United Bank Of India vs M/s. Sarnamoy Plastic Sack Manufacturing Private Limited

Per Harish Chander Suri, Member (T).

This Application under section 7 of the Insolvency & Bankruptcy Code, 2016 read with Rule 4 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has been filed by United Bank of India, a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 having its Head Office in Kolkata (hereinafter referred to as the Financial Creditor), through Shri Skand Kumar Pandey, Assistant General Manager of Salt Lake Branch who was authorized by General Manager (Recovery, legal, Credit Monitoring, RTI, DRT & SAMV) of United Bank of India vide letter of authorization dated 10th January, 2019 to sign and file necessary applications, reply, rejoinder, etc. before this Tribunal and to do all acts and things in connection with the proceedings against M/s. Sarnamoy Plastic Sack Manufacturing Private Limited, a Company incorporated under the Companies Act, 1956 and having its Registered Office at Kolkata (hereinafter referred to as the Corporate Debtor).

It is submitted in the application that the Corporate Debtor was incorporated on 23rd January, 2013 with authorized share capital of Rs.1,00,00,000/- (Rupees One Crore Only) and paid up share capital of Rs. 99,60,370/- (Rupees Ninety Nine Lakh Sixty Thousand Three Hundred Seventy Only), and is engaged in the business of manufacturing and production of plastic woven stocks, polyethylene lined gunny bags, linoleums, article like plastic containers, trays, bags, shopping bags etc. for domestic purposes and for Industrial purposes.

It is submitted that the Corporate Debtor had made a request to the Financial Creditor to sanction a project loan of Rs. 5,10,00,000/- (Rupees Five Crore Ten Lakh Only) and Working Capital of Rs. 7,10,23,000/- (Rupees Seven Crore Ten Lakh Twenty Three Thousand Only) for setting up and running a plastic sack manufacturing unit on the basis of the Project Report and other documents submitted therewith including permissions from the Competent Authority, its Memorandum and Articles of Association etc. Thereafter, after discussions with the Financial Creditor the Corporate Debtor submitted fresh proposal for Term Loan of Rs. 5,29,00,000/- (Rupees Five Crore Twenty Nine Lakh Only) and overall Working Capital Loan of Rs. 3,60,09,000/- (Rupees Three Crore Sixty Lakh Nine Thousand Only) for their Factory.

The Corporate Debtor mortgaged its Unit measuring 5850 sq. mtrs at sector – II in the Falta Special Economic Zone, Falta, Village Bisra, Mouza Uttar Simulberia, Plot No. 37A & B, comprised at Dag No. 158, Khatian No. 448, Police Station Ramnagar, District South 24 Parganas after seeking necessary permission from Falta SEZ authority by way of letter dated 13th July, 2013 permitting the Corporate Debtor to mortgage only the constructions made on the land and machinery installed but not the land itself to the bank, because the land was on leasehold basis and could not have been mortgaged by the Lessee.

Later, on 9th August, 2013 the Corporate Debtor held a meeting of its Board of Directors and passed a Resolution to the effect that the company shall mortgage its building, machinery and also stocks as required by financing bank to avail Term Loan and Working Capital Loans. Copy of said Board Resolution is annexed marked as Annexure – G to the application.

The Financial Creditor thereafter sanctioned credit facilities to the tune of Rs. 8,90,00,000/- (Rupees Eight Crore Ninety Lakh Only). Vide sanction letter dated 24.09.2013, the fresh Term Loan of Rs. 3,80,00,000/- (Rupees Three Crore Eighty Lakh Only) repayable in 22 equal quarterly installments with interest @ 13.25% per annum commencing from December, 2014 and ending in March, 2020.

The Corporate Debtor secured the Term Loan by way of exclusive hypothecation charge on Company's all the movable and immovable assets both fixed and current, relating to the project present and future and exclusive equitable mortgage charge on entire factory building of the unit measuring 5850 sq. mtrs along with Plant and Machinery, furniture, fixtures etc.

Similarly, CC/PC cum FBD was secured by hypothecation of entire current assets of the Company comprising of raw materials, WIP, Finished Goods, consumable stores and spares etc. along with counter guarantee of the Company. Several Security Documents/Banking Agreements etc. were executed by the Authorized Director of the Corporate Debtor on (21^{\text{st}}) October, 2013 which included the following:

The Directors of Corporate Debtor further fastened themselves in their personal capacity with the liability by way of personal Letter of Guarantee dated 21.10.2013 which is continuing in nature.

It was noticed by the Financial Creditor that the Corporate Debtor was not making sufficient number of transactions which were required to be made to make those accounts regular and thereafter on 9th March, 2016, the Corporate Debtor informed the Financial Creditor that since the new project could not generate sufficient cash flows, the company could not repay the term loan together with interest and thus requested to reschedule the repayment of term loan and interest burden which shall generate funds for effective running of the business.

The Financial Creditor reviewed the overall limit vide their letter dated 9th March, 2016 and the Corporate Debtor through their Managing Director accepted the said Sanction Letter along with its terms and conditions by way of Board Resolution dated 29th December, 2016 and 30th December, 2016. In consideration of the sanction of overall credit facility of Rs. 536.00 lacs the Corporate Debtor executed several Security documents including the following:-

And thereafter executed 2 Letters of Extension of Equitable Mortgage on 29th December, 2016.

It is submitted that the Corporate Debtor did not maintain the loan account in terms of Sanction Letter and in spite of repeated requests, it failed to honour those terms and to deposit substantial amount in the credit accounts to regularize the same pursuant to which the Financial Creditor, following the RBI Circulars and Guidelines classified the loans of the Corporate Debtor as Non Performing Assets with effect from (30^{\text{th}}) September, 2017.

The matter was taken up under SARFAESI Act, 2002 by issuing statutory Demand Notice dated 08.11.2018 under section 13(2) of SARFAESI Act, 2002 to the Corporate Debtor and Directors/Guarantors and demanded repayment of total outstanding amount of Rs. 4,92,28,551.51 (Rupees Four Crore Ninety Two Lakh Twenty Eight Thousand Five Hundred Fifty One and Paise Fifty Only) along with interest within a period of 60 days.

It is submitted that the Financial Creditor has a total outstanding claim of Rs. 5,73,49,287.00 (Rupees Five Crore Seventy Three Lakh Forty Nine Thousand Two Hundred Eighty Seven Only) along with interest of (15%) per annum from 1.1.2019 till repayment. It is submitted that the default in repayment of the loan has taken place w.e.f. (30^{\text{th}}) September, 2017 when the accounts of the Corporate Debtor were classified as NPA.

On (11^{\text{th}}) February, 2019, this application under section 7 of the IBC Code, 2016 was listed, and the Corporate Debtor was issued notice. It was brought to the notice of this Tribunal that the Corporate Debtor has been served notice and the affidavit of service dated 12^th April, 2019 was also filed, but when the matter came up for hearing on 18^th June, 2019, none was present on behalf of the Corporate Debtor and the Corporate Debtor was called, and was ordered to be proceeded ex-parte. The matter was therefore heard ex-parte.

The Financial Creditor has been able to prove its case on the basis of the documents annexed with the application including entries in the Bankers books in accordance with the Bankers Books of Evidence Act, 1891, status classification by CIBIL Report dated 28^th December, 2018, a copy of statement of accounts till 30^th December, 2018 with the Financial Creditor’s Certificate, and all other documents attached to the application like audited Balance Sheets for the year 2014-15 & 2015-16.

The Financial Creditor has also proposed the name of the Insolvency Professional Mr. Sanjeev Jhunjhunwala, Chartered Accountants/Insolvency Professional of Siddha Weston, 9, Weston Street, Room No. 134, Kolkata – 700013, an Insolvency Professional registered with the Indian Institute of Insolvency Professionals of ICAI, having Registration No. IBBI/IPA-001/IP-P00325/2017-2018/10595, E-mail ID: [email protected] Mobile No. 9831248361, whose consent letter dated 15^th November, 2018, to accept the appointment as an IRP if an order of admission is passed. He has further submitted in his letter that currently he is serving as an Interim Resolution Professional/Resolution Professional/Liquidator in One Feedatives Pharma Private Limited and there are no disciplinary proceedings pending against him with the Board of Indian Institute of Insolvency Professionals of ICAI. He has further submitted that he does not have any pecuniary or personal relationship with the Corporate Debtor, as stipulated under Schedule-1 of The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 and that he does not have any pecuniary or personal relationship with any of the stakeholders entitled to distribution under Section 53 or 178 of the Code.

We have heard Learned Counsel the Financial Creditor at length and have been taken through all the documents filed by the Financial Creditor mentioned above which sufficiently secured the loan of the Financial Creditor. Since the Corporate Debtor had availed the loan facilities from the Financial Creditor and had executed the Loan Agreement and all the Security documents in favour of the Financial Creditor and committed a default in repayment and ultimately was declared a Non Performing Assets, we are fully satisfied and have no option but to admit the application and initiate Corporate Insolvency Resolution Process under section 7 of the Insolvency & Bankruptcy Code read with Rule 4 against the Corporate Debtor. We, therefore pass the following order:-

ii) Moratorium is declared for the purposes referred to in Section 14 of the Insolvency & Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of Corporate Insolvency Resolution Process and call for the submission of claims under Section 15.

iii) Moratorium under Section 14 of the Insolvency & Bankruptcy Code, 2016 prohibits the following:-

viii) Mr. Sanjeev Jhunjhunwala, Chartered Accountants/ Insolvency Professional of Siddha Weston, 9, Weston Street, Room No. 134, Kolkata – 700013, an Insolvency Professional registered with the Indian Institute of Insolvency Professionals of ICAI, having Registration No. IBBI/IPA- 001/IP-P00325/2017-2018/10595, E-mail ID: [email protected] Mobile No. 9831248361, is hereby appointed as Interim Resolution Professional by this Tribunal for ascertaining the particulars of creditors and convening a meeting of Committee of Creditors for evolving a resolution plan.

ix) The Interim Resolution Professional should convene a meeting of the Committee of Creditors and submit the resolution passed by the Committee of Creditors and shall identify the prospective Resolution Applicant within 105 days from the insolvency commencement date.

xi) List the matter on 26th August, 2019 for filing of the progress report.

xii) Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.