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Judgment
Per: Shri Deep Chandra Joshi, Judicial Memeber
The Company Petition bearing CP No. 49/7/JPR/2023 has been filed by Unity Small Finance Bank Ltd. ('Financial Creditor'/ 'Bank') against M/s Harsh Macro Buildhome Pvt. Ltd. ('Corporate Debtor') under section 7 of the Insolvency and Bankruptcy Code, 2016 ('IBC'/'Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 seeking initiation of the Corporate Insolvency Resolution Process ('CIRP') of the Corporate Debtor on account of default in repayment of the outstanding loan amount.
The Corporate Debtor is a Private Limited Company incorporated on 05.12.2012 and duly registered with the Registrar of Companies, Jaipur, having Identification No. U45201RJ2012PTC040890. The registered office of the Corporate Debtor is situated at the crest, plot no. A-4, airport enclave scheme, Durgapura, Tonk Road, Jaipur. The authorized share capital and the paid-up share capital of the Corporate Debtor is Rs. 15,00,00,000/- (Rupees Fifteen Crores Only). The same has been verified from the online database maintained by the Ministry of Corporate Affairs.
The details of the transactions leading to the filing of the Company Petition bearing CP No. (IB)- 49/7/JPR/2023 as averred by the Financial Creditor are as follows:
The Financial Creditor had preferred the instant Application under Section 7 of the Code against the Corporate Debtor due to default in repayment of the loan by the Corporate Debtor.
Initially, the Corporate Debtor which was formerly known as M/s New World Buildhome Private Limited availed a credit facility to the tune of Rs. 20 Crores from Centrum Financial Services Limited which was sanctioned vide sanction letter dated 30.08.2018. Thereafter, a loan agreement was executed by the Corporate Debtor on 03.09.2018. Subsequently, M/s Centrum Financial Services Limited transferred their business loans including the loan of the Corporate Debtor to the financial creditor herein i.e., Unity Small Finance Bank Limited, vide board resolution dated 23.08.2021. 3.3 Subsequently, the Corporate Debtor failed to maintain financial discipline and consequently, its loan account was declared as NPA on 30.06.2022 in accordance with the guidelines of the Reserve Bank of India. Further, the Financial Creditor sent a demand notice dated 30.07.2022 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act'). 3.4 It was contended that as on 28.02.2023, the outstanding amount in default is Rs. 10,35,89,138.02/- (Rupees Ten Crores Thirty-Five Lakhs Eighty-Nine Thousand One Hundred and Thirty-Eight and Two Paisa Only) plus future interest, cost & expenses. The relevant details as enumerated under Part IV of the instant Application are reproduced hereunder:
Part IV
PARTICULARS OF FINANCIAL DEBT
| Particulars of Financial Debt | ||
|---|---|---|
| 1. | Total amount of debt granted date(s) of disbursement | Corporate Debtor jointly with other borrowers / co-applicants/ guarantors/ mortgagors availed financial facility from Financial Creditor (UNITY SMALL FINANCE BANK LIMITED). REGISTERED OFFICE-40. Basant Lok, Vasant Vihar, New Delhi- 110057 (Rajasthan). Details are as under- TERM LOAN TERM LOAN HAVING ACCOUNT NO-T310818030 TO THE TUNE OF RS 20,00,00,000/- Copy of Sanction Letter dated 30.08.2018, Loan Agreement DATED 3.9.2018 and other relevant documents are annexed herewith and collectively marked as Annexure A/7. It is pertinent to mention here that to secure the above financial facility |
| properties mortgaged in the aforesaid loan account belongs to corporate debtor. | ||
| 2. | Amount claimed to be in default and the date on which the default occurred (attach the workings for computation of amount and days of default in tabular form) | Rs. 10,35,89,138.02/- (Rupees Ten Crore Thirty Five Lakh Eighty Nine Thousand One Hundred Thirty Eight and Two Paisa) as on 28.2.2023 plus future interest, cost & expenses. It is submitted that financial creditor sent demand notice to borrowers/guarantors under Section 13(2) of Securitization Act on 30.7.2022 after classification of account as Non-Performing Asset (NPA) on 30.6.2022. However, no heed was paid by corporate debtor nor the amount of financial creditor was paid by corporate debtor. Copies of Aforesaid demand notice along with courier receipt/postal receipt along with delivery reports are annexed herewith and collectively marked as Annexure A/8. Detail working sheet in tabular form for amount due and date of NPA along with other details, is annexed herewith and duly marked as Annexure A/9. It is further submitted that the said notice was duly served upon corporate debtor |
| but no objections were raised against the same. Date of Default: 30.06.2022 |
The Corporate Debtor filed an Affidavit in Reply to the Application vide Dairy No. 342/2024 dated 06.02.2024 wherein it raised the following contentions:-
The Corporate Debtor raised the preliminary objections that the present Application has been filed to recover money which is neither due nor payable. Further, the instant Petition does not fulfil the requirements of a Petition under Section 7 of the Code, and the same has been filed to pressurize the Corporate Debtor into preponing the payment which are neither due nor payable. It was stated, the present Petition does not contain Form C and Form D which are mandatory in nature, rather some additional documents have been served without any averment qua them in the Petition.
The Corporate Debtor argued that the Financial Creditor has not filed the record of default as per the information utility i.e., NESL, which is a mandatory requirement for filing a Petition under Section 7 of the Code.
The Corporate Debtor also raised questions concerning the veracity of the business transfer agreement between M/s Centrum Financial Services Limited and the Financial Creditor. It was pointed out that the Financial Creditor has not placed the same on record and has merely submitted a Board Resolution of M/s Centrum Financial Services Limited which pertains only to the proposal for transfer of entire business undertaking by way of a slump sale. Thus, in the absence of the business transfer agreement, it shall be presumed that there is no valid business transfer agreement between M/s Centrum Financial Services Limited and the Financial Creditor and the assignment is illegal and void.
It was submitted that the Corporate Debtor is engaged in the business of Real Estate and is the promoter of the real estate project known as "The Coronation" situated at C-1, Budhsingh Nagar, near International Airport, Pratap Nagar, Jaipur and the same is registered with RERA. The Corporate Debtor availed the captioned loan facility from M/s Centrum Financial Services Ltd. vide sanction Letter dated 29.08.2018 to the tune of Rs. 20 Crores. The said facility was to be paid in 8 equal quarterly instalments starting from the end of the 15th month from disbursement of the first tranche. The said loan was secured by way of hypothecation and a charge on escrow account, pledge of shares, personal/corporate guarantees and registered mortgage on land and building of unsold area of the project the Coronation.
As per the loan agreement, the disbursement was to be made in four tranches. However, despite submission of all the documents, M/s Centrum Financial Services Limited disbursed the loan facility with a delay and only a sum of Rs. 18 Crores was disbursed. Thereafter, the Corporate Debtor regularly repaid the accrued interest/ instalments. In the interregnum, the alleged business transfer agreement between M/s Centrum Financial Services and the Financial Creditor was executed. 4.6. Subsequent to the takeover of the loan, the Financial Creditor started imposing illegal penal interest contrary to the terms of the sanction letter. The Corporate Debtor raised its concerns with the Financial Creditor. Further, the Corporate Debtor continued making the payments and in the month of July 2022, it deposited a sum of Rs. 92,02,824/- (Rupees Ninety-Two Lakh Two Thousand Eight Hundred and Twenty-Four Only).
Despite the regular payments by the Corporate Debtor, the Financial Creditor issued a purported demand notice dated 30.07.2022 under Section 13(2) of the SARFAESI Act, wherein it stated that as on 31.08.2018, a loan amount of Rs. 20 Crores was disbursed. Further, as per the demand notice, the loan facility was classified as NPA on 30.06.2022 and an amount of Rs. 11,11,97,850/- (Rupees Eleven Crores Eleven Lakh Ninety-Seven Thousand Eight Hundred and Fifty Only) was due as on 30.06.2022. The details of the outstanding amount as per the demand notice as provided by the Corporate Debtor are reproduced hereunder: -
| Outstanding Details | |
|---|---|
| Principal Outstanding | Rs. 10,50,85,667.00 |
| Overdue Amount | Rs. 3,93,44,91,52.00 |
| Others (Additional Interest/ Bounce Charges/ Penal Charges) | Rs. 61,12,138.00 |
| Total Outstanding as on 30.06.2022 | Rs. 11,11,97,805.00 |
The total amount demanded by the Financial Creditor does not tally with the books of the Corporate Debtor and despite repeated requests, the bifurcation of the interest, penal interest, interest over penal interest, miscellaneous charges levied against the Loan Facility have not been provided to the Corporate Debtor. Further, the demand notice dated 30.07.2022 does not contain description of the securities and it has not been issued to all the guarantors and there is no invocation of guarantee. Thus, the demand notice dated 30.07.2022 is in contravention of the mandatory requirements of Section 13(2) of the SARFAESI Act, 2002.
Subsequently, the Corporate Debtor approached the Financial Creditor and stated that the instalments were being deposited as per the terms of the sanction letter and there is no continuous default on its part. Thereafter, the Financial Creditor directed the Corporate Debtor to continue the instalments and consequently, between October 2022 till January 2023, a sum of Rs. 1,67,92,615/- (Rupees Once Crore Sixty-Seven Lakh Ninety-Two Thousand Six Hundred and Fifteen Only) had been deposited.
It was contended that the Financial Creditor had imposed illegal penal interest and had compounded the same. The Financial Creditor had wrongly applied the penal interest of more than Rs. 40,00,000/- (Rupees Forty Lakh Only) since June, 2022 and the same has been compounded with the principal amount and interest is being charged over it. The same becomes conspicuous from the account statements of the loan account. Further, despite the requests of the Corporate Debtor, the Financial Creditor had failed to provide the bifurcation of the charges or the details qua the declaration of the declaration of its account as NPA. Moreover, the Financial Creditor has not provided any information regarding the payments made by the Guarantors of the loan account and the adjustment of the same.
In the meantime, the Financial Creditor filed a case bearing no. 212/2023 titled Unity Small Finance Bank Ltd. v/s Harsh Macro Buildhome Pvt. Ltd. before the Ld. Debt Recovery Tribunal ('DRT') wherein vide Order dated 10.04.2023, the Ld. DRT had allowed the application under Section 14 of the SARFAESI Act, 2002.
The Corporate Debtor challenged the declaration of its account as NPA before the Ld. DRT through a Securitization Application bearing no. 323/2023 titled as Ashok Singh, Authorized Representative M/s Harsh Macro Buildhome Private Limited v/s Unity Small Finance Bank. In the said Application, the Ld. DRT vide its Order dated 04.05.2023 directed the Financial Creditor not to take any coercive actions till the next date of hearing. Subsequently, the matter was listed on 15.05.2023 and an interim application was moved by the Corporate Debtor stating that while the present Financial Creditor is seeking possession of the flats, it has already issued NOCs for the said flats.
Thereafter, the matter was listed on 18.05.2023 before the Ld. DRT wherein the Financial Creditor stated that they do not intend to take possession of the flats bearing no. A-202, A-203, A-1203 & B-1601. Further, the Corporate Debtor filed a tabular representation of flatwise payments and the NOCs. It was urged that since the demand notice contained the list of flats/units qua which payment was already made, the demand notice was faulty.
The Financial Creditor has not filed any reply to the aforementioned Securitization Application as well as the other application. Further, the instant Petition has been filed concealing all the aforementioned facts.
It was submitted that the Corporate Debtor had made several deposits to the financial creditor over and above the total sale done by the Corporate Debtor. Further, the alleged default amount is not supported by any documents. Moreover, the Financial Creditor has filed CIBII. Report instead of a report of information utility.
It was submitted that for the captioned Loan Account a guarantee was given by M/s. Macro Infra Contractors Pvt. Ltd. The CIRP against the aforementioned Corporate Guarantor was initiated in the matter of CP (IB) No. 14/9/2020 titled as M/s RG Colonizers Private Limited V/s. M/s Macro Infra Contractors Private Limited vide Order dated 04.07.2023. Subsequently, on 07.07.2023 a public announcement was made by the IRP inviting the claims against the Corporate Guarantor. As per the details available in public domain concerning the CIRP of M/s Macro Infra Contractors Private Limited on www.ibbi.gov.in, the Financial Creditor/Petitioner had submitted its claim for the alleged dues as claimed in the present Petition and the name of the Financial Creditor appears in the list of creditors of the Corporate Guarantor as on 08.08.2023. Further, the claim filed by the Financial Creditor for a sum of Rs. 11,42,50,250.81/- (Rupees Eleven Crore Forty-Two Lakh Fifty Thousand Two Hundred and Fifty and Eighty-One Paisa Only) has been admitted in the CIRP of the Corporate Guarantor. The said CIRP is at an advance stage and Resolution Plans have also been invited. The Corporate Debtor contended that it is a settled position of law that there cannot be any duplicity of claim and where for the same set of claims in the CIRP the claim is admitted than another Section 7 Application is not permissible. Since, the Financial Creditor had already filed its claim against the Corporate Guarantor, the instant Petition against the same claim is not maintainable.
It was contended that the Financial Creditor had failed to mention the date of default in the Petition. Further, the instant Petition had been filed with the sole intention to oust the Answering Respondents from the Company and to extort money from them. Thus, the Petition deserves to be dismissed.
The Financial Creditor filed a Rejoinder to the Reply vide Diary No 766/2024 dated 28.03.2024 and made the following submissions: -
It is submitted that the Applicant is acting as per law and therefore, the Corporate Debtor cannot contend that the instant Application has been filed to recover money. Moreover, the Applicant has placed account statements on record accompanied by proof of default and in such a situation the pleas of the Corporate Debtor are devoid of merit and are liable to be rejected. 5.2. It was submitted that after the service of the demand notice, the Corporate Debtor made some payments and the same were adjusted in the loan account and accordingly, the outstanding amount is mentioned in the Petition. 5.3. In relation to the objection raised by the Corporate Debtor concerning the admission of the claim of the Financial Creditor in the CIRP of the Corporate Guarantor, it was submitted that it is settled law that a creditor has a right to recover money from its borrower as well as from the guarantors and the question of multiplicity does not arise. Thus, the pleas taken herein are contrary to the settled law and deserves to be rejected.
It is submitted that the Petition consists of 396 pages which also includes Form C and Form D and the same is mentioned in index as well and have also been supplied to the Corporate Debtor. Further, Form C and Form D were served separately as the same were scanned separately and therefore, pleas taken herein do not support the case of the Corporate Debtor and deserves to be rejected. 5.5. It is submitted that pleas taken by the Corporate Debtor are beyond the scope of Section 7 of the Code. It was contended that while deciding an application under Section 7 of the Code, this Adjudicating Authority has to ascertain only that a default has been committed and the matter is within the pecuniary jurisdiction. The instant Application meets both the requirements and nothing more can be seen at this stage. 5.6. It is submitted that the account of the Corporate Debtor was classified as NPA as per the provisions of law and consequently, a demand notice was issued. Despite receipt of the demand notice, the Corporate Debtor did not raise any objection against the same. Further, after filing of the present Petition, the Corporate Debtor approached the Financial Creditor and gave a one-time settlement proposal which was accepted by the Financial Creditor but the cheque given by Corporate Debtor was dishonoured and therefore, the OTS was revoked.
In relation to the objection raised by the Corporate Debtor against the classification of its account as an NPA, it was submitted that there is no need to serve a loan recall notice prior to classification of the account as NPA nor the same has been provided under the statute. The Corporate Debtor did not raise any objection against the demand notice. Further, the proceedings initiated under SARFAESI Act are completely separate and independent of the proceedings under the Code. Moreover, the provisions of the Code override the provision of SARFAESI Act. 5.8. In relation to the contentions raised qua the charges and interest, it is submitted that all the charges have been debited as per the terms and condition of the loan agreement and there is no capitalization of penal interest. Further, the Corporate Debtor had failed to prove the same and have made bald allegations. 5.9. In relation to the contention of the Corporate Debtor qua the business transfer agreement, it was submitted that the issue raised by the Corporate Debtor falls outside the purview of this Petition. Further, the business transfer agreement was never challenged by the Corporate Debtor prior to the filing of the instant Petition. It is replied that subsequent to the business transfer agreement between M/s Centrum Financial Services Ltd. and the Financial Creditor, the Applicant herein is entitled to recover the dues and the pleas taken herein deserves to be rejected. At the cost of repetition, it is submitted that the Corporate Debtor has given one time settlement offer to the Applicant/ Financial Creditor and the said act of the Corporate Debtor itself goes against their pleadings.
It is submitted that the Corporate Debtor has categorically admitted in its Reply that it availed a facility to the tune of Rs 20 Crore and the loan amount was disbursed as per the terms and conditions of the loan sanction letter. 5.11. It is submitted that the date of default is clearly mentioned in Application as 30.06.2022 and therefore, the plea taken by the Corporate Debtor qua non-mentioning of the date of default is untenable. Further, the default amount is clearly mentioned in the application in tabular form and the account statement has also been placed on record.
It is submitted that due to typographical error, the account statement is marked as Annexure-10 instead of Annexure-11. Further, the account statement is complete and the Corporate Debtor has made bald allegation concerning the veracity of the same. It is further replied that along with the account statement, the Financial Creditor has placed on record a certificate under Section 2(a) of Banker's Book Evidence Act and the same is admissible before all court of law and is duly admissible in evidence.
Thus, the pleas taken by the Corporate Debtor deserves to be rejected and the present Application deserves to be allowed.
During the pendency of the Petition, an Application bearing IA (IBC) No. 675/JPR/2023 has been filed by the Corporate Debtor under Section 60(5) r/w Section 65 of the Code r/w rule 11 and 32 of the NCLT Rules vide Diary No. 3030/2023 dated 20.12.2023 seeking dismissal of the present Petition, inter alia on the following grounds: -
The present Petition of the Financial Creditor has been filed maliciously as a tool to recover money which is neither due nor payable. Further, the present Application is incomplete and does not pass the muster of the requirements of an application under section 7 of the Code. Further, there are clear contradictions as per the own averments of the Financial Creditor, thus, clearly evidencing that the present action is malicious and the same has been undertaken to pressurize the Corporate Debtor into preponing payments which are not yet due or payable.
It was submitted that for the captioned Loan Account, a guarantee was given by M/s. Macro Infra Contractors Pvt. Ltd. The CIRP against the aforementioned Corporate Guarantor was initiated in the matter bearing CP (IB) No. 14/9/2020 titled as M/s RG Colonizers Private Limited V/s. M/s Macro Infra Contractors Private Limited vide Order dated 04.07.2023. Subsequently, on 07.07.2023 a public announcement was made by the IRP inviting the claims against the Corporate Guarantor. As per the details available in public domain concerning the CIRP of M/s Macro Infra Contractors Private Limited on www.ibbi.gov.in, the Financial Creditor/Petitioner had submitted its claim for the alleged dues as claimed in the present Petition. Consequently, the name of the Financial Creditor appears in the list of creditors of the Corporate Guarantor as on 08.08.2023. Further, the claim filed by the Financial Creditor for a sum of Rs. 11,42,50,250.81/- (Rupees Eleven Crore Forty-Two Lakh Fifty Thousand Two Hundred and Fifty and Eighty-One Paisa Only) has been admitted in the CIRP of the Corporate Guarantor. The said CIRP is at an advance stage and Resolution Plans have also been invited. The Corporate Debtor contended that it is a settled position of law that there cannot be any duplicity of claim and where the same set of claims have already been admitted in a CIRP than another Section 7 Application is not permissible. Since, the Financial Creditor had already filed its claim against the Corporate Guarantor, the instant Petition against the same claim qua the Corporate Debtor is not maintainable.
It is imperative to submit that the instant Petition does not contain Form C and Form D which are mandatory in nature, rather some additional documents have been served without any averments in the Petition itself and without seeking any amendment in the Application. Further, the same forms a part of the Petition or not is not conspicuous as the index of the Petition does not mention the same. Thus, the petition is defective and doesn't conform to the mandatory standards of the Code and deserves to be dismissed.
The present application is incomplete on various counts as it does not disclose the mandatory details as required under the Code. The Financial Creditor has failed to file the record of default as per the information utility (NESL) and the same is not a part of the Petition. It is submitted that vide Notification dated 14.06.2022, Regulation 20(1A) was inserted in the IBBI (Information Utilities) Regulation, 2017 and the same is reproduced below:-
"20.Acceptance and receipt of information. [(1A) (Before filing an application to initiate CIRP under Section 7 or 9, as the case may be, the creditor shall file the information of default, with the information utility and the information utility shall process the information for the purpose of issuing record of default in accordance with regulation 21.]"
Subsequent to the above Notification dated 14.06.2022, a circular dated 03.04.2023 was issued wherein it was again reiterated that filing of the record of default issued by the Information Utility is mandatory.
Thus, the present Petition filed under Section 7 of the Code of 2016 is not maintainable and is liable to be dismissed.
The Financial Creditor has filed its Reply to the IA (IBC) 675/JPR/2023 vide Diary No. 765/2024 dated 28.03.2024 and made the following submissions:-
It was submitted that the Financial Creditor duly served the notices and the paper book on the Corporate Debtor and had also filed proof of service qua the same. A bare perusal of the same reveals that service was completed but the Corporate Debtor has raised the objection concerning the paper book with the intention of delaying the proceedings. Further, complete paper book was sent by counsel of the Financial Creditor to the counsel of the Corporate Debtor on 22.10.2023 via email on his personal id. Despite the service, false statement has been made before this Hon'ble Tribunal that paper book was not supplied and thereafter, the paper book was again supplied to the counsel for the Corporate Debtor.
It is a settled law that a creditor can recover its money from principal borrower as well as from the guarantor and pendency of another Petition concerning the Corporate Guarantor before this Hon'ble Tribunal cannot act as a bar to the instant Petition.
It is submitted that the Petition consists of Form C and Form D and the same are mentioned in the index as well. Further, the Petition has been registered only after submission of Form C and Form D and verification of the same by the registry. Moreover, additional documents i.e., Form C and Form D, were served separately as the same were scanned separately and therefore pleas taken by the Corporate Debtor do not support its case in any manner. It is submitted that present application is complete in all aspects and all the documents necessary for the admission of the present Application has already been filed.
It is submitted that the Corporate Debtor has made bald allegations that the amount is not due but has miserably failed to place any documents on record to substantiate the pleadings. Thus, the amount is due and payable and the present application is within the pecuniary jurisdiction of this Adjudicating Authority and deserves to be allowed.
In the intervening period, the Corporate Debtor has filed another Interlocutory Application bearing IA (IBC) No. 303/JPR/2024 vide Diary No. 1353/2024 dated 29.05.224 under Rule 11 read with Rule 32 of the NCLT Rules, 2016 and made the following submissions.
The Applicant/Corporate Debtor without prejudice to its rights and the objections regarding the maintainability and without admission of the debt, submitted a proposal with the Financial Creditor and the same was approved on 19.10.2023 (ONE TIME SETTLEMENT (OTS) DATED 19.10.2023 REF No. USFB/HMBHPL/2023-2024/10/001). 8.2. During the pendency of this Petition, the Corporate Debtor and the Financial Creditor mutually discussed the opportunities for resolving the disputes amicably and the Corporate Debtor herein submitted a proposal on 27.04.2024 whereby it proposed to revive the earlier sanctioned OTS dated 19.10.2023. Further, to show its bonafides, the Corporate Debtor also prepared a Demand Draft in favour of the Financial Creditor which was prepared through 3rd party and a copy of the same was also shared with the Financial Creditor. It was proposed that within a period of 24 hours of the confirmation of the proposal, the demand draft will be handed over to the representative of the Financial Creditor and/ or deposited through RTGS/NEFT as per the instructions of Financial Creditor. A copy of the Demand Draft is annexed with the instant Application as ANNEXURE-A/1.
However, the bone of contention between the Financial Creditor and the Corporate Debtor is that the proposed amount will be released within 24 hours of in-principal sanction of the above proposal and the concurrence of the Financial Creditor qua the issuance of the stagewise/flatwise final/unconditional NOCs as submitted under the proposal.
To mitigate the said differences, the Corporate Debtor is filing the present Application along with the Affidavit to the effect that immediately upon the sanction of proposal and communication of NOCs, the Corporate Debtor will place the Demand Draft as stated hereinabove and to show the bonafides, the Corporate Debtor is annexing herewith his personal cheque for the same amount and undertakes that same can be encashed if the demand draft is not provided to the Financial Creditor immediately after 4 days of the Communication of sanction and subject to simultaneous release of NOCs by the Financial Creditor in favour of the Corporate Debtor.
It is submitted that the action under Section 7 of the IBC is a drastic action and can bring a robust and running company to ground causing severe prejudice to the stakeholders, directors, promoters, customers and even the financial institutions. Further, the present directors are best equipped to take the company forward.
Thus, it was prayed by the Corporate Debtor that the Financial Creditor be directed to decide the proposal dated 28.05.2024 and communicate the same to the Corporate Debtor.
The Financial Creditor had filed its Written Arguments vide Diary No. 1301/2024 dated 21.05.2024 wherein it reiterated its submissions and placed reliance upon the following judgments:-
I. E S Krishnamurthy & Ors v/s Bharath Hi Tech Builders Pvt. Ltd. (2022) BC 197 (SC)
II. Guruprasad V. Hishobkar v/s Shree Aashraya Souhard Credit Society Ltd. & Anr. (2023) BC 18 (NCLAT)
The Corporate Debtor filed its Written Submissions vide Diary No. 2723/2024 dated 06.11.2024 wherein it reiterated its submissions and placed reliance upon the following judgments:-
I. Vishnu Kumar Agarwal v/s Piram Enterprises (Company Appeal (80) (Ins.) No. 346/2018
II. Piramal Capital and Housing Finance Ltd. v/s Hydric Infrastructure Pvt. Ltd. 2023 SCC OnLine NCLAT 254
III. State Bank of India and Another v/s Adhunik Steels Limited, 2019 SCC OnLine NCLT 15632
IV. Anand Rathi Global Finance Ltd. v/s Premier Ltd. 2021 SCC OnLine NCLT 1797
V. Bijay Kumar Agarwal v/s State Bank of India and Anr. 2020 SCC OnLine NCLAT 143
VI. Vidharbha Industries Power Ltd. v/s Axis Bank Ltd. (2022) 8 SCC 352
VII. Palm Products Pvt. Ltd. v/s T.V.L. Narsimha Rao & Anr. (Company Appeal (AT) (Insolvency) No. 809 of 2020)
VIII. Agarwal Veneers v/s Fundtonic Services Pvt. Ltd. 2022 SCC OnLine NCLAT 3355.
We have heard the Ld. Counsels for the parties and perused the averments made in the Petition, Reply, Rejoinder, and Interlocutory Applications along with the documents enclosed therein.
Before delving into the merits of the case, we may recapitulate some of the significant details and relevant dates which are going to have a bearing on the determination of the present case and the same are provided hereunder:-
The Corporate Debtor availed a loan of Rs. 20 Crores (Rupees Twenty Crores Only) from M/s Centrum Financial Services Limited vide sanction letter dated 30.08.2018. Consequently, a loan agreement was executed on 03.09.2018. Thereafter, M/s Centrum Financial Services Limited transferred its business loans including the loan of the Corporate Debtor to the Financial Creditor herein i.e., Unity Small Finance Bank Limited.
The instant Petition has been filed by the Financial Creditor i.e., Unity Small Finance Bank Limited, claiming a default of Rs. 10,35,89,138.02/- (Rupees Ten Crore Thirty-Five Lakh Eighty-Nine Thousand One Hundred Thirty-Eight and Two Paisa) by the Corporate Debtor. Further, the date of default has been mentioned as 30.06.2022 in the Petition.
The Financial Creditor has filed the Record of Financial information i.e., Form C, and Record of Default i.e., Form D, issued by National E-Governance Services Limited along with the Petition.
A perusal of the facts narrated in the above paragraph, renders the arguments of the Corporate Debtor qua non-filing of the report of information utility and non-mentioning of the date of default in the Petition superfluous. A perusal of the Petition makes it conspicuous that form-C and form-D have been filed along with the Petition and Part IV of the Petition mentions the date of default as 30.06.2022.
Besides the aforementioned objections, the moot question of law that has been raised by the Corporate Debtor in its Reply to the Petition and IA (IBC) No. 675/JPR/2023 is whether a financial creditor who has already filed its claim in the CIRP of the Corporate Guarantor can initiate the CIRP of the Corporate Debtor qua the same debt. It was contended that the Financial Creditor has filed its claim in the CIRP of the Corporate Guarantor i.e., Macro Infra Contractors Private Limited, in the matter bearing no. CP (IB) No. 14/9/JPR/2020 and the same has been admitted to the tune of Rs. 11,42,50,250.81/- (Rupees Eleven Crores Forty-Two Lakh Fifty Thousand Two Hundred and Fifty and Eighty-One Paisa Only). The Corporate Debtor contended that since the Financial Creditor has already filed its claim in the CIRP of the Corporate Guarantor, therefore, qua the same claim, CIRP of the Corporate Debtor cannot be initiated.
The aforementioned issue came up for consideration before the Hon'ble Apex Court in the case of BRS Ventures Investment Ltd. v/s SREI Infrastructure Finance Ltd. and another 2024 SCC OnLine SC 1767 wherein the Apex Court formed the issue that "Whether the second Application under Section 7 of IBC is not maintainable against the Corporate Debtor as for the same debt and default, CIRP has already been taken place against the Corporate Guarantor and the Financial Creditor has accepted the amount in full and final settlement of all its dues?” The Hon’ble Court held that: -
“19...Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is co-extensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.”
A perusal of the aforementioned Judgment makes it clear that simultaneous proceedings can be initiated by a Financial Creditor against a Corporate Guarantor and a Corporate Debtor qua the debt. Further, mere admission of the claim of the Creditor in the CIRP of the Corporate Guarantor will not disentitle it from proceeding against the Corporate Guarantor. Thus, the objection raised by the Corporate Debtor in its Reply and the IA (IBC) No. 675/JPR/2023 are not tenable.
At this juncture it is incumbent to refer to Section 7 of the Code which clarifies that the Adjudicating Authority upon being satisfied that the default of financial debt has occurred, may order for initiation of CIRP of the Corporate Debtor. The key ingredients of an Application filed under Section 7 of the Code are: (i) there has to be a financial debt and; (ii) there must be a default in repayment of the financial debt. Hence, the Applicant must establish that there is a financial debt and that a default has been committed in respect of the financial debt by the Corporate Debtor. While dealing with an application under section 7, the Adjudicating Authority is not required to consider the question of the dispute between the parties as long as the ‘debt’ and ‘default’ is proved.
In the instant case, there is no dispute that the Corporate Debtor had availed loan facilities to the tune of Rs. 20 Crore from M/s Centrum Financial Services Limited which was later transferred to the Financial Creditor. The same is also corroborated by the documents on record and the pleadings of the parties. Thus, the existence of the first ingredient i.e. financial debt is nowhere in dispute among the parties.
In so far as the existence of default is concerned, the Corporate Debtor has contended that it has not defaulted in making the payments qua the availed facility and the Petition has been filed for an amount which is neither due nor payable.
A perusal of the record reveals that the account of the Corporate Debtor was declared as NPA on 30.06.2022 and a demand notice under Section 13(2) of the SARFAESI Act was given by the Financial Creditor on 30.07.2022. Further, after the filing of the instant Petition, the Corporate Debtor entered into a One-time Settlement with the Financial Creditor for a settlement amount of 10.50 Crores against the total outstanding amount. Moreover, the Corporate Debtor issued a Cheque of Rs. 1,50,00,000/- (Rupees One Crore Fifty Lakh Only) in favour of the Financial Creditor as a part of the aforementioned OTS. However, the said cheque was returned by the concerned bank due to insufficient funds in the account of the Corporate Debtor and thus, the OTS was revoked by the Financial Creditor. Besides the aforementioned facts, a perusal of the Order Sheets of the case reveals that subsequent to the failure of the aforementioned OTS, the Corporate Debtor had tried to enter into an OTS with the Financial Creditor on several occasions. Thus, we are of the opinion that the Corporate Debtor has defaulted in repaying the financial debt to the Financial Creditor and the same is corroborated by the documents filed with the Petition.
At this juncture, it becomes relevant to take note of the proceedings before the learned DRT. The Hon’ble Supreme Court in Employees Organisation vs. Jaipur Metals and Electricals Limited (2018) ibclaw.in 34 SC has clearly held that a petition under Section 7 is an independent proceeding which is unaffected by pendency of proceedings in other court, which may be filed by the same company. The above judgment of the Hon’ble Supreme Court clearly lays down that the proceedings under Section 7 can neither be held to be barred by any order passed by DRT under the 1993 Act, nor pendency of any proceedings before DRT shall preclude decision on Section 7 Application on merits.
Thus, we are of the opinion that the Corporate Debtor has defaulted in the repayment of loan facilities extended by the Financial Creditor as it has failed to repay the same.
At this juncture, it is relevant to refer to the judgment of the Hon’ble Supreme Court in M/s Innoventive Industries Ltd. vs. ICICI Bank, C.A. Nos. 8337-8338 of 2017, wherein it was held that upon being satisfied that a debt is due and default has occurred, the Adjudicating Authority is bound to commit the Corporate Debtor into CIRP. The relevant excerpts from the judgment are as below:
“28.When it comes to a financial creditor triggering the process, Section 7 becomes relevant. ... It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. ... The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. ...
30.On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.”
(emphasis added)
Further, the Apex Court in the case of E S Krishnamurthy & Ors. vs. M/s Bharath Hi Tech Builders Pvt. Ltd., Civil Appeal No. 3325 of 2020, dated 14.12.2021, relied upon the judgment of Innoventive (supra) and had held as below:
“25.In Innoventive Industries (supra), a two-judge Bench of this Court has explained the ambit of Section 7 of the IBC, and held that the Adjudicating Authority only has to determine whether a “default” has occurred, i.e., whether the “debt” (which may still be disputed) was due and remained unpaid. If the Adjudicating Authority is of the opinion that a “default” has occurred, it has to admit the application unless it is incomplete. Speaking through ...
27.The Adjudicating Authority has clearly acted outside the terms of its jurisdiction under Section 7(5) of the IBC. The Adjudicating Authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the Adjudicating Authority must then either admit or reject an application respectively. These are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5). The Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute."
(emphasis added)
Thus, upon conclusion of the fact that the debt has become due and default has been committed in payment of the same to the Creditor, this Adjudicating Authority has no discretion to refuse the admission of the Application for CIRP of the Corporate Debtor.
The instant Section 7 Application has been filed by the Financial Creditor vide Diary No. 1870/2023 dated 03.08.2023 alleging a default of Rs. 10,35,89,138.02/- (Rupees Ten Crore Thirty-Five Lakh Eighty-Nine Thousand One Hundred and Eighty-Two and Two Paisa Only). As per the Form IV filed with the Application, the Date of default is mentioned as 30.06.2022. During the intervening period, the Corporate Debtor has made certain part payments to the Financial Creditor and has given OTS proposals. Thus, the CP No. (IB)- 49/7/JPR/2023 which has been filed on 03.08.2023 is considered within the period of limitation and being proceeded with accordingly.
The registered office of the Corporate Debtor is located in the State of Rajasthan and therefore the same falls within the jurisdiction of this Adjudicating Authority.
In view of the discussion on the proposition of law entailed in the preceding paragraphs and considering the circumstances of the case; we find that the Petition filed under Section 7 of the Code ought to be accepted. In our considered view, the debt and default were adequately demonstrated by the Applicant in the instant case and the same is supported by the records. Further, the default is above the threshold limit of Rs. 1 crore. This is a case where all the pre-requisites for filing a Section 7 stood fulfilled thus the Adjudicating Authority is inclined to admit the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit.
Under such circumstances, The Corporate Insolvency Resolution Process can be initiated against the Corporate Debtor, as it has committed a default. Thus, this Application stands admitted and the Corporate Insolvency Resolution Process against the Corporate Debtor is hereby ordered to be initiated. Since the Applicant has proposed the name of the IRP, therefore, we appoint Mr. Shreyansh Jain having Registration Number IBBI/IPA/-001/IP-P-01683/2019-2020/12727, duly registered with ICAI Insolvency Professional Agency, to be appointed as the Interim Resolution Professional. The Applicant has filed Consent in Form 2 under Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016, stating that no disciplinary proceedings are pending against the named IRP.
Consequences of initiation of CIRP shall be inter-alia as follows:
The Resolution Professional proposed by the Applicant is Mr. Shreyansh Jain, who is an IP registered with ICAI Insolvency Professional Agency having Registration No. IBBI/IPA/-001/IP-P- 01683/2019-2020/12727. He is hereby appointed as the Insolvency Resolution Professional (IRP) to take over the affairs of the Corporate Debtor and duties as required to be performed by him under the provisions of IBC, 2016, including the issue of the publication in widely circulated Newspaper as contemplated under the provisions of IBC, 2016 and calling for the claims from the creditors of Corporate Debtor and collation of the same shall be done.
ii) Further, as a sequel of admission, moratorium as envisaged under Section 14 of IBC, 2016 is invoked concerning the Corporate Debtor, which will be in vogue during the Corporate Insolvency Resolution Process of the Corporate Debtor. The IRP shall carry out CIRP strictly as per the timelines specified and as envisaged under the provisions of IBC, 2016 in relation to the Corporate Debtor.
iii) The said IRP shall act strictly in compliance with the provisions of IBC, 2016 and defray his expenses to be incurred and fees on the account. The Applicant is directed to act in accordance with Regulation 33(1) of the Insolvency and Bankruptcy (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Applicant shall deposit a sum of Rs. 2,00,000/- (Rupees Two Lakhs Only) as the fees in the account of IRP within three working days from the date of this order. The IRP shall duly file a status report from time to time appraising this Adjudicating Authority about the progress of CIRP unfolded in relation to the Corporate Debtor. In terms of Section 17 & 19 of IBC, 2016, all personnel of the Corporate Debtor including promoters and Board of Directors, whose powers shall stand suspended, shall extend all cooperation to the IRP during his tenure as such and the management of the affairs of the Corporate Debtor shall vest with the IRP.
iv) In terms of Section 7 of IBC, 2016, this order shall be communicated to the Applicant, Corporate Debtor, and the Interim Resolution Professional (IRP) appointed by this Adjudicating Authority to carry out the CIRP at the earliest, not exceeding one week from today.
Copy of this order shall also be communicated to IBBI for its record, and to any other body/entity to whom the Corporate Debtor is under legal/contractual obligation to inform/update.
In the circumstances, IA (IBC) No. 675/JPR/2023, IA (IBC) No. 303/JPR/2024 are rejected and disposed of and CP No. (IB)- 49/7/JPR/2023 stands admitted.
Further, the Registry is directed to serve a copy of the order to the parties.