State Bank Of India vs Lily Jewellery Private Limited

The case is fixed for pronouncement of the order. The order is pronounced in the open court, vide separate order. Detailed order is being uploaded on the NCLT portal today.

This is an Application bearing C.P. (IB) No.476/MB/2025 filed on 12.08.2024 by State Bank of India, the Applicant (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “the AAA Rules”) through Mr. Tapan Kumar Satapathy, Assistant General Manager & Case Lead Officer-Team 5 of the Applicant vide Authorisation Letter dated 12.07.2024 for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of Lily Jewellery Private Limited, the Corporate Debtor (CD).

The Applicant is a body corporate constituted under State Bank of India, Act 1955 on 01.07.1955 (erstwhile State Bank of Patiala). The CD is engaged in jewellery manufacturing and export business.

The Applicant has relied on the following documents:

xxviii. Copy of NeSL Form D Record of Default.

As per Part-IV of the Application the total amount claimed to be in default by the Applicant is Rs.100,35,44,847.42/- (One Hundred Crore Thirty-Five Lakh Forty-Four Thousand Eight Hundred and Forty-Seven Rupees Forty-Two Paisa) including principal amount of Rs.20,08,86,457.75/- (Twenty Crore Eight Lakh Eighty-Six Thousand Four Hundred and Fifty-Seven Rupees and Seventy-Five Paisa) and unapplied interest of Rs. 80,26,58,389.67 (Eighty Crores Twenty-Six Lakh Fifty-Eight Thousand Three Hundred Eighty-Nine Rupees and Sixty-Seven Paisa).

The date of default is mentioned as 29.07.2021.

The principal amount along with the interest for the days of default in tabular chart are annexed at Annexure - F along with the screenshots generated from the system maintained by the Applicant annexed at Annexure-G, Statement of Accounts along with the Interest Calculation showing the outstanding balances is annexed at Annexure – H. A copy of the Entries in a Bankers Book along with the Certificate u/s 2(a)(b) and (c) in accordance with The Bankers Books Evidence Act, 1891 is annexed at Annexure-I of the Application.

The Applicant granted various credit facilities including fund-based and non-fund based to the CD since 2004. The said Credit Facilities were revised on various occasions since 2004, and the last sanction was in April, 2013. Copies of Sanction Letters are annexed at Annexure-K (Colly) of the Application.

The Applicant granted a total amount of Rs. 24.23 Crores to the CD and the amount was disbursed on several occasions vide the following Sanction Letters:

The first default arose on 02.11.2013 and accordingly the account turned NPA on 01.02.2014. However, this instant Application under Section 7 is not barred by limitation in view of the subsequent events of default vide Decree cum Recovery Certificate No.100/2021 issued by Hon'ble DRT-1, Mumbai vide its Order dated 29.07.2021 read along with the Order dated 10.01.2022 passed by the Hon'ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020. Copy of the Certificate of NPA dated 01.02.2014 is annexed at Annexure-J and Decree cum Recovery Certificate No. 100/2021 dated 29.07.2021 is annexed at Annexure-N7 of the Application.

This Tribunal vide order dated 21.04.2025 directed the Applicant to amend the Application as under:

The Applicant complied with the above order which is recorded vide order dated 29.04.2025, wherein the Applicant had filed additional affidavit along with amended Form-I.

The date of default as per the amended Form-I is 29.08.2021. The Applicant submitted that he has revised the computation of limitation and clarifies that the Hon’ble DRT-I, Mumbai passed a Decree order on 29.07.2021, whereby the CD was directed to pay a certain adjudicated amount to the Applicant within 30 days from the date of the order. Accordingly, the date of default has arisen on 29.08.2021.

Therefore, the limitation period for the present Application began from 29.08.2021 and was set to expire on 29.08.2024. The present Application was filed on 16.08.2024, i.e. well within the prescribed three - years limitation period stipulated under the limitation Act 1963 r/w Section 238A of the Code. Thus, the Application stands filed within time and is legally maintainable.

The Applicant has submitted that due to CD’s default in repaying the financial debt, the total outstanding amount in its A/c nos. 35426341405 and 38327333472 has amounted to Rs. 100,35,44,847.42/-. This includes principal amount and unapplied interest amount from 01.12.2006 to 30.06.2024.

The above credit facilities were enhanced and renewed through various sanction letters, including Ad-Hoc limits. The final renewal of the said credit facilities was sanctioned through letter dated 04.02.2013 by which the fund-based limits were maintained at Rs. 24 Crores and Non-fund-based limit at Rs. 0.23 Crores. In support of the availed limits, the CD executed a loan agreement, Hypothecation Agreement of goods and assets and Deed of Guarantee dated 30.04.2013 was executed by Yash Jewellery Pvt. Ltd. and Say India Jewellery Pvt. Ltd. extending the Guarantee for sum of Rs. 39 Crores and Rs. 6.50 Crores respectively against the credit facilities availed by the CD.

Further, the Asst. Registrar of Bandra Centre of Courts issued notice to the Senior Inspector of Police pursuant to the order dated 11.07.2016 by the Hon’ble Chief Metropolitan Magistrate Esplanade, Mumbai in Case No. 421/SA/2015, to provide assistance for taking physical possession of mortgaged property. The Applicant took physical possession of the mortgage property under Section 14 of SARFAESI Act, 2002 on 11.11.2016 along with paper publication.

The Applicant initiated the recovery proceedings before Hon’ble Debt Recovery Tribunal – I, Mumbai and issued Decree cum Recovery Certificate (No. 100 of 2021) dated 29.07.2021 adjudicating the total liability of the debtor for Rs. 100,35,44,847.42/-which was further substantiated through statement of accounts showing outstanding balance and statement showing applied interest from 01.02.2014 to 30.06.2024.

The Tribunal’s order dated 13.06.2025 and 26.06.2025 respectively records as below,

It was seen that no one appeared on behalf of the CD on these dates and no Vakalatnama and Reply was filed on DMS. Therefore, this Tribunal vide order dated 26.06.2025, set the CD ex-parte.

We have heard the Counsel for the Applicant and have perused the records as placed before us. Our findings in the matter are as under: -

The Applicant has placed on record Sanction Letters dated 03.09.2004, 07.11.2007, 23.08.2008, 18.04.2009, 23.04.2012, 26.07.2017 and 04.02.2013. From perusal of these letters it is seen that the Applicant had sanctioned the Fund Based (FB) and Non-Fund Based (NFB) credit facilities as requested by the CD. The sanctioned amount was Rs. 2 Crore for Ad-hoc EPC (Export Packing Credit), Rs. 4.50 Crore for Ad-hoc EPC and PSC (Post Shipment Credit) and Rs. 5 Crore for Ad-hoc Pre-Shipment/Post Shipment. The FB and NFB were renewed several times and finally they were renewed for Rs. 24.23 Crore.

Thereafter, a Loan Agreement was executed between the Applicant and the CD on 30.04.2013. This agreement was in support of the credit facilities borrowed by the CD, along with Hypothecation Agreement of goods and assets dated 30.04.2013, Deed of Guarantee dated 30.04.2013 executed by Yash Jewellery Pvt. Limited and Say India Jewellery Pvt. Ltd. extending a guarantee for sum of Rs. 39 Crore and Rs. 6.50 Crore respectively.

The certificate under Section 2A(a) of the Banker’s Book of Evidence Act, 1891 confirms that the CD has maintained the accounts bearing no. 35426341405 and 38327333472 with the Applicant bank.

The CD then issued an acknowledgment of debt of Rs. 6,01,10,307/-, against EPC Limit (11063799881) as on 31.03.2014, through a Revival Letter executed by the CD and the Guarantors. But the CD failed to clear the outstanding dues.

Due to continued defaults by the CD, the Applicant issued a recall notice dated 13.01.2015 recalling the debt amount. But on perusal of the recall notice dated 13.01.2015 we see that the page is missing where the recall had been made, if any. Further, the Applicant issued a statutory Demand Notice under Section 13(2) of the SARFAESI Act, 2002 dated 21.01.2015 demanding the outstanding dues of Rs. 22,63,70,872/- and unapplied interest of Rs. 4,99,40,285.72/- calculated from 31.12.2013 along with interest at the rate of 17% p.a. from 31.12.2014 on the aforesaid amount. The CD has not replied or disputed to this Demand Notice.

Thereafter, the Applicant had initiated the recovery proceedings before the Ld. DRT-I, Mumbai. The Ld. DRT-I issued Decree cum Recovery Certificate (No. 100 of 2021) dated 29.07.2021 recording the following:

The CD has not complied with the above decree and therefore, the Applicant gets a fresh cause of action from the date of decree of the Hon’ble DRT-I i.e. 30 days from 29.07.2021. The CD had to pay the Applicant an amount of Rs. 31,01,58,477.62 together with 17% p.a. with monthly rests from the date of filing of the Original Application till realization and CD having defaulted the same, the Applicant has filed this Application under Section 7 of the Code. The debt amount as per the Application is more than the threshold amount of Rs.1 Crore and therefore, considering the Decree cum Recovery Certificate and the Application, we are of the view that the CD has defaulted in paying the outstanding debt amount to the Applicant.

The Applicant stated that the first default arose on 02.11.2013 and the account turned NPA on 01.02.2014. The CD has taken the date of default in Part-IV as 29.08.2021 which is 30 days from the date of Decree cum Recovery Certificate No. 100/2021 issued by Hon’ble DRT-1, Mumbai vide its order dated 29.07.2021. To support this date of default the Applicant has placed reliance on the judgment of Hon’ble Supreme Court in Dena Bank vs C. Shivkumar Reddy and Anr., (2021) 10 SCC 330 where the Hon’ble Court has held that the Appellant bank was entitled to initiate the proceedings under section 7 of the IBC within 3 years from the date of issuance of recovery certificate. The extract of the judgment is reproduced as below,

Therefore, relying on the case of Dena Bank (Supra), we hold that the present Application filed by the Applicant is maintainable and within limitation.

The date of default is mentioned as 29.08.2021 and the same was set to expire on 29.08.2024. However, the Applicant has filed the Application on 16.08.2024 which is within limitation period i.e. 3 years as given under the Limitation Act, 1963.

The NeSL record of default under Form D records the Status of Authentication as ‘Authenticated’ and the total outstanding amount as Rs.16,72,28,928/- and Rs. 3,36,57,530/- which is the principal amount as per Part-IV of the Application.

The Applicant has proposed the name of Mr. Mukesh Khathuria to act as the Interim Resolution Professional (IRP) and has given his declaration in Form 2, inter alia, stating that no disciplinary proceeding is pending against him. On perusal of the IBBI website the Applicant has AFA which is valid till 31.12.2025.

Thus, it is clear from perusal of the record that an amount more than the threshold limit of Rs.1 Crore under Section 4 of the Code was due and payable by the CD to the Applicant. Hence, we find that the Applicant has been able to substantiate the existence of a financial debt due and payable by the CD which remained unpaid. The debt so owed by the CD to the Applicant falls within the definition of “financial debt” under Section 5(8) of the Code.

In view of the above, we find that requisite conditions necessary to trigger CIRP in respect of the CD are fulfilled, the Application is complete as all the relevant documents have been attached by the Applicant along with the Application. As a result, the matter deserves to be admitted under Section 7 of the Code.

We make it clear that at this stage we have not crystalized the amount as claimed in this Application, the same is left to be collated by the IRP.

In view of the aforesaid findings, Application bearing C.P.(IB) No.476/MB/2025 filed under Section 7 of the Code by State Bank of India, the Applicant, for initiating CIRP in respect of Lily Jewellery Private Limited, the Corporate Debtor is hereby admitted.

We further declare moratorium under Section 14 of the Code with consequential directions as mentioned below: -