TaxTMI 
TaxTMI 
2020 (10) TMI 164
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....a, West Bengal, hereinafter referred to as the "Corporate Debtor". 2. The Financial Creditor has proposed the name of one Mr. Samir Kumar Bhattacharyya to act as Interim Resolution Professional in case the application is admitted. Mr. Samir Kumar Bhattacharyya vide his letter dated 23.08.2018 has given his consent to be appointed as IRP. 3. It is submitted that the Financial Creditor is the Lead Bank of the Consortium of Banks from whom the Corporate Debtor, (formerly known as LMJ International Limited), now known and named as Sri Munisuvrata Agri International Limited had been availing credit facilities under a Consortium arrangement. The other member Banks of the Consortium are State Bank of India, Allahabad Bank, Indian Overseas Bank, UCO Bank, Standard Chartered Bank, Canara Bank, Punjab National Bank and Corporation Bank. It is further submitted that the Corporate Debtor had executed joint documents in favour of the member Banks of the Consortium including supplemental joint deed of hypothecation dated 15.02.2018 and created joint mortgage by deposit of title deeds in favour of the member Banks of the Consortium. The Corporate Debtor had also executed individual document....
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.... f) Trust Receipt (Import) executed by the Corporate Debtor on 22.02.2017; g) Trust Receipt (Export) executed by the Corporate Debtor on 22.02.2017; h) Letter of Undertaking (Packing Credit Advance) executed by the Corporate Debtor on 22.02.2017; i) Inland/Foreign Letter of Credit Undertaking executed by the Corporate Debtor on 22.02.2017; j) Letter of Undertaking executed by the Corporate Debtor on 22.02.2017; k) Letter of Undertaking of Packing Credit Facility executed by the Corporate Debtor on 22.02.2017; l) Letter of Undertaking in respect of Book Debts executed by the Corporate Debtor on 22.02.2017; m) Undertaking not to withdraw deposits by the Partners/Directors till the advance is liquidated, executed by the Corporate Debtor on 22.02.2017; n) General Undertaking, executed by the Corporate Debtor on 22.02.2017; o) Undertaking cum Declaration, executed by the Corporate Debtor on 22.02.2017; p) Declaration cum Undertaking, executed by the Corporate Debtor on 22.02.2017; q) Power of Attorney in respect of Book debts, executed by the Corporate Debtor on 22.02.2017; ....
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....ded by the Financial Creditor had recorded a single breach either of the covenant or any condition enshrined in the security documents or in the sanction letter. 8. It is submitted that the credit facilities which were made available to the Corporate Debtor were regularly enhanced after reviewing the past dealings and transactions of the Corporate Debtor. It is submitted that the situation had changed from the middle of March, 2018 because of a sudden and unexpected circular issued by the Reserve Bank of India dated March 13, 2018 being Circular No. 20 by which all authorized dealer Category-I Bank authorized to deal in foreign exchange were directed to discontinue the practice of issuance of Letter of Undertakings (LoUs)/Letter of Comforts (LoCs) for trade credits for imports into India with immediate effect. Therefore, by reason of the Reserve Bank of India Circular dated March 13, 2018 the working capital consortium agreement dated December 7, 2006 and the supplemental working capital consortium agreement dated February 15, 2018 which enabled the Corporate Debtor to apply and obtain credit was rendered nugatory. The facility of buyers credit/LoUs/LoCs were no longer being pro....
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....Corporate Bank, one of the members of the BOB consortium, had agreed to enhance credit limit of Rs. 8.5 crore and executed the supplemental working capital consortium agreement. However, Corporation Bank subsequently and deliberately failed and intentionally neglected to disburse the agreed enhanced limit of Rs. 8.5 crores in terms of the said supplemental working capital consortium agreement. It is further stated that apart from the difficulties faced with some of the member banks of the consortium as mentioned above, the Corporate Debtor had also received a purported demand of Rs. 173 crore from Income Tax department and in order to recover such purported demand, IT Department served notice upon all the banks of the consortium asking them to pay the money due and payable to the corporate debtor. Consequently entire accounts of the company have become inoperative since March, 2018. The management of the corporate debtor repeatedly urged before the members of the consortium banks to render assistance in this regard, which, however, was not heeded to, except demanding the alleged dues from the corporate debtor. 13. During the various meetings of the consortium held on April 23, 2....
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.... its rejoinder has submitted that the Corporate Debtor had admitted unequivocally the default in para 19 of the reply affidavit and that the accounts of the Corporate Debtor were classified as Non Performing Assets with effect from 29th May, 2018. It is submitted that the Corporate Debtor in para 21 of the reply affidavit unambiguously submitted admission of the petition filed by the Financial Creditor and for appointment of Resolution Professional. It is submitted that in the light of the unequivocal admission of default by the Corporate Debtor, the petition filed by the Financial Creditor should be admitted and Resolution Professional should be appointed. 17. It is submitted that the Corporate Debtor was maintaining the account in a satisfactory manner till its account was classified as a Non Performing Asset with effect from 29th May, 2018. 18. After dealing with the pleadings of the Financial Creditor and the Corporate Debtor, we need to deal with the application filed by Sleepwell Industries Co. Limited which has come forward to intervene in the proceedings as a necessary party by way of an application being CA(IB) No. 881/KB/2019 filed on 7th March, 2019. The applicant ....
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....porate debtor herein and has awarded exemplary cost of Rs. 20 lakh to be paid by the Corporate Debtor to the applicant herein. The applicant apprehends that the section 7 application filed by the Bank of Baroda is also a got-up case by corporate debtor herein since section 10 application was dismissed by this Tribunal. Even this Tribunal in its order dated 15.11.2018 has observed that the Corporate Debtor (corporate applicant therein) has means but desires not to pay. 21. During the course of hearing held on 6th November, 2019, the following order was passed:- "We heard the Ld. Counsel for the Financial Creditor as well as the Corporate Debtor. The Corporate Debtor has not objected the admission of the application. However, an intervener appears and strongly objected this application and submitted that a Special Leave Petition (Civil) No. 5493 of 2019 has been filed before the Hon'ble Supreme Court for stay of the Section 7 application filed by the Financial Creditor before this Tribunal, which is pending for consideration. Upon hearing objection on the side of the Ld. Counsel for the intervener, it appears that a direction be issued to the Financial Credit....
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....oner. 23. The Hon'ble Supreme Court dismissed the SPL petitions with exemplary cost of Rs. 20,00,000/- (Rupees Twenty Lakh Only) towards costs be paid to the respondent within six weeks from the date of the order. From the aforesaid facts and circumstances, it transpires that this is another attempt by the Corporate Debtor to continue avoidance of the dues of the present applicant/Intervener with the alleged active support from the Officers/Officials of Bank of Baroda who have filed Section 7 petition against the Corporate Debtor in spite of the fact that all the records and pleadings speak otherwise. 24. In the meanwhile the Corporate Debtor had filed Section 10 application (CP (IB) No. 615/KB/2018) wherein the present applicant had filed an intervening application CP(IB) No. 635/KB/2018 and ultimately Section 10 application was dismissed by this Tribunal on 15th November, 2018 inter alia holding that the Corporate Debtor had failed in proving the existence of default of financial debt and that the application filed by the Corporate Debtor in C.P. 615/2018 was with mala fide intention and with the ulterior motive for the purpose other than for resolution and to frustrate....
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....corded the submissions of the Punjab & Sind - Bank/Financial Creditor therein as under:- "The lead bank submitted that the outstanding amount respectively as in the tabular form, Annexure A-5, is due and the Corporate Applicant has defaulted in repayment. Punjab & Sind Bank has submitted that the Corporate applicant is indebted to it to the extent of Rs. 9,07,78,093.53 and defaulted in repayment. However, it opposed the application, denying the contentions taken by the corporate applicant in its application". 29. It is submitted by the Ld. Counsel for the corporate debtor that under both Sections 7 & 10, the two factors are common i.e. the debt is due and there is a default. In a case of this nature, no doubt, the occurrence of default is to be established by supporting evidence by the financial creditor. 30. In the said application under Section 10, no argument had been advanced on behalf of the Financial Creditors denying the allegations levelled against it by the objectors. Except Punjab & Sind Bank, no argument had been advanced on behalf of the Financial Creditors and therefore serious allegations had been levelled against the Financial Creditors by the objector....
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....earing on behalf of the Appellant submits that pursuant to the 'Annual General Meeting' the application under Section 10 of the 'Insolvency and Bankruptcy Code, 2016' (for short, the I&B Code') was filed and the learned counsel appearing on behalf of the Respondents - 'Financial Creditors (Respondent Nos. 1 to 5) also accepts that there is a 'default'. Learned counsel appearing on behalf of the 'Financial Creditor' submits that the 'default' has occurred prior to the date of filing an application under Section 10 of the I&B Code and submitted that this fact has not been noticed by the Adjudicating Authority. It is also submitted by the 'Financial Creditor' that the application under Section 7 of the I&B Code has also been filed and is pending before the Adjudicating Authority. Learned counsel appearing on behalf of Respondent No. 11 (Operational Creditor) submits that the application under Section 10 was filed by the Appellant in collusion with the Banks. Reliance has been placed on the judgment of the Hon'ble Supreme Court dated 20th February, 2019 passed in 'Special Leave Petition (Civil) No. 540 of 2018'....
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....CC 14,50,00,000/- FBP/FBD (sub limit) (14,50,00,000/- PSDL (sub limit) (4,25,00,000/-) PCFC (sub limit) (5,00,00,000/-) Standby Credit for Export (Gold Card) 2,70,00,000/- Inland/Import Letter of Credit 45,25,00,000/- LOC/LOU for Buyers Credit (sub limit) (45,25,00,000/- Inland/Foreign Guarantees 4,00,00,000/- Credit Exposure limit 5,00,00,000/- Total 85,95,00,000/- The Ld. Counsel highlighted some important dates:- Amount claimed to be in default and the date on which the default occurred Total defaulted amount in Cash Credit Account No.11520500000035 is Rs. 46,32,00,000/- as on 23.09.2018. Total defaulted amount in Packing Credit/FBP/FBD Account No.11520700000002 is Rs. 17,17,00,000/-as on 23.09.2018 Total defaulted amount in Inland/Import Letter of Credit Account is Rs. 7,32,00,000/- as on 23.09.2018, Total defaulted amount in Inland/Foreign Bank Guarantee Account is Rs. 73,00,000/-as on 23.09.2018. The....
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....e petition by the applicant. She has submitted that Supplementary Working Capital Consortium Agreement was executed on 15.02.2018 between LMJ International Limited i.e. the Corporate Debtor which referred to the earlier Working Capital Consortium Agreement dated 7th December, 2006, as varied by the Supplemental Agreement dated 22nd December, 2008, 17th August, 2010, 9th December, 2014 and 11th August, 2016. It is submitted that this agreement dated 15th February, 2018 mentions that on the request of the Borrower (Corporate Debtor) and with the consent of the Consortium Banks, the Bank of Baroda has reviewed the limits under the Credit Facilities and agreed to enhance the limits under the credit facilities from Rs. 71,25,00,000/- to Rs. 78,25,00,000/-. 40. It is further submitted that the State Bank of India had reviewed the limits under the credit facilities from Rs. 54,00,00,000/- to Rs. 60,00,00,000/- and Allahabad Bank has reviewed the limits under the credit facilities and enhanced the credit facilities from Rs. 75,00,00,000/-to Rs. 85,00,00,000/-. It is submitted that likewise other Consortium Banks had also agreed to enhance the limits of credit facilities in favour of the....
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....lines provided in the Notice of Conversion get the Equity Shares listed with such stock exchanges where the said shares are usually traded. vi. The Conversion Right may be exercised by the Bank on one or more occasions during the currency of the Loan at its sole and absolute discretion; vii. The Borrower shall make suitable modifications to its constitutional documents to facilitate the aforesaid Conversion Right, in a seamless manner. The Borrower shall ensure that all requisite corporate approvals/authorizations including but not limited to the approvals from the shareholders are duly obtained for giving effect to the aforesaid Conversion Right available to the Bank and the same is in conformity with the Constitutional documents of the Borrower. Failure to obtain the requisite approvals as mentioned above shall amount to an event of default under the Facility Letter and/or agreements executed in relation thereto. Notwithstanding anything to the contrary contained in this agreement, in the event of formation of a joint lenders forum in terms of the Distressed Assets Framework (RBI's Framework for Revitalising Distressed Assets in the Economy dated 25 Fe....
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....plemental Joint Deed of Hypothecation dated 15th day of February, 2018, in para 12, it is specifically mentioned "that based on the modification herein made, the principal deed as varied by the Supplemental Deed shall stand accordingly and the principal deed shall be read and construed in conjunction with these presents. It is submitted by the Ld. Counsel that immediately after entering into a document by the Bank with the Corporate Debtor it is unbelievable that there would be a default within a few days. 44. Ld. Counsel has further referred to the report of ICRA in respect of the Corporate Debtor, LMJ International Limited, dated July 09, 2018. Under the heading Rating Action it is written as under:- "ICRA has revised the long-term rating from (ICRA) BBB (pronounced ICRA triple B) ISSUER NOT COOPERATING to (ICRA) D pronounced (ICRA D) ISSUER NOT COOPERATING and the short term rating from (ICRA)A3+ (pronounced (ICRA A three plus) ISSUER NOT COOPERATING to (ICRA) D ISSUER NOT COOPERATING assigned to the Rs. 173.70 crore fund-based bank facilities of LMJ International Limited (LIL). ICRA has also downgraded the short-term rating assigned to the Rs. 330.00 crore non-fund ....
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.... the Bank of Baroda, including revoking its licence or the authority to carry on banking business, if necessary, COT 55 of 2019 succeeds to such limited effect". 48. The Ld. Counsel further referred to and relied upon the judgment of the Hon'ble Appellate Tribunal (2018 SCC Online NCLAT 588). The relevant extract thereof is reproduced as under:- "4. It is submitted that if any person initiates the Insolvency Resolution Process fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, the Adjudicating Authority may impose such person any penalty as stipulated under section 65. According to 2nd Respondent (Intervener), any person can bring to the notice of the Adjudicating Authority that the Insolvency Resolution Process has been initiated by the person fraudulently and with malicious intent for the purpose other than resolution of insolvency. For bringing the aforesaid facts to the notice of the Adjudicating Authority it is not necessary that he should be a shareholder or a creditor or a debtor for the Corporate Debtor. It is submitted that the 2nd Respondent (Intervener) intends to bring certain facts to the notice of the Adj....
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....orate Debtor. 52. Ld. Counsel for the Bank of Baroda, however, submitted that the Resolution dated 9th February, 2017 was passed by the Board of Directors of the Corporate Debtor thereby agreeing to all the terms and conditions and against the Security stipulated in the letter of sanction dated 9th February, 2017 issued by the International Business Branch, Kolkata of Bank of Baroda. It is submitted on behalf of the Bank that the facilities had been granted to the Corporate Debtor on the basis of Sanction Letter dated 9th February, 2017 only, and there is no sanction as such on 15th February, 2018. It is further submitted that when all the member Banks had sanctioned the credit facilities which took a lot of time, then only the documents dated 15th February, 2018 had been executed and thereafter the default had taken place. It is submitted that once the facilities desired by the Corporate Debtor had been circulated amongst the members and finally approved by the various Banks, that the sanction letters are issued by the members of the Consortium Bank, he conceded that there was a delay in executing the documents. 53. Ld. Counsel for the Corporate Debtor submitted that there w....
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....takings (LoUs)/Letter of Comforts (LoCs) for trade credits for imports into India with immediate effect. However, it has come out in evidence that the credit facilities which were made available to the Corporate Debtor were regularly enhanced after reviewing the past dealings and transactions of the Corporate Debtor, and the Financial Creditor has not tried to set up a case that they had discontinued any of the facilities extended to the Corporate Debtor. On the other hand, the Financial Creditor had executed Supplemental Working Capital Consortium Agreement on 15.02.2018, between the Corporate Debtor and the Consortium of Banks; Supplemental Joint Deed of Hypothecation, on 15.02.2018 between the Corporate Debtor and the Consortium of Banks; Supplemental Inter-se Agreement on 15.02.2018, executed between the Consortium Banks and Joint and Several Deed of Guarantee dated 15.02.2018, executed by Mr. Hulash Chand Jain, Mr. Navin Kumar Jain and Mr. Jayant Kumar Jain in favour of the Consortium Banks. 56. Within 4 months of the execution of the said agreements, the Financial Creditor has classified the account as NPA and issued demand notice under section 13(2) on 9th July 2018. What....
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....circumstances lead to a further conclusion that the Financial Creditor comes to this Tribunal not with clean hands. The above said circumstances also lead to a conclusion that the Financial Creditor is aiding the Corporate Debtor so as to defeat the valuable right of the Intervener in realising its debt found due. Even if the Corporate Debtor was found solvent and running in profit knocked the door of High Court, Supreme court and the this Tribunal for avoiding payment but showed inability to pay the debt found not due to the Financial Creditor. 59. After hearing Ld. Counsel for all the parties, including the intervener, we find that there is enough material on record to prove that the Financial Creditor had never been serious in initiating any action under the Code against the Corporate Debtor either in the earlier application under Section 10 of the Code, filed by the corporate applicant, or in the present proceedings under Section 7 of the Code. The Credit facilities had admittedly been revised and sanctioned from time to time and finally on 15th February, 2018 when various documents had been got executed from the Corporate Debtor, the date of default could not be 28th Februa....