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Judgment
ORDER
The case is fixed for pronouncement of the order. The order is pronounced in open Court vide separate sheet.
The instant application was filed on 25.04.2023 by VSJ Investments Private Limited (Applicant) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (CODE) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) against Rai Homes (India) Private Limited (Respondent) for the default amount of Rs. 24,37,08,496/- (Principal Amount of Rs. 8,54,03,951/- + Interest of Rs. 15,83,04,545/-). The date of default as stated in Part IV of the application is 30.06.2022.
The applicant is a company incorporated under the Companies Act, 1956 on 09.06.1993. Mr. Pradeep Kumar Bala is an authorized representative of the applicant vide Board Resolution dated 22.08.2022 to file the present application. The respondent is a private limited company (CIN: U45200MP2011PTC025799) incorporated under the provisions of the Companies Act, 1956 on 15.04.2011.
The averments made by the financial creditor/applicant in its petition and as presented/argued by the learned counsel for the applicant are summarized hereunder:
The respondent had applied for a loan facility of Rs.10,00,00,000/- to Dewan Housing Finance Corporation Limited (DHFL) and the same was sanctioned on 22.01.2014 for construction and development work of the Bhavya City Phase-II, Bhopal, Madhya Pradesh.
Meanwhile, Hon’ble National Company Law Tribunal, Mumbai Bench approved the reverse merger of Piramal Capital & Housing Finance Limited into DHFL w.e.f. September 30, 2021. By way of reverse merger, all rights in respect of recovery of debts, including the Loan, came to lie with Piramal Capital & Housing Finance Limited.
Subsequently, the loan along with all its financing documents and any underlying security interests in respect of the said loan security have been assigned by Piramal Capital & Housing Finance Limited to the applicant vide Assignment Agreement dated 27.04.2022.
As per the said loan agreement, the repayment was to be done in 24 EMIs commencing after 36 months from the date of first disbursement and the interest of default was at the rate of 24% on EMI and 30% on the entire principal loan balance.
A Deed of Guarantee dated 25.01.2014 was executed by Amrish Rai and Deepa Rai to secure the loan advanced to the respondent. Furthermore, land admeasuring 8.71 acres on which the said Project is being developed was mortgaged by the respondent as security against the Loan vide Declaration dated 24.01.2014. The respondent has also executed a Demand Promissory Note promising to pay the Loan amount along with a Deed of Hypothecation dated 25.01.2014 wherein the respondent hypothecated all its present and future book debts, outstanding moneys, receivables, claim rights of sold and unsold units of the said Project.
The respondent defaulted in repaying the loan amount and a recall notice dated 15.02.2019 was issued to the respondent and the guarantors calling upon them to pay the outstanding amount within 30 days from the receipt of the notice.
Subsequently, the respondent and Piramal Capital & Housing Finance Limited entered into a One Time Settlement Agreement dated 28.02.2022 for payment of Rs. 12,00,00,000/- as the full and final settlement of outstanding dues.
The respondent was made aware about the Deed of Assignment dated 27.04.2022 between Piramal Capital & Housing Finance Limited and the applicant vide letter dated 09.05.2022.
The respondent failed to make the instalment payment as set out in the One Time Settlement Agreement and vide another letter dated 06.09.2022, the respondent was given three days’ time from the receipt of the said letter to make payment of the due instalment. The respondent failed to make payment of due instalment, the applicant vide letter dated 21.09.2022 cancelled, revoked and withdrew the One Time Settlement Agreement dated 28.02.2022 and called for payment of the entire amount.
The applicant has further issued demand notices dated 27.12.2022 under section 95 of the Code to the personal guarantors i.e. Amrish Rai and Deepa Rai with respect to the outstanding dues.
The objections raised by the corporate debtor/respondent in its reply dated 28.11.2023 and as presented/argued by the learned counsel for the respondent are summarised as under:
The present application filed by the applicant is barred by Limitation as the cause of action arose much before the loan recall notice dated 15.02.2019.
Subsequently, on 28.02.2022, a letter was issued by Piramal Capital & Housing Finance Limited regarding the alleged outstanding debt of Rs. 23,32,86,420/- as on 23.02.2022 and the respondent was advised to make a payment of Rs. 12,00,00,000/- to settle the entire outstanding debt.
The applicant, eventually, cancelled, revoked and withdrew the letter dated 28.02.2022 vide another letter dated 21.09.2022. Therefore, the date of default stated to be 30.06.2022 for alleged non-payment of financial debt is incorrect and barred by limitation.
The Applicant claims to have acquired the rights of a creditor from the Piramal Capital & Housing Finance Limited vide Assignment Agreement dated 27.04.2022. However, the debt has already become time barred prior to the said date of Assignment Agreement. Furthermore, it is a settled law that no person can assign/ transfer any right which is not possessed on the date of the assignment/ transfer.
The applicant has failed to produce a copy of board resolution which is a mandate to legally raise borrowings and proof of disbursements.
The applicant has itself stated that the cause of action has occurred for the first time on 11.02.2017 and the loan account of the respondent was classified as NPA on 31.12.2018. There was no payment made by the respondent after the date of default. Reliance has been placed by the learned counsel on the case of Milind Kashiram Jadhav v. State Bank of India and Anr [Company Appeal (AT) (Insolvency) No. 1589 of 2023]. In view of the above, the date of default is the date of NPA and not 19.02.2019 when the recall notice was sent.
Furthermore, there is no proof attached by the applicant that the loan recall notice has been served to the respondent. The applicant has also stated that the date of default is stated to be 30.06.2022 intentionally to bring a time barred debt to life.
The acknowledgment of debt is not supported by the Approval Letter dated 28.02.2022 as the applicant has itself withdrawn, cancelled and revoked the said letter. Therefore, the date of default cannot be extended due to acknowledgement of debt.
The applicant has not supported its disbursement with bank statements, rather only its internal ledger statements have been provided. In order to mislead the Adjudicating Authority, a statement as A-23 has been attached without the seal of the authority/institution, which is an insufficient proof for disbursement.
The submissions made by the financial creditor/ applicant in its rejoinder dated 15.01.2024 and as presented/argued by the learned counsel for the applicant are summarised as under:
The present application filed by the applicant is well within the Limitation period. It is stated in the NeSL report that the default in payment of loan occurred on 11.02.2017 which initiates the limitation period for filing the application. During the subsistence of this limitation, the respondent made payment of Rs. 2,50,000/- towards the loan on 29.09.2017 which extended the limitation period by three years to 29.09.2020.
Subsequently, owing to the difficulties faced by the litigants during COVID-19 pandemic, the SC in In Re: Cognizance for Extension of Limitation [WP(C) No. 3 of 2020] excluded the period of 15.03.2020 to 28.02.2022 for the purposes of computation of limitation period.
Furthermore, during the said excluded limitation period, the respondent and the applicant entered into a One Time Settlement Agreement dated 28.02.2022, however, the respondent failed to make payment of its instalment dated 30.06.2022 as set out in the OTS Agreement leaving the applicant with no choice but to issue another letter dated 21.09.2022 wherein the said OTS agreement was cancelled, revoked and withdrawn and entire outstanding payment was called for by the applicant.
As the respondent agreed to enter into an OTS Agreement, there was another acknowledgement of debt by the respondent which further extends the limitation period by three years from the date of OTS Agreement dated 28.02.2022.
We have heard the learned counsel for the applicant as well as for the respondent and perused the material available on record. It is noted that DHFL sanctioned a project loan dated 22.01.2014 in favour of the respondent and subsequently, a loan agreement was executed in this regard on 25.01.2014. Furthermore, it is also noted that DHFL disbursed Rs. 9,80,00,000/- out of the total sanction amount of Rs. 10,00,00,000/- in multiple tranches of Rs. 5,00,00,000/- on 29.01.2014; Rs. 1,50,00,000/- on 06.06.2014; Rs. 1,50,00,000/- on 08.10.2014; Rs. 1,50,00,000/- on 8.10.2016 and Rs. 30,00,000/- on 29.03.2017. In view of the default, the loan account was classified as Non-Performing Asset (NPA) on 31.12.2018. It is also noted that the applicant issued recall notice dated 15.02.2019 demanding the repayment of entire outstanding payment. Furthermore, Piramal Housing & Finance Limited and the Respondent entered into an OTS Agreement dated 28.02.2022 for Rs. 12 Crores and upon failure to pay the first instalment of the said Amount, the OTS Agreement was revoked and cancelled vide letter dated 21.09.2022 by the applicant. Further, the applicant has placed on record the NeSL certificate which shows the status of authentication of default as ‘Deemed to be Authenticated’.
It is noted that the account was classified as NPA on 31.12.2018 and as has been observed by the Hon’ble NCLAT in Milind Kashiram Jadhav Suspended Director of Jabalpur MSW Pvt. Ltd v. State Bank of India Company Appeal(AT)(Insolvency)No. 1589 of 2023 that the NPA classification date is to be treated as the ‘date of default’ within the ambit of the Code. The relevant paragraphs are reproduced hereunder for ready reference–
“74.The loan accounts of the Corporate Debtor were officially classified as Non-Performing Assets (NPA) on September 27, 2019, following 90 days of non-payment, thereby triggering a default event. Despite subsequent partial payments made by the borrower, the NPA status and default persisted, indicating a continuous state of default. Consistent with established judicial precedents and the specific circumstances of the case, the date of NPA classification serves as the valid "Date of Default" for initiating insolvency proceedings. Even after the NPA classification, the borrower remained in default. Consequently, September 27, 2019, the date of NPA classification, stands as the "date of default" under the Insolvency and Bankruptcy Code (IBC), superseding any subsequent events, such as the loan recall notice issued on August 18, 2020.….”
Thus, the date of default would be 31.12.2018 and not 30.06.2022 as stated in Part IV of the application by the applicant.
As regards the limitation period, it is noted that the Hon’ble Supreme Court vide its order dated 10.01.2022 in the In Re: Cognizance for Extension of Limitation WP(C) No. 3 of 2020 excluded the period of limitation from 15.03.2020 till 28.02.2022 for all judicial and quasi-judicial proceedings. In cases where the limitation expired during the period between 15.03.2020 till 28.02.2022, further uniform extension in limitation period of 90 days from 01.03.2022 was granted. However, the unexpired period of limitation (from original cause of action) up to 15.03.2020 shall be further available to a party from 01.03.2022 in cases where the unexpired period is greater than 90 days. In the present case, the date of default would be 31.12.2018 and the present application is filed by the applicant on 25.04.2023. Taking note of the said decision of the Hon’ble Supreme Court, we find that the present petition is filed well within the limitation period as the period from 31.12.2018 to 15.03.2020 and 01.03.2022 to 25.04.2023 is less than three years.
It is also noted that the respondent has not disputed the alleged outstanding amount and has only contested the limitation period for filing the application. In view of the above, we are of the considered opinion that there exists financial debt which is payable and defaulted by the respondent. The same is also recorded in their audited balance sheets. The debt is more than the threshold limit of Rs. 1 crore as per Section 4 of the IBC. This application is filed within limitation and is defect-free; and as such it is a fit case to be admitted under section 7 of the Code.
Accordingly, we admit this application and order as under:
ORDER
Corporate Debtor – Rai Homes (India) Private Limited is admitted in the Corporate Insolvency Resolution Process under section 7 of the Insolvency & Bankruptcy Code, 2016.
The moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the Code.
(a)the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b)transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c)any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d)the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
The order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of the Section 31 or passes an order for liquidation of Corporate Debtor Company under Section 33 of the IBC, 2016, as the case may be.
As proposed by the financial creditor, we appoint Mr. Biswanath Choudhary having registration No. IBBI/IPA– 002/IP-N00597/2018-19/12042 as approved by this Adjudicating Authority vide order dated 05.04.2024 in IA 138 of 2024; to act as an IRP under Section 13(1)(c) of the IBC, 2016 in respect of the CIRP of the corporate debtor. IRP shall conduct the Corporate Insolvency Resolution Process of the corporate debtor as per the provisions of the Insolvency & Bankruptcy Code, 2016 read with Regulations made thereunder.
The IRP so appointed shall make a public announcement of initiation of Corporate Insolvency Resolution Process (CIRP) and call for submission of claims under Section 15 as required by Section 13(1) (b) of the Code.
The supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period. The corporate debtor to provide effective assistance to the IRP as and when he takes charge of the assets and management of the corporate debtor.
The IRP shall perform all functions as contemplated, inter-alia, by sections 17, 18, 20 & 21 of the Code. It is further made clear that all personnel connected with Corporate Debtor, its Promoter or any other person associated with management of the Corporate Debtor are under legal obligation under Section 19 of the Code extending every assistance and co-operation to the Interim Resolution Professional. Where any personnel of the Corporate Debtor, its Promoter or any other person, is required to assist or co-operate with IRP, do not assist or Co-operate, the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.
The IRP shall be under duty to protect and preserve the value of the property of the ‘Corporate Debtor Company’ and manage the operations of the Corporate Debtor Company as a going concern as a part of obligation imposed by Section 20 of the Insolvency & Bankruptcy Code, 2016.
The Financial Creditor is directed to pay an advance of Rs. 1,00,000/- (Rupees one lakh only) to the IRP as regards the CIRP of each of the corporate debtor within two weeks from the date of receipt of this order for smooth conduct of Corporate Insolvency Resolution Process (CIRP) and IRP to file proof of receipt of such amount to this Adjudicating Authority along with First Progress Report. Subsequently, the IRP may raise further demands for Interim funds, which shall be provided as per Rules.
The Registry is directed to communicate a copy of this order to the Financial Creditor, Corporate Debtor and to the Interim Resolution Professional and the concerned Registrar of Companies, within seven working days and upload the same on website immediately after pronouncement of the order.
The IRP shall also serve a copy of this order to various departments such as Income Tax, GST, State Trade Tax and Provident Fund etc. who are likely to have their claim against Corporate Debtor as well as to the trade unions/ employee’s associations so that they are timely informed about the initiation of CIRP against the corporate debtor.
The commencement of the Corporate Insolvency Resolution process shall be effective from the date of this order.