United Bank of India vs Adyama Rice Mill Pvt. Ltd.

Per Shri. Jinan K.R., Hon’ble Member (J):

This is an application filed by the Financial Creditor / United Bank of India under Section 7 of the Insolvency and Bankruptcy Code 2016 (I&B Code in short) for initiating Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor / Adyama Rice Mill Pvt. Ltd. alleging that the Corporate Debtor has failed to make repayment of the credit facilities which was availed by the Corporate Debtor and granted by the Financial Creditor, in pursuance of three Sanction Letters dated 31.05.2006, 23.10.2009 and 18.04.2011 and the Corporate Debtor has therefore, committed default, and the amount claimed to be in default is to the tune of Rs. 16,61,51,559.78/- (Rupees Sixteen Crores Sixty One Lakhs Fifty One Thousand Five Hundred Fifty Nine and Paise Seventy Eight only) as on 31.12.2018, and so, the Financial Creditor has filed this application under Section 7 of the I & B Code.

Brief facts for the consideration of the application are as follows:-

- The Financial Creditor enhanced the existing limit of credit facilities from Rs. 270.72 lakhs to Rs. 358.78 lakhs in favour of the Corporate Debtor, on its request, by issuing a Sanction Letter dated 31.05.2006, pursuant to which the Corporate Debtor executed various documents in favour of the Financial Creditor. Further, upon request from the Corporate Debtor, the Financial Creditor issued a Sanction Letter dated 23.10.2009 in favour of the Corporate Debtor enhancing the existing credit limit, in pursuance of which, the Corporate Debtor on 28.10.2009, had mortgaged the property by deposit of title deeds, and executed certain banking documents in favour of the Financial Creditor and executed a letter of Guarantee through its authorised directors in favour of the Financial Creditor. Thereafter, the Financial Creditor, upon request from the Corporate Debtor, further enhanced the credit limit vide Sanction Letter dated 18.04.2011, pursuant to which certain banking documents as well as extension of equitable mortgage of the property were executed in favour of the Financial Creditor. The Sanction Letters dated 23.10.2009 and 18.04.2011 are annexed with the application and marked as "Annexure D" and “Annexure K”, respectively. Upon execution of the abovementioned documents, the Corporate Debtor availed the said credit facilities in full.

- The Corporate Debtor confirmed the balance in the loan account, as on 31.12.2012, by executing acknowledgment of debt, signed by the Corporate Debtor on 26.02.2013, a copy of which is annexed and marked as “Annexure O”. The Corporate Debtor, therefore committed default in repayment of the Credit facilities and continued with the default consequent to which, the loan account was declared as Non – Performing Asset (NPA) on 31.08.2013. The Financial Creditor wrote various letters to the Corporate Debtor for non-servicing of instalments and thereafter, issued a Recall Notice dated 01.10.2013 recalling the entire dues inclusive of interest as on 31.08.2013, and the Corporate Debtor issued a reply to the said letter on 21.10.2013, however, it did not pay any amount as demanded in the Recall notice. - The United Bank of India on 17.10.2013, issued notice under Section 13(2) of the SARFAESI Act, 2002 calling upon the Corporate Debtor to pay the outstanding amount, a copy of which is annexed as “Annexure S”. The Corporate Debtor made a representation against the said Notice on 18.11.2013 wherein it admitted the dues of the Financial Creditor. The United Bank of India has also initiated proceedings before the Ld. Debts Recovery Tribunal – II, Kolkata against the Corporate Debtor and its guarantors on 10.02.2015 by filing application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 bearing O.A. No. 63 of 2015 wherein the proceeding is pending final adjudication.

- As on 31.12.2018, the total outstanding amount under the various credit facilities granted by the Applicant to the Corporate Debtor is Rs. 16,61,51,559.78/-, which the Corporate Debtor has failed and neglected to repay. Therefore, the Financial Creditor has filed this application under Section 7 of the I & B Code, 2016 and prays for passing an order for admission of the application.

The Financial Creditor produced proof of lending loans to the Corporate Debtor and following are the documents relevant for the consideration of the case in hand:-

The applicant has also proposed the name of Resolution Professional to act as Interim Resolution Professional, and produced Form 2 and written communication from Mr. Balaknath Bhattacharyya, with address at Sahabagan, Salua, Post Office – R. Gopalpur, Dist – North 24 Parganas, Kolkata - 700 136 with Registration No. IBBI/IPA-003/IP-N00096/2017-18/10971 with e-mail id: [email protected]. Upon the abovementioned contentions, the applicant prays for admitting the application under Section 7 of the I & B Code.

The Applicant filed an affidavit of service proving delivery of notice to the Corporate Debtor by way of publication as well as by e-mail. So, delivery of notice to the Corporate Debtor is declared sufficient. Since nobody on the side of the Corporate Debtor appeared and thereby, the Corporate Debtor was called absent and declared ex-parte vide order dated 29.07.2019.

Heard the Ld. Counsel appearing for the Financial Creditor and perused the records.

This is an application filed by the Financial Creditor for initiating Corporate Insolvency Resolution Process as against the Corporate Debtor alleging that the Corporate Debtor committed default in repayment of the credit facilities availed by it to the tune of Rs. 16,61,51,559.78/- (Rupees Sixteen Crores Sixty One Lakhs Fifty One Thousand Five Hundred Fifty Nine and Paise Seventy Eight only) as on 31.12.2018 as per three Sanction Letters executed with the Financial Creditor. The copies of two of the Sanction Letters have been produced along with the application and marked as “Annexure D” and “Annexure K”. According to the Ld. Counsel for the Financial Creditor, the requirement to be meted out to file an application of this nature has been complied with by the applicant and since the Corporate Debtor did not repay the debt, the application deserves to be allowed. It is submitted that the Corporate Debtor availed the credit facilities under the Sanction Letters in full and thereafter, committed default in repayment of the said credit facilities, as a result of which the loan account was declared as NPA on 31.08.2013. A balance confirmation dated 31.12.2012, is also seen produced on side of the Financial Creditor (annexed and marked as “Annexure O”) which is signed by the Corporate Debtor on 26.02.2013 acknowledging that a balance of Rs. 9,19,82,677.78/- is due to the Financial Creditor. It is further contended that despite several reminders and letters sent to the Corporate Debtor, and issuing the loan recall notice dated 01.10.2013 ("Annexure Q"), the Corporate Debtor failed to repay the loan amount and, thereafter, the applicant issued notice dated 17.10.2013 under Section 13(2) of the SARFAESI Act, 2002 calling upon the Corporate Debtor to pay the outstanding amounts. The Corporate Debtor replied to the said notice vide letter dated 18.11.2013 by requesting for restructuring the loan account and admitting the dues of the Financial Creditor. Copies of the Section 13(2) Notice and the reply of the Corporate Debtor are annexed with application and marked as "Annexure S" and "Annexure T", respectively. The Corporate Debtor, however did not pay the outstanding amount, and further, the Financial Creditor initiated proceedings before the Ld. Debts Recovery Tribunal - II, Kolkata against the Corporate Debtor and its guarantors by filing application being O.A. No. 63 of 2015 which is pending final adjudication, and hence, the Financial Creditor has filed this application under Section 7 of the I & B Code, 2016 to initiate CIRP against the Corporate Debtor.

The Ld. Counsel on behalf of the Financial Creditor also submits that a copy of the statement of accounts is produced to prove that the above said amount is due and the document is marked as "Annexure R" and "Annexure U". Therefore, being proved that the loan amount as claimed is due, and that the Corporate Debtor has committed default in repaying the outstanding dues despite recalling of the loan, issuing notice under SARFAESI Act, 2002, and initiating proceedings before the Ld. Debts Recovery Tribunal, and hence it appears to us that the Financial Creditor here, in the instant case, has succeeded in proving the existence of default on part of the Corporate Debtor.

The applicant has also proposed the name of Resolution Professional to act as Interim Resolution Professional, Mr. Balaknath Bhattacharyya, with address at Sahabagan, Salua, Post Office – R. Gopalpur, Dist – North 24 Parganas, Kolkata - 700 136 with Registration No. IBBI/IPA-003/IP-N00096/2017-18/10971 with e-mail id: [email protected]. A reference to the Form 2 produced on side of the applicant proves that there are no disciplinary proceedings pending against him. Therefore, the applicant has succeeded in meeting with all the requirements to be satisfied under Section 7 (3) of the I & B Code 2016 and so it appears to us that the application is complete as per the statutory provisions. Accordingly, this application deserves to be admitted.

In the light of the above said discussions, we hereby admit the application under Section 7 of the I & B Code, upon the following orders: -

Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Sec.31 or passes an order for liquidation of corporate debtor under Sec.33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be.

List the matter on 16th September, 2019, for the filing of the progress report.