TaxTMI 
TaxTMI 
2017 (7) TMI 971
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....the Corporate Debtor has been assigned to this Applicant. When this Corporate Debtor defaulted (Exhibit-"5-B") in making repayment of Rs. 591,95,73,112 as on March 15, 2017, this financial creditor has taken out this application for initiating corporate insolvency resolution process against this Corporate Debtor Company. Notice has been duly served upon the corporate debtor and the corporate debtor availed full opportunity in making its side submissions. 2. The creditor submits that this debtor company is in shipping business, to meet its fund requirements, IDBI (assignor) granted loan to it as working capital facility (WCF) of Rs. 450 crores under the working capital consortium agreement dated March 30, 2010 which has been modified from time to time. On account of default in repayment of the WCF by the corporate debtor, the dues outstanding under the WCF were restructured and certain additional facilities were granted to the corporate debtor by the Banks including IDBI under Corporate Debt Restructuring (CDR) scheme issued by Reserve Bank of India vide Master Restructure Agreement dated June 30, 2012 as amended from time to time. The details of the debts granted to the corporat....
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....m the security receipt holders in whose favour security receipts shall be issued by the trustee on the terms and conditions mentioned herein. It is normal practice that Asset Reconstruction Companies (ARC) pay 15% of the sale consideration in cash and the rest is given by way of Security Receipts (SR) payable soon after realisation, for undergoing this process, a Trust will be set up to meet this arrangement, likewise, here also, the applicant company has started a Trust called EARC Trust SC-205 by declaration of Trust. In this document, it has been declared that the applicant company (trustee) holds and stands possessed of initial trust fund together with all additions and accretions thereto in trust for the benefit of security benefit holders conferring power upon itself to act directly or through the Trust to recover the debt. 4. Since the Debtor Company could not fulfil its repayment obligations in relation to the restructured facilities under the MRA, it has been recorded that the lenders exited from CDR scheme owing to the debtor company's failure in repayment as per the MRA. Thereafter, on account of the debtor company failure to fulfil its obligations under CDR schem....
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....rd. 2. This CP cannot be filed without record of the default recorded with the information utility as per section 7 (3) (a) r/w section 7 (5) (b) of the Code. Since Section 7 (5) clearly contemplates that the Adjudicating Authority is required to ascertain the existence of default from the record of Information Utility, for such record of default in respect to this claim is not in existence with information utility, this CP shall be dismissed. 3. The claim made by the applicant is not an adjudicated claim, therefore not a debt u/s 3 (11) of the Code. 4. This creditor applicant has not produced (i) record evidencing that the alleged amounts have been committed to the corporate debtor and also (ii) financial statement that debt has not been repaid, details of the amounts received upon invocation of 1,25,25,692 shares have been produced. 5. This petition is not maintainable having regard to the fact that there are company petitions pending against the debtor company before the Hon'ble High Court of Bombay, therefore insolvency proceedings cannot be simultaneously initiated. 6. The applicant herein will not fall within the definition of ....
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....into Master Restructuring Agreement, but of no avail. The company failed on all fronts, today it is not the case of the debtor company that it could repay its debts, it is also not the case of the debtor company that the debt liability is false or the debt has not been assigned to this applicant, all it says is this petition is short of x, y, z reasons, therefore it has to be dismissed. 7. The issue zeroed in on is as to whether any shortage is there in the application as canvassed by the debtor company, if so, whether such shortage has been complied with by the applicant or not. On record, it is apparent that this company has become insolvent, and it is on face clear, thousands of crores of public money is stuck in the debtor company, the trials of the creditors to bail out the debtor company miserably failed, enough time had already been consumed in restructuring plans. This shipping business ship is now almost sunk, if further time is given, the danger lurking is, the creditors also get sunk along with the Debtor Company. If we see whose money all these thousands of crores is, it is evident mostly it is public money lying with the public sector banks. The purpose and object o....
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....ny gone into liquidation, that result also comes only after four five years. Now situation is converse, once insolvency proceeding is initiated, committee of creditors come into onerous position to protect the sinking ship, it is inevitable to them to protect because their money is involved. It is also simultaneously to remember several checks and balances are arranged to safeguard the interest of the company, promoters, creditors and employees and workmen, now it is nobody's hegemony to leave somebody high and dry. If this Bench admits a case, it does not mean that creditor is left open to gobble up everything in the company, this is only a threshold step to initiate proceedings, after initiation of this proceeding, again the same creditor has to prove his claim before IRP; if anybody has any grievance at that stage, then also it is open to the aggrieved to come before NCLT. So one need not be under the impression that default has been crystallised and decreed and it can't be relooked into, of course it has to be seen as to whether debt is in existence and default is there, what we say is simply by seeing slight variation in computation of interest, plus or minus here and ....
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....has yet been produced as specified u/s 240 (2) (f) of the Code (power to make regulations by Insolvency and Bankruptcy Board of India-IBBI) despite sub-clauses (a) & (c) of section 7 (3) of the Code insists upon to furnish record or evidence or information of default as specified by the Board. 2. This CP cannot be filed without record of the default recorded with the information utility as per section 7 (3) (a) r/w section 7 (5) (b) of the Code. Since Section 7 (5) clearly contemplates that the Adjudicating Authority is required to ascertain the existence of default from the records of Information Utility, for such record of default in respect to this claim is not in existence with information utility, this CP shall be dismissed. 3. The claim made by the applicant is not an adjudicated claim, therefore not a debt u/s 3 (11) of the Code. 9. All these three objections raised are about non-compliance of the mandate given under section 7 (3) of the Code and Rules and Regulations thereto. Factual aspect of granting loan, default in repayment, restructuring of loan, failure to adhere to the restructuring package or even assignment of this loan to ARC and invocation o....
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.... the procedure to be applied for taking "the other record or evidence of default under clause (a) and any other information under clause (c) of sub-section (3) of section 7." Section 240(2)(f) does not speak about availability of record of default with information utility. Basing on these two sections, central government framed Rules applicable to the Adjudicating Authority, simultaneously IBBI framed Regulations with the power under section 240 of the Code. As the procedure has been specified in the above Rules and the Regulations, this Tribunal has to go by as specified under the Rules and Regulations to admit petition under either under section 7 or 9 or 10. 13. Moreover, by the time this case was filed, Information Utility Centres had not been established, to establish them, Rules have been notified only on 31st March 2017, registration of utility centres and bringing them to functioning will take its own time, therefore record of default getting recorded or not recorded with Information Utility Centre, could not have become an objection to admit this petition. Recording of debt and default of repayment with information utility centre is not made compulsory, it is only optio....
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....h person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee. (2) The existence of debt due to the financial creditor may be proved on the basis of- (a) the records available with an information utility, if any; or (b) other relevant documents, including - (i) a financial contract supported by financial statements as evidence of the debt; (ii) a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor; (iii) financial statements showing that the debt has not been repaid; or (iv) an order of a court or Tribunal that has adjudicated upon the non-payment of a debt, if any." 16. This Regulation is made applicable in two situations, one - when financial creditor makes claim before the interim resolution professional, two - when the financial creditor makes claim before Adjudicating Authority at the time of admission of petition. For Rules governing the procedure observed that Adjudicating Authority dealing with petitions under section 7 shall follow the ab....
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....nly optional, if it is available, it can be filed. For this reason alone/ in Regulation 8 above mentioned, it has been said that if any record of default from information utility centre is available, it may be proved by that mode or else the creditor can file other records to prove default as stated above, therefore the objection on the ground of non-filing of record from utility centre will not make this petition invalid. So the objection raised by this corporate debtor is invalid. 20. In section (7) (3) (a), it has been said to produce such other record or such other evidence of default of repayment, means that financial creditor can produce evidence in the place of record as well, it is not that if record as mentioned is not available, then financial creditor is not entitled to lay evidence to the belief of the Adjudicating Authority to admit a petition. This Bench does not say that such other record to show default in repayment with regard to this case is not in existence, what all this Bench says is it is not that this Bench cannot look into other information to the belief of the Bench to ascertain existence of debt and existence of default in repayment. 21. Since the Co....
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....sideration of that fact/facts by a court or as the case may be, and finally upon such consideration of a fact, if the court believes it to exist, or considers its existence so probable that a prudent man ought to act upon the supposition that it exists, then such fact that inspired belief in the Court/judge is considered as proved. For this reason alone, Regulation 8 (2) starts saying that "Existence of debt due to the financial creditor may be proved on the basis of, by this, it is clear whatever the Code permits the party to place material to claim, that shall be satisfying to the belief of the court. Ultimately the belief of court is the requisite element to believe the existence of default. 23. On applying these legal propositions to the given facts, it is prolific that this corporate debtor not even once mentioned that it has not taken loan from IDBI Bank, MRA has not entered into, the Banks have not exited from CDR mechanism in 2013 itself, it has not mentioned shares have not been pledged with consortium Banks, it is not even the case of this Corporate Debtor that the debt claim in this case has not been assigned by IDBI to Edelweiss Asset Reconstruction Co. Ltd., therefo....
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....has placed financial contract dated 31.3.2010 as amended by supplemental Working Capital Consortium Agreement dated 30.9.2010 and 2.9.2011 to prove that this Corporate Debtor executed the Agreement to the then Financial Creditor, i.e. IDBI Bank Ltd. reflecting providing of working capital facility of Rs. 450 crores and also other accounts disclosing that Corporate Debtor drawing the above amounts from the account lying with IDBI Bank Ltd and also the material disclosing the Corporate Debtor defaulted in making repayment to the IDBI Bank Ltd. and thereafter IDBI Bank issued a recall notice dated 5.8.2015 to the company demanding payment of dues owed by the Debtor Company to IDBI. When IDBI Bank noticed Corporate Debtor failing to repay the loan despite notice has been issued by it, IDBI Bank assigned this debt to the present Financial Creditor on 30.3.2016 by executing an Assignment Agreement. It may be noted that SBICAP Trustee Company Limited (security trustee acting on behalf of the lenders of the debtor company) had, on instructions from the financial creditor, invoked some of the shares pledged as security with respect to the facilities advanced by several lenders to the compan....
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....en about pending proceedings will become impediment to initiate proceedings under section 7 of the Code unlike in proceedings under section 9 of the Code. Moreover, the suit pending before High Court is for an injunction against invocation of pledge of shares, wherein Hon'ble High Court, Bombay categorically denied granting any injunction on the footing that the Corporate Debtor itself agreed for invocation of pledge of shares in the Master Restructuring Agreement as well as the minutes passed on 28th July 2016, and when an appeal was filed over the order passed by the Hon'ble High Court of Bombay, the Division Bench of Hon'ble High Court simply affirmed the order passed by the Hon'ble High Court of Bombay. By reading the judgments passed by the Learned Single Judge and the Division Bench of the Hon'ble High Court of Bombay, two things are evident (i) that this Company defaulted in making repayment of more than Rs. 7000 crores as on the date of passing those orders, (ii) the invocation of shares was very much in the knowledge of the Debtor company, therefore, the Corporate Debtor today cannot say that since proceedings are pending before some other court this Pe....
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.... Financial Creditor. In view of the definition above mentioned, this applicant is a valid Financial Creditor to file this Company Petition; therefore, this Bench has not found any merit in the objection raised by the Corporate Debtor. Since in the Trust Deed itself it has been mentioned that this applicant, as a trustee, can deal in all respects with respect to the trust and its assets, for this reason, we are of the view that this applicant is competent to file this petition as an applicant; therefore, this objection raised by the corporate debtor is invalid. 7th objection of the debtor company: This petition is not in the prescribed form, because no record of default is recorded with information utility, no identification number of financial creditor has been produced, computation has not been claimed as per Part TV of Form - 1, no details of record of default have been recorded with any credit information agency, the entries are not shown as stated under Banker's Book Evidence Act, 1981. 29. As to record of default with information utility, this point has already been answered saying that non-existence of record of default from information utility will not make this Pe....
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....not been provided by IDBI Bank, this Petition shall be dismissed, but we have not observed any merit in that objection because it has already been decided that this Corporate Debtor failed to adhere to the MRA and the banks already exited from the CDR package. Therefore, this applicant now cannot make any claim under MRA for additional facilities; accordingly, this Bench has noticed no merit on this objection. 9th objection of the debtor company: Stamp duty has not been paid over the Assignment Agreement dated March 30, 2016 as per the provisions of Bombay Stamp Act 1958; therefore, this case should not be admitted for it is hit by Indian Stamp Act or Bombay Stamp Act 1958. 31. As to non-payment of stamp duty over assignment agreement, the applicant has categorically mentioned that the applicant has paid requisite stamp duty to Government of Maharashtra on 30-3-2016; therefore, this debtor company should not have taken this plea, which is not valid in the eye of law. 32. For the sake of information, it is hereby informed that Enforcement of Security in Trust and Recovery of Debts Law and Miscellaneous Provisions (Amendment) Act, 2016 has come into force on September 1,2016....
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.... & Construction (P.) Ltd. (CP No. 21/& BP/NCLT/MB/MAH/2017)(Para 11). 35. For it has already held that what evidence is sufficient, what is not sufficient as outlined in the statute and Regulations and Rules, this Bench cannot read something into the statute and Regulations, therefore, the ratio in Chandradhar Goswani v. Gauhati Bank Ltd. AIR 1967 SC 1058 (Para 6) is not applicable to the present facts. 36. As to stamp duty, it has already been elaborately dealt with, hence nothing is repugnant to the ratio decided in SMS Tea Estates (P.) Ltd. v. Chandmari Tea Co. (P.) Ltd. [2011] 14 SCC 66,moreover it is the case decided in arbitration proceeding. 37. On perusal of the documents placed and the reasons given above, this Bench being satisfied that the debtor company defaulted in repaying its debt to the financial creditor, this Bench hereby admits this application prohibiting all of the following of item-I, namely: - I (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) transferr....