Vinsan Credit & Securities Limited vs M U Buildcon Pvt. Ltd.

PER: SHRI ASHOK KUMAR BHARDWAJ, MEMBER (J)

The captioned petition has been preferred by Vinsan Credit & Securities Limited (hereinafter referred to as the “Financial Creditor /Petitioner”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 against M/s M U Buildcon Pvt. Ltd. (hereinafter referred to as the “Corporate Debtor/Respondent”) seeking initiation of Corporate Insolvency Resolution Process on account of alleged default in payment of Financial debt amounting to ₹ 6,99,91,618.40/-. The amount of default is stated have arisen from the breach of Memorandum of Settlement dated 06.09.2023 and sanction letter dated 31.05.2012 executed between the petitioner and the respondent. It is the case of the Applicant that an application under Section 7 of the IBC, 2016 was earlier filed against the Respondent/Corporate Debtor and was admitted by this Tribunal vide order dated 01.08.2023 viz. CP (IB) No. 258/ND/2023. Subsequently, during the pendency of the CIRP, the suspended management of the Corporate Debtor approached the Financial Creditor with a proposal for an amicable settlement of the outstanding dues. Pursuant thereto, and upon approval of the Committee of Creditors, an application under Section 12A of the Code was filed seeking withdrawal of the CIRP. This Tribunal, vide order dated 30.10.2023, allowed the withdrawal of the CIRP in terms of the settlement arrived at between the parties. The Corporate Debtor failed to comply with the terms of the settlement. Consequently, the settlement stood breached and the benefit accruing therefrom ceased to operate. Accordingly, the original debt, after giving due credit to the amounts received under the settlement, revived and became due and payable.

The facts as espoused by the petitioner in the captioned petition, reads thus:-

I. In or around May 2012, the Corporate Debtor approached the Financial Creditor seeking financial assistance of Rs. 10,00,00,000/- for its business requirements. Upon considering the request and the representations made by the management of the Corporate Debtor, the Financial Creditor sanctioned a loan of Rs. 4,00,00,000/- vide Sanction Letter dated 31.05.2012. The loan carried interest at the rate of 6% per annum on a floating basis, with the interest to be settled at the end of each financial year. The terms of the sanction further provided that, in the event of default in payment of interest, the unpaid interest would be added to the principal loan amount. The Sanction Letter also entitled the Financial Creditor to demand partial or full repayment of the loan or the outstanding balance at any time before complete repayment of the loan together with interest, and the Corporate Debtor was liable to repay the same on demand.

II. Pursuant to the sanction, the Financial Creditor disbursed the loan amount to the Corporate Debtor in various tranches as per its requirements. Initially, the Corporate Debtor regularly serviced the loan. However, it defaulted in payment of interest for the Financial Year 2014-15. Regarding the default, the directors of the Corporate Debtor attributed the delay to financial constraints and assured that the outstanding interest would be cleared at the earliest. Thereafter, the Corporate Debtor made partial payments of Rs. 11,65,000/- on 01.12.2016 and Rs. 7,40,000/- on 15.12.2016 towards the outstanding interest. Despite these payments, substantial interest remained unpaid. The Corporate Debtor further failed to pay the interest accrued for the financial years ending March 2017, March 2018, March 2019 and March 2020, while continued to acknowledge the ledger accounts for the respective financial years.

III. During discussions with the directors of the Corporate Debtor, the Financial Creditor informed them that if the outstanding interest was not cleared before the end of the financial year in March 2021, the loan account would be classified as a Non-Performing Asset (NPA) and the entire loan would be recalled. Thereafter, the Corporate Debtor made a payment of Rs. 50,00,000/- on 30.03.2021 towards part payment of the outstanding interest. However, as the Corporate Debtor continued to remain in default and the outstanding liability kept increasing, the loan account was classified as NPA on 31.07.2021.

IV. Following the classification of the account as NPA, the Financial Creditor issued a legal demand notice dated 20.06.2022 demanding payment of Rs. 8,22,32,703/- as on 31.03.2021 along with future interest and incidental charges. The Corporate Debtor, through its Advocate, replied on 26.07.2022 seeking one month's time to settle the outstanding dues. Despite such assurance, no payment was made. Consequently, the Financial Creditor issued a recall notice dated 24.03.2023 recalling the entire loan facility and demanding payment of Rs. 10,66,10,613/- as on 24.03.2023, being the total outstanding amount including accrued interest, within 10 days from receipt of the notice. The Corporate Debtor failed to repay the said amount.

V. As a result, the Financial Creditor initiated proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 before this Tribunal. The application was admitted vide order dated 01.08.2023 passed in CP (IB) No. 258 (ND) / 2023 and Corporate Insolvency Resolution Process was ordered to be commenced against the Corporate Debtor.

VI. During the pendency of the CIRP, the suspended management of the Corporate Debtor approached the Financial Creditor for an amicable settlement of the outstanding dues. Accordingly, a Memorandum of Settlement dated 06.09.2023 was executed between the parties. Under the settlement, the admitted claim of the Financial Creditor amounting to Rs. 10,92,07,239/- was agreed to be settled for an amount of Rs. 5,78,00,000/-. The settlement provided that the entire settlement amount would be paid by the Corporate Debtor on or before 31.03.2024, or alternatively by 31.05.2024 along with interest at the rate of 12% per annum. It was further agreed that, in the event of default by the Corporate Debtor, the parties would be at liberty to immediately initiate CIRP proceedings against the Corporate Debtor.

VII. Pursuant to the settlement and upon approval of the Committee of Creditors, an application under Section 12A of the Code was filed seeking withdrawal of the CIRP. This Tribunal, vide order dated 30.10.2023, allowed the withdrawal of the CIRP in terms of the settlement arrived at between the parties.

VIII. In furtherance of the settlement, the Corporate Debtor paid Rs. 1,31,83,404.70 on 11.01.2024 and Rs. 26,29,124.90 on 17.01.2024 to FC. Thereafter, despite repeated follow-ups, the Corporate Debtor and its directors represented that efforts were being made to arrange the remaining funds and proposed to transfer an immovable property, i.e., the second floor forming part of the half portion of property bearing Municipal No. 2216-2222, situated at Gali Inder Chamar, Teliwara, Delhi-110006, towards partial discharge of the settlement amount to the extent of Rs. 2,00,00,000/-. The said property was transferred in favour of the Financial Creditor through a registered Sale Deed dated 05.03.2024.

IX. Despite the aforesaid payments and transfer of property, the Corporate Debtor failed to pay the remaining settlement amount and continued to make assurances without complying with its obligations under the settlement. Consequently, the Corporate Debtor breached the terms of the Memorandum of Settlement and committed default in payment of the agreed amounts. Owing to such breach, the benefit arising from the settlement ceased to operate and the original debt, after adjusting the amounts received and the value of the property transferred pursuant to the settlement, revived and became due and payable.

The Financial Creditor has furnished the details of the financial debt in Part IV of the petition. The relevant excerpt of Part IV, reads thus: -

The Respondent/Corporate Debtor has not filed any reply opposing the pleas raised in the present petition. Ld. Counsel for the petitioner could draw our attention to the order dated 25.05.2026, which reveals that no one had entered appearance on behalf of the Corporate Debtor despite service of notice. In the wake, the proceedings qua it were set as ex-parte.

We have heard the Learned Counsel appearing for the Petitioner and perused the material available on record.

The case of the Petitioner is that CIRP was initiated against the Corporate Debtor vide Order dated 01.08.2023 passed by this Adjudicating Authority. Subsequently, a Memorandum of Settlement dated 06.09.2023 came to be executed between the Corporate Debtor and the Financial Creditors. Pursuant thereto, and upon approval of the Committee of Creditors, an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 was filed seeking withdrawal of the CIRP. This Adjudicating Authority, vide Order dated 30.10.2023, allowed the withdrawal of the CIRP in terms of the settlement arrived at between the parties.

Pursuant to the Memorandum of Settlement, the Corporate Debtor paid an amount of Rs. 1,31,83,404.70 on 11.01.2024 and Rs. 26,29,124.90 on 17.01.2024 to the Petitioner. According to the FC, upon further follow-ups, the Corporate Debtor and its directors represented that they were in the process of arranging and were making efforts to transfer an immovable property, viz., the second floor forming part of the half portion of property bearing Municipal No. 2216–2222, situated at Gali Inder Chamar, Teliwara, Delhi–110006, towards partial discharge of the settlement amount to the extent of Rs. 2,00,00,000/- (Rupees Two Crore Only). The said property was accordingly transferred in favour of the FC vide a registered Sale Deed dated 05.03.2024. It is the petitioner’s case that, thereafter, despite repeated demands, the Corporate Debtor failed to pay the remaining settlement amount and continued to extend assurances regarding payment.

The CIRP qua CD viz. M U Buildcon Private Limited was initiated by this tribunal vide Order dated 01.08.2023 passed in CP (IB) No. 258/ND/2023. The relevant observations made in the said order reads thus:-

Subsequent to the passing of the aforesaid Order dated 01.08.2023, the parties arrived at a settlement and moved an application under Section 12A of the Insolvency and Bankruptcy Code, 2016 seeking withdrawal of the CIRP. A perusal of the Order dated 30.10.2023 passed by this Adjudicating Authority in CP (IB) No. 258/ND/2023 reveals that the Corporate Debtor was released from the rigours of the CIRP in view of the settlement arrived at between the parties. The relevant excerpt of the order dated 30.10.2023 reads thus:-

At this stage, when the Petitioner has once again approached this tribunal seeking initiation of CIRP against the Corporate Debtor, it would be apposite to refer to the Memorandum of Settlement dated 06.09.2023. A perusal of the said Memorandum reflects that during the first meeting of the Committee of Creditors held on 04.09.2023, the Suspended Director of the Corporate Debtor entered into an amicable settlement with the members of the Committee of Creditors. As per Clause 2.1 of the Memorandum of Settlement, the admitted claim of the Petitioner was quantified at Rs. 10,92,07,239/-, whereas the settlement amount agreed between the parties was Rs. 5,78,00,000/-.

It is not in dispute that certain payments were made by the Corporate Debtor pursuant to the settlement. However, the Corporate Debtor failed to make the payment of balance amount as per settlement. Clause 3.2 of the Memorandum of Settlement stipulated 31.03.2024 as the due date for payment of the balance amount, which could be subsequently extended till 31.05.2024. Despite such extension and the indulgence granted by the creditors, the Corporate Debtor failed to liquidate the outstanding dues.

From the material placed on record, it is evident that the settlement, on the basis of which the CIRP was withdrawn under Section 12A of the Code, has not been honoured in its entirety. The default committed by the Corporate Debtor continues to subsist. Though we are not presently undertaking an exercise to determine the exact quantum of the outstanding amount, the documents placed on record sufficiently shows that the amount remaining unpaid is well above the threshold prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016.

In these circumstances and in the absence of any rebuttal from the Corporate Debtor despite due service, we are satisfied that a financial debt remains due and payable and that default thereof has occurred. The amount of default mentioned in the application is above the threshold limit as prescribed under Section 4 of the I&B Code. In the wake, we are left with no option but to admit the present petition and initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. Ordered accordingly.

In light of the above facts and circumstances, it is, hereby ordered as follows:-

As a consequence of the Application C.P. (IB) 213/ND/2026 being admitted in terms of Section 7 of the Code, moratorium as envisaged under the provisions of Section 14(1) of the Code, shall follow in relation to the Respondent/(CD) as per clauses (a) to (d) of Section 14(1) of the Code. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the Code shall come into force.

As proposed by the Petitioner, this Bench appoints Ms. Deepa Gupta as IRP having Registration No. IBBI/IPA-002/IP-N00867/2019-2020/12801, Email id: [email protected]. She has filed her written communication, as per the requirement of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Form 2 furnished by the IP has been placed on record as enclosure to the petition. There is a declaration made by her that there are no disciplinary proceedings pending against her with the Board or ICSI Institute of Insolvency Professionals. In addition, further necessary disclosures have been made by Ms. Deepa Gupta as per the requirement of the IBBI Regulations.

The Applicant is directed to deposit Rs.2,00,000/- (Two Lakh only) with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Applicant.

We declare the Moratorium in terms of the provisions of Section 14 of IBC, 2016. Further, the IRP would act in terms of the provisions of Sections 13, 15, 17, 18, 20 and 21 of IBC, 2016 read with Regulations thereunder.

In terms of Section 7(7) of the Code, the Registry/Court Officer is hereby directed to communicate a copy of the order to the Applicant/FC, the Respondent/CD, the IRP and the Registrar of Companies, NCR, New Delhi, by Speed Post and by email, at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of the Respondent/CD and specific mention regarding admission of this petition must be notified.

The Registry/Court Officer is further directed to send a copy of this order to the Insolvency and Bankruptcy Board of India for their record.