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Judgment
ORDER
Heard the Learned Counsel Mr. Anirudh Krishnan, appearing for the Appellant.
According to the Appellant/Suspended Director of the ‘Corporate Debtor’ (M/s. YKM Entertainment and Hotels Pvt. Ltd. Hyderabad) the Instant Company Appeal (AT) (CH)(INS) No. 66 of 2022 is preferred by him, on being dissatisfied with the Impugned Order dated 05.01.2022 passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench, Hyderabad) in admitting the CP/IB/206/2021 filed by the 1st Respondent/Applicant/Financial Creditor under Section 7 of the I&B Code, 2016 seeking to initiate ‘CIRP’ against the 2nd Respondent.
The ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench, Hyderabad) while passing the ‘Impugned Order’ dated 05.01.2022 in Company Petition CP/IB/206/2021 at paragraph Nos. 5 to 8
“5.After hearing the Financial Creditor and perusing record, it is observed that the Corporate Debtor has declared in its Audited Financial Statements for F.Y’s 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20, the long term borrowings from the Financial Creditor/Applicant herein. Further in Notes to Accounts for the Audited Balance Sheet for F.Y. 2019-20 the Corporate Debtor has declared as under:
“The Company has entered into One Time Statement dated 1st August 2019 with State Bank of India to settle the Outstanding SBI Loan (NPA) and interest dues with One time payment of 112.00 crores plus cash margin of BG outstanding of 2.7 crores to be paid in 4 payments before 31st January 2020”.
6.The outstanding balance as on 31.03.2020 stood at Rs.197.96 crore. Copy of the aforementioned OTS proposal, the Joint Compromise Memo and OTS cancellation letter are also placed on record by the Financial Creditor which are perused.
7.A conjoint reading of the details of Long Term Borrowings as reflected in the Balance Sheet, as well as the OTS related documents and the afore extracted Note to Accounts clearly indicates that there was a “financial debt” owned by the Corporate Debtor to the Financial Creditor and there was a “default” on the part of the Corporate Debtor as claimed by the Financial Creditor. We, therefore, are of the view that in the instant case there is a financial debt and there has been a default in repayment of the same and that this Adjudicating Authority is satisfied that the Financial Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Further, it is pertinent herein to note that the Hon’ble Supreme Court, while deciding the matter in the case of INNOVENTIVE INDUSTRIES LTD. Vs. ICICI Bank & ANR., in Civil Appeal Nos. 8337-8338 of 2017, held as under:
“………… 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. Under subsection (7), the adjudicating authority shall then communicate the order passed to the Financial Creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be.”
8.The Financial Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Financial Creditor, this Adjudicating Authority is inclined to admit the instant Application.”
and ultimately admitted the ‘Application’ and appointed an Interim Resolution Professional Mr. Dantu Indu Sekhar and declared moratorium etc.
The grievance of the Learned Counsel for the Appellant is that the Appellant was not served with the copy of the Application and Paper Book in CP/IB/No.206/07/HDB/2021 before the ‘Adjudicating Authority’ and in fact the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench, Hyderabad) in CP/IB/No.206/07/HDB/2021 on 07.12.2021had observed the following:
“Learned Counsel for Corporate Debtor appearing in this matter submits that when the original notice was served by the Financial Creditor as there was only skeleton staff in the office, as such, they could not receive the notice and he seeks to set aside the order passed by this Bench setting the Corporate Debtor as ex-parte. As it can be seen from the record that the Financial Creditor has also taken out a publication in this matter and Corporate Debtor is knowing it pretty well that there is a matter pending. The Corporate Debtor had deliberately chosen not to appear and seeks to set aside the ex-parte Order.”
The plea of the Appellant is that owing to the 2nd Respondent failure to receive the notice issued by the 1st Respondent and that the reason for which the Appellant raised the plea before this ‘Tribunal’ in Appeal is that “there was no sufficient notice” as a result of which, the Appellant was very much prejudiced in not projecting the defense/setting up of the case in the Company Petition.
The other contention advanced on behalf of the Appellant is that on 22.12.2021 the letter was issued to the 1st Respondent by the 2nd Respondent indicating the change of registered address of the 2nd Respondent and further that it was brought attention of the 1st Respondent that the Registered Office of the 2nd Respondent had changed from ‘6-3-883/F1, 1st Floor, Pothula Towers Annexe, Somajiguda, Hyderabad-500082 to “D.No.1/-225, Golden Ridge Township, Pendyal Village, Maheshwaram Mandal, Rangareddy District, Telangana - 509325.”
The clear-cut stand of the Appellant is that the ‘Master Data’ of the 2nd Respondent which reflected change in address was also provided to the 1st Respondent, etc.
Moreover, the 2nd Respondent was not conducting any operations from its old registered address at 6-3-883/F1, 1st Floor, Pothula Towers Annexe, Somajiguda, Hyderabad-500082, Telangana from September 2021.
The reason advanced on behalf of the Appellant is that due to the scaling down of operations because of COVID-19 crisis the 2nd Respondent was to change its registered address owing to change in infrastructure needs.
This ‘Tribunal’ has heard the Learned Counsel appearing for the Appellant and noticed its contentions.
The case of the 1st Respondent/Bank/Financial Creditor is that the Corporate Debtor’ had availed financial assistance from it and ‘associated Banks’ under the ‘Consortium Arrangement’ and committed ‘Default’ in repaying the ‘Loan sum’. In fact, the 1st Respondent/Bank had filed Original Application No. 767 of 2018 on the file of Debt Recovery Tribunal, Hyderabad-2 against the ‘Corporate Debtor’ and other Defendants therein for recovering a sum of Rs.184,82,88,871/- together with interest.
It comes to be known that during the pendency of the aforesaid OA No.767 of 2018, ‘One Time Settlement’ proposal was offered by the ‘Corporate Debtor’ through its Letter dated 02.04.2019 addressed to the 1st Respondent/Bank whereby and whereunder, the Corporate Debtor had admitted its liability towards the 1st Respondent/Bank. In fact, the 1st Respondent /Bank by way of its letter dated 01.09.2019 had accorded its approval in respect of the ‘OTS proposal’ by determining certain terms and on such condition that in the case of ‘Corporate Debtor’s failure to pay ‘OTS sum’ or any instalment within the schedule period, the 1st Respondent/Bank/Financial Creditor reserves its right to cancel the ‘OTS’ and the entire dues to the 1st Respondent/Bank will be claimed before the ‘Tribunal’ in the ‘Original Application’ with interest and cost that become due for payment, after adjusting the same recovered under the ‘One Time Settlement’.
In the instant case, it is brought to the notice that the ‘Corporate Debtor’ passed a Resolution of the Board in its meeting that took place on 06.08.2019, accepting the ‘One Time Settlement’ terms. Later IA No.4620/2019 was projected before the ‘Debt Recovery Tribunal’ to record the ‘Compromise’, whereby and whereunder, the ‘Corporate Debtor’ had agreed that in case of failure in making payment of ‘Compromise of Settlement/OTS’, the same shall be treated as cancelled and the 1st Respondent/Bank/Financial Creditor shall be entitled to the ‘original claim’ after adjusting the same already paid by the ‘Corporate Debtor’.
In reality, the ‘Debt Recovery Tribunal’ after recording the terms agreed between the parties under the ‘Joint Compromise Memo’ had allowed the ‘Original Application’ as per order dated 19.09.2019 by according liberty to the 1st Respondent/Bank/Financial Creditor to approach the ‘Debt Recovery Tribunal’ in issuing a ‘Recovery Certificate’ against the ‘Corporate Debtor’ and other ‘Defendants’ therein in the event of ‘Default’ in payment of the ‘One Time Settlement’.
In the present case, the ‘Corporate Debtor’ had not paid any instalment and pursuant to the terms of the ‘One-time Settlement’ and in fact, the ‘One time Settlement’ which was sanctioned earlier, got annulled. In fact, the 1st Respondent/Financial Creditor/Bank projected the MA/61/2020 before the ‘Debt Recovery Tribunal’, bringing to its notice in spite of the fact that the ‘Debtor’ had failed to adhere to the terms of ‘One-time Settlement’ and ‘Joint Compromise Memo’ and hence relief was sought from the ‘Debt Recovery Tribunal’ to pass an order for the same claimed in ‘Original Application’.
The Application before the ‘Adjudicating Authority’, in the present case, was filed whereby a claim was made for Rs.277,55,86,069/- outstanding on 19.07.2021 Rs.137,20,30,278 with accrued interest with effect from 01.09.2016 Rs.137,65,55,791/0 and non-fund liability of a sum of Rs.2,70,00,000/-.
There is no two opinion of the fact that on 22.11.2021 after due notice and ‘Substituted Service’ of Paper Publication having been to effected, the ‘Adjudicating Authority’ had set ‘Corporate Debtor’ ‘Exparte’.
The emphatic plea made by the Learned Counsel for the Appellant Mr. A.K. Krishnan, is that one opportunity may be provided to the ‘Appellant’ to put forward its defence in the main Application and in such an event, the ‘Appellant’ will be provided with an opportunity to contest the main case after the ‘original order’ passed by the ‘Adjudicating Authority’ is set aside after hearing the ‘Appellant’.
In the present case, it cannot be brushed aside that the balance amount standing as on date 31.03.2020 was at Rs.197.96 Crores and in view of the fact that the ‘One Time Settlement’ was cancelled through the Letter of the Bank and because of the fact that in the ‘Audited Balance Sheet’ in respect of the Financial Year 2019-20, the ‘Corporate Debtor’ himself had proceeded to make a relevant mention among other things that “the Company has entered into ‘One Time Settlement’ dated 01.08.2019 with the State Bank of India to settle the outstanding SBI Loan (NPA) and interest due with ‘One Time Payment’ of 112.00 Crores + cash margin of BG Outstanding to 2.7 Crores to be paid before 31st January 2020.”
It is to be remembered that before the ‘Adjudicating Authority under Section 7 of the I & B Code, 2016, the 1st Respondent/Financial Creditor/Bank filed CP/IB/206/HDB/2021 and under Section 7 of the I&B Code, it is incumbent on the part of the Applicant/Financial Creditor/bank, to establish the ‘Debt default’. If the ‘Adjudicating Authority’ is subjectively satisfied that there was Debt due and payable in law and in fact, by the Corporate Debtor to in favour of the 1st Respondent/Bank/Financial Creditor then, in law, the ‘Adjudicating Authority’ is left with no other alternative but to admit the application under the I&B Code, 2016.
Therefore, this ‘Tribunal’ on going through the ‘Impugned Order’ passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench, Hyderabad) in CP/IB/206/HDB/2021is of the earnest opinion that the ‘Adjudicating Authority’ was right in admitting the Application under Section 7 of the Code filed by the 1st Respondent/Bank and the said order is free from any legal infirmities. Consequently, the Appeal is ‘devoid of merits’.
In fine, the Company Appeal AT CH INS No.66 of 2022 is dismissed. No costs. The IA Nos. 139 and 140 of 2021 are closed.