State Bank Of India vs SAV Steels Pvt. Ltd.

The Financial Creditor is a statutory body constituted under the State Bank of India Act, 1955. The Corporate Debtor is a Private Limited Company incorporated under the relevant provisions of the Companies Act, 1955, and carrying on its business as a Dealer of Iron, Steels and Iron ores.

The case of the Financial Creditor is that the Corporate Debtor approached the Financial Creditor for availing a term loan with a credit limit of Rs. 28 Crores. Upon consideration of the said loan application, the Financial Creditor issued a sanction letter dated (16^{\text{th}}) September, 2009 for allocation of such term loan.

Thereafter, the Corporate Debtor approached the Financial Creditor to enhance the sanctioned credit limit to ₹34 Crore, the Financial Creditor, vide letter dated 13^th September, 2010, sanctioned the same. In order to materialize the said enhancement of credit limit, the Directors of the Corporate Debtor stood as personal guarantors.

After successive enhancement of credit limits till 2012, the total credit limit sanctioned to the Corporate Debtor stood at ₹55 Crore (the principal amount).

In spite of repeated demands and requests by the Financial Creditor regarding the repayment of the dues, the Corporate Debtor failed and neglected to make payments and maintain the said loan account. Accordingly, as per RBI guidelines, the said loan account was classified as Non- Performing Assets (NPA) on (29^{\text{th}}) June, 2013.

Thereafter, the Financial Creditor issued a notice under section 13(2) of the SARFAESI Act, 2002 dated (30^{\text{th}}) November, 2013 to the Corporate Debtor. In spite of the same, the Corporate Debtor failed to pay the outstanding dues to the Financial Creditor.

Afterwards, the Ld. Debt Recovery Tribunal- I, Kolkata (DRT), upon adjudicating the proceedings initiated on (12^{\text{th}}) January 2015, under the Recovery of Debts Due to Bank and Financial institutions Act, 1993, passed a final order dated (29^{\text{th}}) March 2022 whereby the Ld. DRT set the Corporate Debtor ex parte on (30^{\text{th}}) August 2019 and simultaneously allowed the recovery of a sum of (\text{₹}72,93,99,998.68) alongwith interest @14.25% from the date of filing of the proceedings before the Ld. DRT.

The instant petition has been filed by the Financial Creditor for initiating CIRP of the Corporate Debtor against the admitted debt and default to the tune of ₹1,59,57,15,936.60 as on 31^st May 2021.

The Financial Creditor has relied on various documents to support its claims, including:

a. Memorandum of Deposit of Title Deeds and Memorandum related to deposit of Title Deeds for creation of charge for the Term Loan, being Exhibit "E";

b. Sanction Letter for Commercial Advances dated (16^{\text{th}}) September 2019, being Exhibit "H";

c. Agreement of Loan cum Hypothecation dated (17^{\text{th}}) September 2009, being Exhibit "I";

d. Renewed sanction letter dated (6^{\text{th}}) March 2012 for overall credit limit of ₹55 Crore issued by the Financial Creditor, being Exhibit "W";

e. Supplemental Agreement of loan cum hypothecation for overall limit of ₹55 Crore dated 7^th January 2012, being Exhibit "X";

f. CIBIL Report, being Exhibit "BB";

g. Statement of the account as on (31^{\mathrm{st}}) May 2021, of the Corporate Debtor maintained with the Financial Creditor, being Exhibit "DD";

h. Notice under SARFAESI Act, 2002, dated (30^{\text{th}}) November 013, being Exhibit "EE";

Demand Notices dated (18^{\text{th}}) December 2014 and (5^{\text{th}}) January, 2015, being Exhibit "FF";

The instant interlocutory application has been filed by the Financial Creditor to put on record additional documents being the order dated 29th March 2022 passed by the Ld. Debt Recovery Tribunal- III, Kolkata as well as to seek the Amendment of the Petition, as indicated in Annexure 'B' of the interlocutory application.

Notice in this petition was issued on 27th September, 2021 by this Adjudicating Authority. As per the Tracking Report of the Postal Department, the same was served upon the Corporate Debtor on 5th October, 2021. However, the Corporate Debtor did not appear and a fresh notice was issued on 21st April, 2022.

Again, on 5th May, 2022, notice was directed to be served upon the Corporate Debtor. On 23rd May, 2022 because of continuous non-appearance of the Corporate Debtor and its failure to file Reply Affidavit, the matter was set ex-parte.

On 8th June, 2022, further opportunity was sought by Financial Creditor to serve the Corporate Debtor by substituted service. Service Affidavit has been filed on behalf of the Financial Creditor, placing on record publication made in two newspapers i.e. 'Business Standard' and 'Ekdin' whereby the publication was made for appearance of the Corporate Debtor. The Corporate Debtor despite publication has not appeared.

When this matter was pending, interlocutory application was filed by the Financial Creditor on 12th July 2022 wherein it is sought to bring on record the final order/judgment passed by the Ld. Debt Recovery Tribunal-I, Kolkata on 29th March, 2022 after filing of the instant petition under section 7 of the Code. Inadvertently this was not mentioned in the section 7 petition. Pursuant to the said final order /judgment passed by the Ld. DRT, the date of default is to be mentioned as 28th April, 2022 in Part-IV of this petition.

While arguing this application, reliance had been placed on judgment passed by the Hon'ble Supreme Court in the case of Dena Bank vs. C. Shivakumar Reddy and Anr.1, paragraph 141, which is reproduced hereinbelow:-

In view of law laid down by the Hon'ble Supreme Court of India in the above referred judgement, IA No. 973/KB/2022 filed by the Financial Creditor is allowed.

Further, in view of the abovementioned judgment and in light of the order dated (29^{\text{th}}) March 2022 passed by the DRT, a fresh cause of action will arise from (29^{\text{th}}) March 2022. Accordingly, the date of default has been amended to (28^{\text{th}}) April, 2022 in the Form 1 of the petition. In view of the same, the instant petition is within the period of limitation.

We have heard the Ld. Counsel appearing for the Financial Creditor and perused the record.

Now coming to the merits of the case, it is observed that the overall amount sanctioned to the Corporate Debtor as on (6^{\text{th}}) March 2021 is ₹55 Crore (Exhibit W, pages 249-257 of the petition). It can further be seen from the CIBIL report that the Corporate Debtor availed various credit facilities from the Financial Creditor over the years and as such multiple loan accounts of the Corporate Debtor were open on the last reported date i.e (31^{\text{st}}) January 2016. As such a debt was due from the Corporate Debtor to the Financial Creditor and that the Corporate Debtor has defaulted in the repayments of the said debt.

Further, the DRT, vide order dated (29^{\text{th}}) March 2022, has admitted a sum of ₹72,93,99,998.68 along with interest @14.25% from the date of filing of the proceedings before the Ld. DRT, thereby making it further clear that a debt is still due from the Corporate Debtor to the Financial Creditor.

No further payment of the debt or any part thereof has been put on record, further indicating that the Corporate Debtor has defaulted in the payment of its debt.

In view of the above facts and circumstances, this Adjudicating Authority is satisfied that the a debt is due from the Corporate Debtor and the Corporate Debtor has defaulted in the payment of the same and accordingly and as such it must be admitted into CIRP for revival. The IRP has been nominated by the Financial Creditor. As such, the petition is complete in all respects.

It is, accordingly, hereby ordered as follows:-

The application bearing CP (IB) No. 208/KB/2021 filed by State Bank of India (Financial Creditor), under section 7 of the Code read with rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP against SAV Steel Private Limited, CIN: U27109WB2006PTC109155, the Corporate Debtor, is admitted.

ii) There shall be a moratorium under section 14 of the IBC.

iii) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be.

iv) Public announcement of the CIRP shall be made immediately as specified under section 13 of the Code read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Mr. Uday Narayan Mitra, registration number IBBI/IPA-001/IP-P00793/2017-18/11360, email: [email protected] is hereby appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the Code subject to submission of a valid Authorisation of Assignment in terms of regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016. The fee payable to IRP or the RP, as the case may be, shall be compliant with such Regulations, Circulars and Directions as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the Code.

vi) During the CIRP period, the management of the Corporate Debtor shall vest in the IRP or the RP, as the case may be, in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. vii) The IRP/RP shall submit to this Adjudicating Authority periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor. viii) The Financial Creditor shall initially deposit a sum of ₹ 4,00,000 /-(Rupees Four lakh only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC). Further, the Fees of the IRP will be subject to the approval of the COC in accordance with Notification No. IBBI/2022-23/GN/REG091 dated 13.09.2022, issued by the Insolvency and Bankruptcy Board of India, as published in the in the Official Gazette. ix) In terms of section 7(5)(a) of the Code, Court Officer of this Court is hereby directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post, email and WhatsApp immediately, and in any case, not later than two days from the date of this Order.

Additionally, the Financial Creditor shall serve a copy of this Order on the IRP and on the Registrar of Companies, West Bengal, Kolkata by all available means for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.