TaxTMI 
TaxTMI 
2021 (8) TMI 798
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....& Bankruptcy Code (hereinafter called "Code") read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Submissions made by the Petitioners: 2. The Petition reveals that the State Bank of India ("Original Lender") had extended various credit facilities to the Corporate Debtor at the requests made by the Corporate Debtor vide its Sanction Letters, the details of which are extracted below: 3. The Counsel for the Petitioner submits that the above mentioned credit facilities were secured by the Personal and Corporate Guarantees of various individuals and one Corporate namely M/S. Perfect Engineering Products Ltd. vide the following Deeds of Guarantee: * Guarantee Agreement dated 11.12.2008 * Guarantee Agreement dated 15.12.2008 * Guarantee Agreement dated 30.05.2009 * Guarantee Agreement dated 23.03.2010 * Guarantee Agreement dated 31.03.2011 4. The Counsel for the Petitioner submits that the Corporate Debtor entered into the following Agreements for Hypothecation of Goods and Assets with the Original Lender in relation to the above mentioned credit facilities extended: * Agreement of Hyp....
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....e dues in the sum of Rs. 80,67,60,995.92/- along with future interest. The Debt Recovery Tribunal, vide its Order dated 22.11.2016, allowed the Original Application and issued the Recovery Certificate also. 9. The Counsel for the Petitioner further submits that it addressed a Restructuring Letter dated 30.06.2017 for restructuring the loans of the group of companies (including the Corporate Debtor). The Restructuring Letter confirmed the terms and conditions provided that the combined dues of all three companies shall be payable as follows; a. Rs. 77.50 Crores repayable from operational cash flows of the company as per the schedule provided in Annexure I. b. The possession of land (admeasuring 9,048 sq. mtrs.) and building at Wagle Industrial Estate; Thane (Thane Property) has been taken by EARC and the Promoter shall assist in sale of the property. The estimated value of the Thane property is Rs. 60 crores. c. The possession of Land Parcel admeasuring 14,100 sq. mtrs. at Chikalse, Pune has been taken by EARC and EARC may sell the property under SARFAESI and adjust the proceeds against the dues of PEPL. The promoter shall assist in scouting buyers for ....
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....tion of Corporate Insolvency Resolution Process of the Corporate Debtor for a claim amount of Rs. 226,77,83,051/-. 13. The Counsel for the Petitioner submitted the following computation of dues payable by the Corporate Debtor to the Petitioner: Reply by the Corporate Debtor: 14. The Counsel for the Corporate Debtor contended that: a. The present Petition is not maintainable per se as the claim of the Petitioner is barred by limitation applicable to proceedings under the Code. The Petitioner herein has attempted to trigger a fresh round of limitation on the basis of a restructuring package which is not permissible. There is no fresh default under the said restructuring package as alleged by the Petitioner and hence, there is no cause or occasion for filing the present Petition on the basis of the said package. b. The Corporate Debtor along with another group concern namely Perfect Engineering Private Limited (PEPL) were granted credit facilities by State Bank of India (Original Lender) against several common securities including the security of Thane Land. SARFAESI Notice u/s. 13(2) dated 13 February 2013 issued by State Bank of India was addressed to PEPL....
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....otices as is set out hereinabove. It is therefore evident that regardless the approval of the restructuring package and pending implementation, the Petitioner continued to classify the account of the Corporate Debtor and PEPL as an NPA continuously and continued to act pursuant to the SARFAESI notices issued by the State Bank of India well before assignment of the debt to the Petitioner herein. It is therefore submitted that all along the account of the Corporate Debtor continued to be in 'default status'. f. The Petitioner had also filed an Original Application bearing No. 01/2014 before the Debt Recovery Tribunal (DRT). The Petitioner, even after the approval of the restructuring package, continued to prosecute the said recovery application without placing on record the factum of the restructuring package. Not only that, on or about 22nd November, 2016, the Petitioner went on to secure a recovery certificate from DRT, Pune for entire amount of claim without any reference to the said restructuring package. It is thus evident that the said recovery certificate was obtained pursuant to the original liability in default and the restructuring package made no impact on the def....
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....ginally expected, the Petitioner was pleased to realign the repayment schedule of the settled amount of Rs. 77.50 crores by its letter dated 30 June 2017. Save and except the relaxation in repayment resulting from revised estimation of projected 'operating cash flow', no other condition was changed. The said revised letter of approval also mentioned about the compliances of the earlier sanction till then effectuated by the Corporate Debtor and its group concern named above. Yet again, the revised schedule of yearly repayments was illustrative in nature having been based upon the revised estimates of EBIDTA and operating cash flow. Yet again, there was no stipulation of induction of any funds by the promoters in case of shortfall of the operating cash flow. i. There has been no allegation of the Application against the Corporate Debtor, its associates or its management that any part of the EBIDTA or the operating cash flow has been diverted for any purpose other than what was stipulated in the above OTS package and the revised OTS package. There is no insinuation in any contemporaneous correspondence or in the present application, and rightly so, that there was any obligati....
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....etter also put forth the performance of the Corporate Debtor for the past two years and also mentioned that there is no element of willful default, no diversion of funds and based on the package approved by the Petitioner, Corporate Debtor and the investor had put in money. The repayment of money had to be paid by the internal generation only and interest had to be paid in case of delay. m. The present Petition has been filed by the Petitioner on the basis that there was a default qua the restructuring package and the Petitioner has sought to compute limitation on the basis thereof. The Corporate Debtor and its associates employed by it workers whose wages are paid up to date. The Corporate Debtor is the registered MSME and produces OEMs which included large corporates like Cummins India Ltd., Bajaj Auto Ltd, Tata Motors Ltd., Tata Companies Ltd. and others. n. The Corporate Debtor being the MSME protected by the rigours of the Code. Section 240 A of the Code incorporates the special provision of the code. The government has gone to the extent of saying that MSME may be exempted from the CIRP by prohibiting filing of an application against the MSME under Section 7....
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....Petition has been filed merely for "Recovery of its dues" which not only fails on the ground of its being barred under the "Limitation Act, 1963" as well as but also is clearly against the provisions of Section 65 (1) of the Code and hence, on these counts, the present Petition deserved to be quashed and costs be levied on the Petitioner in terms of provisions of Section 65 of the Code. Findings: 15. The question which arises for consideration are as follows; a. Whether the Petition is barred by Limitation? b. Whether the Petitioner has waived his statutory right by restructuring the loan on 07.11.2014 and 30.06.2017? c. Whether there is any default on the part of the Corporate Debtor in view of the restructuring of the loan? 16. The present Petition is filed for initiation of CIRP against the Corporate Debtor for nonpayment of outstanding dues of Rs. 226,77,83,051/-. The Petitioner has been assigned the debt from the Original Lender, i.e., SBI vide Deed of Assignment dated 19.03.2014. The Original Lender, i.e., SBI had extended the loan facility to the Corporate Debtor has vide sanction letters more particularly mentioned below; 17. The said ....
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.... disputed as per the NESL record, and that there is no fresh default on the part of the Corporate Debtor pursuant to the restructuring package. The restructuring package dated 07.11.2014 sets out terms and conditions of the sanction which inter alia included the payment of lump sum amount of Rs. 77.50 Crores. The repayment schedule is based on projected EBIDTA/ Operational cash flows. However, the Corporate Debtor mentions that there was no condition required that the Corporate Debtor to induce additional funds for funding payment of installment of the Petitioner. 22. The Corporate Debtor contended that the Petitioner has sanctioned the 2nd restructuring package as on 30.06.2017 which captured the schedule of repayment based on revised estimation of projected operating cash flow. There were no indication about payment of monies by the promoter in case of shortfall of operating cash flow. The Petitioner revoked the restructuring package on 01.06.2018 and the Corporate Debtor immediately objected to the revocation of restructuring package and brought to the notice of the Petitioner that several critical steps being followed post the restructuring and that the company was in no ele....
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....aid that the Original Lender, i.e., SBI had granted a loan to the Corporate Debtor to the tune of Rs. 62.73 crores as on 31.03.2011. The Petitioner was assigned this debt as per the deed of assignment dated 19.03.2014 and the original lender had commenced the proceeding under SARFAESI and Debt Recovery Tribunal (DRT). The Debt Recovery Tribunal (DRT) had issued the Recovery Certificate of Rs. 80,67,60,995.92 along with future interest on 22.11.2016. The Petitioner granted a restructuring on 07.11.2014 and 30.11.2017 the restructuring package is as follows. The restructuring package as on 30.06.2017 is as follows; a) The restructuring package categorically contained a clause wherein the outstanding dues was repayable from operational cash flows. b) It also contains conditions wherein the possession of land admeasuring 900 sq.mts. at Wagle Industrial Estate thane has been taken over by the Petitioner. The estimate value of Thane property is Rs. 60 crores. The possession of land parcel at Chikalase, Pune was taken over by the Petitioner and the Petitioner may sell the property at SARFAESI. There will be a transfer of equity shares of 13.5 stakes in the company of Cor....
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....e date of default relied upon the Petition is on the 31.03.2009 and 28.06.2012, therefore, even if we assume that cause of action arose on 28.06.2012, even then the Petition, if filed beyond three years, is time barred. 29. Evidently, there has been restructuring of loan on 07.11.2014 and 30.06.2017, contrary to the terms and conditions of the restructuring package, the Petitioner has revoked the restructuring package on 01.06.2018. The said letter of revocation of restructuring immediately objected/rebutted by the Corporate Debtor. In strict interpretation of law of Contracts, it seems that there was no consensus ad idem and the unilateral revocation was strongly objected by the Corporate Debtor who pointed out that there is no default and payments will have to be made only from operational cash flows. It is relevant to refer to Section 3(12) of the Code, which defines default as follows: "Default means no-payment of debt when whole or any part or instalment of amount of debt has become due and payable and is not paid by the debtor or the corporate Debtor as the case may be" Therefore, this Bench finds it difficult to construe that default has occurred in the presen....
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....arrated in the aforesaid paras indicate that post filing of DRT proceedings by the Original Lender. The present Petitioner was substituted by virtue of deed of assignment from SBI in March, 2014. The Petitioner granted First restructuring package on 7 November, 2014, which was revoked on 22.09.2016 and Second restructuring Package on 30.06.2017, thus at the time when Recovery certificate was granted on 22.11.2016. The Petitioner having contractually agreed to be bound by certain terms and conditions of the contract under the restructuring package, wherein a mechanism is prescribed for payment of outstanding dues, cannot now enforce its statutory rights when there is no default in payment by the Corporate Debtor. 34. The Corporate Debtor and its group are OEM suppliers having interdependent operations. The said OEM's include Companies like Cummins India Limited, Bajaj Auto Limited, Tata Motors Limited, Kirloskar Oil Engines Limited, Indian Railways etc. and that the Corporate debtor and its associates has 600 employees on its rolls and accreditations which may fall by initiation of CIRP proceedings. The intention of IBC is maximization of assets of Corporate Debtor and initiating....