha I Biswa, comprised in Mustatil No. 35, Killa No. 18 (4-0) and 23 Min (4-3), situated in village Mehrauli, Tehsil Mehrauli, New Delhi together with a G+ 1 building admeasuring 4.710 Sq. Ft. (Built Up area) ("Secured Property") to meet its debt obligations qua the Applicant by way of a full and final settlement, only for the Applicant to renege on their in-principle understanding to the effect that subject to realization of the sale proceeds of the said Secured Property by the Applicant, the Applicant shall have no further claim against the Respondent and all accounts between the parties shall be deemed to have been settled and squared up.

iv.

Between 03.07.2019 to 15.03.2020, the Applicant disbursed multiple financial facilities to the tune of INR 46 Crores to the Respondent, vide Loan cum Hypothecation Agreements bearing nos. 178606, 178716, I78717, 178723, 178724, 178733, 178732, 178745 and 187117 respectively ("Loan Agreements").

v.

To secure the financial facility, the respondent mortgaged property to the Applicant as a security.

vi.

Due to unprecedented global pandemic i.e. Covid-19 and nationwide lockdown declared by the Government of India in 2020, the business of Respondent came to standstill. Resultantly the Respondent could not service the loan account with the Applicant properly and certain amounts became due and payable by the Respondent. As a consequence thereof the account of the Respondent could slip in the category of NPA and was classified as such by the Applicant on 05.12.2020.

vii.

Subsequently, the Applicant issued to the Respondent a recall notice dated 02.03.2021 for an amount of INR 22,15,01,427/- qua the loan agreement no. 187117, and another recall notice dated 27.04.2021 for an amount of INR 36,99,36,001/- qua the loan agreement nos. 178606, 178716, 178717, 178723, 178724, 178733, 178732 and 178745, thereby seeking repayment of all the financial facilities extended to the Respondent.

viii.

Thereafter, on multiple occasions, the parties attempted to explore the possibility of arriving at an amicable out of court settlement, but despite repeated parlays the parties were not in a position to reach any consensus and no settlement could thus be arrived at.

ix.

In the meantime, in terms of the order dated 08.10.2021, CIRP could commence qua the Applicant/Financial Creditor.

x.

Then to meet the debt obligation, the Respondent approached the Applicant with an offer that the Respondent be allowed to sell the secured property to clear the dues of the Applicant. On being permitted by the Applicant, the Respondent sold secured property for INR 45.3 crores, the proceeds of which went entirely to the Applicant on 30.6.2023.

xi.

Thereafter the Applicant issued a fresh recall notice dated 28.12.2023 seeking payment of the alleged balance outstanding loan amount of Rs. 75,75,14,032 within 15 days i.e. by 12.01.2024.

xii.

The loan agreement being not sufficiently stamped cannot be relied upon and need to be impounded under Section 33 of Stamp Act for being referred to adjudication of duty and penalty to the Collector under Section 38 (2) of the Act.

xiii.

The loan account of Respondent turned NPA on 05.12.2020 i.e. during the period covered by Section 10A of IBC, 2016 (25.03.2020 to 25.03.2021), thus the present application is not maintainable.

xiv.

In view of the Judgment of Hon’ble Supreme Court in Babulal Vardharji Gurjar vs. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1 and Jagdish Prasad Sarada vs. Allahabad Bank, CA (AT) (Ins) No. 183 of 2020 ordinarily date of NPA can be considered as date of default and same would not shift.

xv.

In view of the Judgment of Hon’ble NCLAT in Milind Kashiram Jadhav vs. State Bank of India, CA (AT) (Ins) No. 1589 of 2023, not the date of recall of loan facility, but the date of NPA need to be treated as date of default.

xvi.

In terms of the Judgment of Hon’ble Supreme Court in Laxmi Pat Surana vs. Union Bank of Ors., (2021) 8 SCC 481, Page 1, Section 7 of IBC, 2016, comes into play when, Corporate Debtor commits default. The expression default and not NPA/recall notice could be used in the provision consciously.

xvii.

In Bank of Maharashtra vs. Avivet Nutritional Services Pvt. Ltd. CP (IB) No. 1137/MB/2022 it could be ruled that the date of declaring the account as NPA is not of much relevance for the purpose of Section 7 of IBC, 2016 and the date of default will represent the actual or specific date on which the debt or part thereof fell due and payable by the CD in terms of the loan agreement but the same was not paid. Section 10A categorically provides that no application for initiation of CIRP qua a CD u/s 9 or 10 shall ever be filed for any default arising during the period between 25.03.2020 and 24.03.2021.

xviii.

Issuance of fresh Recall Notice subsequent to part payment of NPA debt would not shift the date of default.

xix.

In IDBI Trusteeship Services Ltd. vs. Direct Media Distribution Ventures Pvt. Ltd., it could be viewed that subsequent realisation of part amount of debt which fell due during the period covered by the provisions of Section 10A would not lead to the conclusion that the application was not barred by Section 10A of the Code.

xx.

The default is not reported to IA.

xxi.

With payment of Rs. 45.30 crores to the Applicant, the entire amount of debt was settled.

i.

The date of default in the present case is 12.01.2021 and the same is not covered by the period mentioned in Section 10-A of the Code viz. 25.03.202t to 24.03.2021.

ii.

There is nothing on record to suggest that the Applicant shall have no claim against the Respondent and all accounts between the parties shall be deemed to have been settled and squared up. On the contrary, it is the admitted case of the CD itself that the sale of the secured property was for the purpose of pay off part dues of Applicant, which is evident from the letter dated 07.12.2022.

iii.

In terms of the view taken by Hon’ble NCLAT IN Hiren Meghji Bharani vs. Shankeshwar Properties Pvt. Ltd., Company Appeal (AT)(Insolvency) No. 446/2023, non-stamping of document does not render the corporate insolvency resolution process as not maintainable, where there exists other material on record to prove existence of debt in payment of default.

iv.

The amount of loan was repayable between the year 2020 to 2023, thus the default occurred after 25.03.2021 cannot be said to be covered by Section 10A of the Code. The default would finally occur only when the CD failed to act upon the arrangement arrived at between the FC and the CD pursuant to exchange of letters dated 07.12.2022, 23.12.2022 and 27.06.2023.

v.

In terms of the view taken by Hon’ble NCLAT in Indiabulls Housing Finance Ltd. vs. Revital Realty Pvt. Ltd., Company Appeal (AT)(Insolvency) No. 994 of 2022, it is not necessary for the Appellant to file an application u/s 7 of the Code, on the happening of first default of amount due and it is discretion of the FC to decide filing of an application u/s 7 as per the facts and his legal rights.

“15.

Learned Counsel for the Appellant sought to distinguish the above judgment stating that the term of loan credit facility in the present case is distinctive from the term of repayment in the above case. It is true that in the present case, principal amount of loan was payable in one installment after 48 months, which default fell on 11.02.2021. What is prohibited by Section 10A is not to initiate any Application for default committed by CD during 10A period. In event, the CD defaults after the end of 10A period, the said default can very well be made basis for any Application under Section 7 and in the present case, finding of the Adjudicating Authority is that amount of default from 26.03.2021 to 31.05.2021 was Rs.9,38,44,668/-. The interest liability shall not come to an end merely on the ground that default of principal amount fell during 10A period. The interest was payable on outstanding loan as per the terms of the Facility Agreement as noted above. Prohibition to initiate Section 7 Application for default under 10A period, cannot mean that liability is wiped out. If the outstanding amount continues even after 10A period, the interest liability on outstanding amount on the CD shall not come to an end.”

“(iv)

certify that there are no disciplinary proceedings pending against me with the Board or ICSI Institute of Insolvency Professionals.”