State Bank Of India vs Cosmas Research Lab Ltd.

Per : Sh. L.N. GUPTA, M (T) & Sh. HARNAM SINGH THAKUR, M (J)

Both IA No.1315/2023 and IA No.1325/2023 are taken up together for discussion being interrelated and interconnected.

The present application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, on behalf of the Financial Creditor, i.e. State Bank of India to place on record certain additional documents as Annexure R-1 and R-2. The same are taken on record. The IA- 1318/2023 is disposed of accordingly.

The present application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, on behalf of the Financial Creditor, i.e. State Bank of India to place on record additional documents as Annexures R-1 to R-6. The same are taken on record. The IA-1325/2023 is disposed of accordingly.

The applicant State Bank of India (for brevity, the “Applicant”) has filed the present petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity, the ‘IBC, 2016’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 with a prayer to initiate the Corporate Insolvency process against M/s Cosmas Research Lab Ltd (for brevity, the "Respondent")

The Respondent namely, M/s Cosmas Research Lab Ltd is a Company incorporated on 02.05.2008 with CIN U24110PB2008 PLC031925 under the provisions of the Companies Act, 1956 having its registered office at B-1-1446, Haibowal Khurd, Hambrain Road Distt. Ludhiana, Punjab-141001, which is within the territorial jurisdiction of this Bench. The Authorized Share Capital of the Respondent Company is Rs. 25,00,00,000/- and the Paid-up Share Capital of the Company is Rs.249866000/- as per the Master Data.

In its application, it is averred by the Applicant that vide sanction letter No. RM-1/222, dated 17.03.2011, it had done the revalidation of Term Loan for an aggregate amount of Rs. 25 Crores ("Credit Facilities") to the Respondent. The detailed particulars of the unpaid Financial Debt claimed including the total amount of default and the date of default as mentioned by the applicant in Part IV of the application read thus:

Thus, as per Part IV of the application (ibid), the Applicant has claimed an outstanding "financial debt" of Rs. 58,78,52,702.48 /- and relied on 28.01.2013 as the "date of default". It has been added that the Account of the Respondent Company was classified as NPA on account of default on 28.01.2013. It is further submitted that on 29.11.13, the Applicant Bank issued the Loan Recall Notice-cum-invocation of Guarantees, calling upon the CD and other obligors to pay the defaulted amount.

To buttress its plea, the Applicant has relied on the following documents:

Based on the facts described above and the documents, the Applicant has prayed for the initiation of CIRP against the Respondent.

On issuance of the notice, the Respondent has filed its reply dated 27.05.2022 stating mainly the following:

The petition is not maintainable because it has not been filed by a duly authorized person. It has been filed by a sub-delegatee, the authorization and power of the person delegating the said authority is not available on record.

The documents filed with the application are neither original nor proved in accordance with law. The applicant has failed to fulfil the mandate of law and file the statutory form/Application as per the requisite statutory norms, even Form-l, Part-V is incomplete.

The date of default as defined under IBC, 2016 is 28.01.2013, when the account of the Corporate Debtor was declared NPA and the present petition has been filed before this NCLT in July 2019, which is beyond the statutory period of three years as provided under the Limitation Act, 1963.

The Hon'ble Supreme Court in its judgment dated 30.09.2019 in the matter of Sagar Sharma & Anr. Vs. Phoenix ARC Private Limited & Anr., (2019) 10 SCC 353 following its own ruling in the matter of B.K. Educational Services Private Limited vs. Parag Gupta and Associates, (2019) 11 SCC 633 has reiterated that the date of coming into force of the Insolvency and Bankruptcy Code 2016 on 01.12.2016 does not and cannot form a trigger point of limitation for applications filed under the Code and since "Applications" are Petitions which filed under IBC, it is only Article 137 of the Limitation Act, 1963, which will apply to such Applications under the Code. Furthermore, in the case of C. Shivakumar Reddy Vs. Dena Bank & Anr. Company Appeal (AT) (Insolvency) No. 407 of 2019, Hon'ble National Company Law Appellate Tribunal in its judgment dated 18.12.2019, following the ratio of the judgment of B.K. Educational (Supra) held that the limitation period starts from the date of default i.e. the date when the account was declared NPA and set aside the order passed by the Adjudicating Authority initiating CIRP against the Corporate Debtor, thus dismissing the Application under Section 7 of IBC, filed by Dena Bank in that case. Accordingly, the claim of the Financial Creditor herein is a time-barred claim and the petition needs to be dismissed on this ground only.

In counter response, the Applicant has filed its rejoinder dated 06.12.2022 and written submissions dated 30.01.23 and a short note dated 06.04.2023 (on the point whether the petitioner - SBI Bank could have filed the present petition independently without the consent of the co-creditor i.e. Punjab National Bank) stating mainly the following :

The Financial Creditor is a bank and abides by the guidelines of RBI. The Gazette Notification No. ORG/ 17405 dated 02.05.1987 clearly specifies the class of officers, who can exercise the Signing Power to the extent specified against each officer. The Gazette Notification is also annexed along with the Section 7 Application filed by the Financial Creditor as Annexure-A-1.

The entries in the balance sheet amounts to acknowledgement of debt and extends limitation. The relevant balance sheets are enclosed as Annexure-A1 in the application.

The bank had filed an application for recovery of its dues before DRT, Chandigarh against the present Corporate Debtor along with its guarantors/mortgagors, which was allowed by the Hon'ble DRT and the Recovery Certificate was issued on 20.06.2019. The Demand Notice in the recovery proceeding was issued on 29th January 2021. Consequently, a fresh cause of action also arises in favour of the Applicant Bank being a secured financial creditor. Thus, the present application is within the limitation period.

The Applicant has placed reliance upon the judgment of C. Shivakumar Reddy vs. Dena Bank & Anr. Company Appeal (AT) (Insolvency) no. 407 of 2019, which has been set aside by the Hon'ble Supreme Court in Dena Bank vs. C. Shivakumar Reddy & Anr. Civil Appeal No. 1650 of 2020 observing that an application under Section 7 of the IBC would not be barred by limitation on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were acknowledgements of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. Thus, the present claim of the financial creditor is not barred by time.

The Corporate Debtor has accepted in their averments that they have defaulted and are unable to pay the stipulated repayment as per schedule as the unit of the Corporate Debtor was still at the implementation stage and yet to commence operations. When an account is declared NPA by any branch, the account is transferred to Stressed Asset Management Branch and the same cannot be disputed as it is the banking norms.

Lastly, NCLT does not have any jurisdiction over SARFAESI actions as the reply is misleading and filed with a mala-fide intention of defeating the SARFAESI measures initiated by the financial creditor in order to recover its dues from the corporate debtor.

We heard the submissions of both parties and perused the pleadings on record, including the Written Submissions and short note of Applicant. The Respondent in its defence has contended that the petition is not maintainable because it has not been filed by the duly authorized person. Moreover, the present petition has been filed before this Adjudicating Authority in July 2019, which is beyond the statutory period of 03 years as provided under the Limitation Act, 1963. Further, the financial creditor has filed the present petition independently without the consent of co-creditor, i.e., Punjab National Bank.

Per Contra, the Applicant has annexed various documents to prove that this petition has been filed by the duly authorized person and the Application is within limitation. During the hearing, in support of its contentions, the Ld. Counsel for the Applicant referred to the Sanction Letter dated 17.03.2011 (Pg. 125), Loan Recall Notice (pages 8-10 of IA 1446/2022) issued on behalf of the Applicant Bank, and the working sheet regarding computation of amount and days of default. The Applicant has also contended that there is no Inter-Se/consortium agreement between the Financial Creditor and Punjab National Bank.

To examine the first contention of the Respondent that the petition is not maintainable because it has not been filed by the duly authorized person, we refer to the document placed by the applicant i.e. “the Govt. of India, Gazette Notification of the Applicant Bank, which reads as given overleaf:

Further, the Applicant bank has placed on record the Specific authorization for filing application before NCLT under IBC, which reads as follows:

Thus, on perusal of the Gazette Notification of the Applicant Bank and Specific authorization for filing application before NCLT under IBC, this Bench observes that the Application has been filed by the duly authorized person Sh. Praveen Kumar Sharma, Assistant General Manager-SBI.

Now, we would like to examine the Respondent’s second contention that the petition is barred by limitation. We have already noted above while perusing Part IV of Application (Particulars of Financial Debt) that the Date of default relied upon by the Applicant is 28.01.2013. During the course of arguments, the Applicant referred to the CIBIL Report dated 23.06.2015 as per which there was an outstanding balance of Rs. 22,94,88,900/- is reflected against the Account No. “00000031683916117” of the corporate debtor. The said report is reproduced below for the sake of immediate reference:

Further, during the course of arguments, the Applicant also referred to the Financial Statement of the corporate debtor for the period from 01.04.2016 to 31.03.2017 (page 49 of rejoinder), which reflects the borrowing from the Applicant Bank by the CD. The said Financial Statement of the corporate debtor for the period from 01.04.2016 to 31.03.2017 is reproduced below for immediate reference:

On perusal of the aforesaid documents, we find that the present application filed by the Applicant Bank is well within the limitation in the following manner:

As regards the third objection of the Respondent regarding the present application being filed by SBI alone without the consent of the co-creditor i.e. Punjab National Bank, the Applicant Bank vide its short note dated 06.04.2023 has submitted that there is no Inter-Se/Consortium agreement between the Financial Creditor (SBI) and Punjab National Bank and has contended that any member of Consortium of Banks/lenders can individually filed an application under Section 7 of IBC, 2016. The Applicant has relied upon the judgment in Ferro Alloys Corporation Ltd. V. Rural Electrification Corporation Ltd. Company Appeal (AT) (Insolvency) No. 92 of 2017, in which the Hon’ble NCLAT has held that Consortium of Banks have no role to play at the time of the admission of the application under Section 7 of the Code. For examining the present objection, we refer to Section 7 (1) of the Code which reads as follows:

Thus, from a bare perusal of the above provision, it can be inferred that a Financial Creditor either by itself or jointly, with other financial creditors can file a Section 7 application. Thus, we find no force in the contention of the Respondent that the Applicant Bank - SBI could not have filed the present application without the consent of the Punjab National Bank and hence, rejected.

The Applicant Bank has also placed on record the loan recall notice under section 13(2) of SARFAESI Act, 2002, which is reproduced below:

Furthermore, from the pleadings, we also notice that as part of the Comprehensive Debt Restructuring Proposal (‘CDRP’), the Respondent Company itself had proposed to the Applicant Bank for a one-time settlement of its dues, which in terms of the judgment of the Hon’ble Supreme Court in “Dena Bank (now Bank of Baroda) vs. C. Shivakumar Reddy and Anr.” is an acknowledgment of debt. The relevant para of the judgment (supra) dated 04.08.2021 reads thus:

Thus, in terms of the abovementioned discussion, we find that the petitioner Bank has been able to successfully establish the debt and default beyond doubt on the part of the Respondent in repayment of its financial debt.

In the sequel to the above and the given facts and circumstances, the present Application being complete and the Applicant having established the default on the part of the Respondent in payment of the Financial Debt for an amount being above the minimum threshold limit, the present Application is admitted in terms of Section 7(5) of the IBC and accordingly, the Moratorium is declared in terms of Section 14 of the Code. As a necessary consequence of the Moratorium in terms of Section 14(1) (a), (b), (c) & (d), the following prohibitions are imposed, which must be followed:

As proposed by the Applicant, this Bench appoints Mr. Rajender Kumar Jain as IRP having Registration IBBI/IPA-001/IP-P00543/2017-2018/10968 Email ID: [email protected] The antecedents of the proposed IRP have been verified by the Legal Research Associate of this Adjudicating Authority. This Adjudicating Authority further orders that:

The Applicant is directed to deposit Rs.5,00,000/- (Five Lakhs) only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as to be duly accounted for by IRP and shall be paid back to the Applicant.

A copy of this Order shall immediately be communicated to the Applicant Bank, the Respondent, and the IRP named above by the Court Officer/Registry of this Tribunal.

In addition, a copy of the Order shall also be forwarded by the Court Officer/Registry to IBBI for their records.