TaxTMI 
TaxTMI 
2022 (11) TMI 1236
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....ellant / Bank', subsequent to the `Board Resolution dated 25.06.2014', on the ground that these documents are very vital documents for arriving at a just and proper decision of the `Appeal', with a view to find out the truth. 2. According to the Respondent / Appellant / Bank / Financial Creditor, the two additional documents, sought to be produced by the `Petitioner / Respondent / Corporate Debtor', are only a ruse to delay and derail the proceedings of the instant `Appeal'. Further, the documents sought to be produced, in any event, does not save the `Petitioner / Respondent / Corporate Debtor', from the only conclusion that there is a `Default' of a `Financial Debt' and the `Corporate Insolvency Resolution Process', ought to be initiated `qua' the `Petitioner / Respondent / Corporate Debtor'. 3. In view of the fact that the Petitioner / Respondent / Corporate Debtor, has come out with a plea that the two additional documents sought to be produced in IA No.1284 of 2021 in Comp. APP (AT) (INS) No.80 of 2021 are very much vital and of great relevance to the matter at hand, to find out the truth and for arriving a just and proper decision in the instant `Appeal', this `Tribunal', i....
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....ed in the Bank. It will also have to be ascertained whether all the bills raised are undisputed as regards the payments released by the bank, amounts repaid by the Corporate Debtor, calculation of LC charges and interest levied etc. This position clearly needs to be reconciled through a process of entry by entry scrutiny of the accounts of the Corporate Debtor from 2012 to 2016 as against the LC and other charges levied and payments made / adjusted. This would also require comprehensive scrutiny and reconciliation with the Bank records, available correspondence and decisions taken with regard to the settlement / golden handshake etc. 34. The above gap could be either on account of the Corporate Debtor's perception that when it cleared the loan in 2012 and paid Rs.10.63 crore and adjusted its FDRs in 2016, its entire Working Capital Account got liquidated. Alternatively, the charges levied by the Financial Credit towards LC charges etc. were incorrectly charged as against the facilities actually availed and full credit was not given for the same. But it does appear strange to us that when the loan and other facilities availed from the CC Account had been entirely paid on the above....
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....credit (LC Limits), on 23.03.2015 if at that point of time, there was a huge outstanding debt and if there was a default in clearing the same by the Corporate Debtor. Subsequently also the AGM in his letter dated 14.10.2016 stated "...... look forward to your continued patronage...", as mentioned by the Corporate Debtor in his objections, indicating that the debt had been cleared or that the FC had no further issues of recovery with the Corporate Debtor with regard to recovery of debt. 37. On the other hand, we also find that during the hearing on 19.06.2019 the MD of the Respondent Corporate Debtor stated that if any dues were payable in spite of all the payments made, then he can settle the dues, provided the correct amount is worked out after proper reconciliation. 38. We also find from the objections filed by the Corporate Debtor that the Corporate Debtor is not an insolvent company that has lost its substratum, cannot engage in business and earn revenue, or pay its debts. As mentioned by the Corporate Debtor, it had stocks and receivables of around Rs.138 crore, the market value which was around Rs.215 crore. It is stated to be holding stocks and receivables, personal guar....
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....ly Allottees in Housing Projects, has to be given primacy and pushing the Corporate Debtor into liquidation would only be the last option." The Corporate Debtor in the instant case is also into business related to Infrastructure Development on which the hard earned income of hundreds / thousands of home buyers stands invested and is at stake. 41. In view of the foregoing, we are not satisfied that a case has been made out by the Financial Creditor for initiating CIRP against the Corporate Debtor, as of now. The disputes raised, the lack of clarity of the actual figures of debt, if any, and whether after the settlements offered by the Corporate Debtor and the payments made since 2012, and its belief that its entire CC account of Rs.45 crore had been liquidated after the payment of Rs.10.63 crore and adjustment of its FDs, require a detailed scrutiny and audit of the demand raised on account of both Fund based and Non-Fund based facilities and the amounts paid / settled, which cannot be conducted in these summary proceedings. We may mention here that this Tribunal is not a dispute resolution forum. If any disputes exist on the issues mentioned above, which appear to be present, t....
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....olvency Resolution Process' of the Corporate Debtor, all the more, when the `Default' of a `Financial Debt' is `more than Rs. 1 Lakh, which exists, in the instant case, on hand'. 7. It is represented on behalf of the Appellant, that the `Adjudicating Authority', had passed an `erroneous order', in directing an `Audit', of the `Amounts Due', and `liable to be paid', by the `Respondent', which is clearly outside the ambit of the ingredients of Section 7 of the I & B Code, 2016. 8. The Learned Counsel for the Appellant points out that the `Adjudicating Authority', is not empowered at the `pre-admission stage', to venture into matters, in respect of the `Value of the Assets of the Corporate Debtor', or its `Business', or the possibility of attracting a `Viable Resolution Plan', under the Code. 9. Advancing his argument, the Learned Counsel for the Appellant takes a stand that, while dealing with an `Application', under Section 7 of the I & B Code, 2016, an `Adjudicating Authority', cannot take into account of `any purported defence of the Corporate Debtor', that its `Assets' far in `Excess' of the `Underlying `Financial Debt' in `Default'. 10. The other contention projected on the ....
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....ication and not otherwise." 15. The Learned Counsel for the Appellant refers to the decision of the Hon'ble Supreme Court of India in E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd., reported in (2022) 3 SCC at Page 161, Spl Pgs : 177 & 179, wherein at Paragraphs 31 & 34, it is observed as under: 31. "On a bare reading of the provision, it is clear that both, clauses (a) and (b) of sub-section (5) of Section 7, use the expression "it may, by order" while referring to the power of the Adjudicating Authority. In clause (a) of sub-section (5), the Adjudicating Authority may, by order, admit the application or in clause (b) it may, by order, reject such an application. Thus, two courses of action are available to the Adjudicating Authority in a petition under Section 7. The Adjudicating Authority must either admit the application under clause (a) of sub-section (5) or it must reject the application under clause (b) of sub-section (5). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available. 34. The Adjudicating Authority has clearly acted outside the terms of its jurisdiction under Section 7(5) of the IBC....
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....bitrary decisions in increasing LC margins from 10% to 15%" 18. The submission of the Appellant / Bank is that the Respondent, is in `Default' of the `Debt', arising out of the `Devolvement of Letters of Credit', and the aforesaid document clearly exhibit the same. In this regard, the stand of the `Appellant / Bank' is that, the `Adjudicating Authority', does not have any jurisdiction, to enter into the merits of the matter i.e., the `Adjudicating Authority', is not to examine the each and every aspect of `Default'. 19. The Learned Counsel for the Appellant refers to the decision of the Hon'ble Supreme Court of India in M/s. Tarapore & Co. Madras v. V.O. Tractors Export, Moscow & Another, reported in (1969) SC Page 233 at Spl Pg: 239, wherein at paragraph 12, it is observed as under: "It is often made a condition of a mercantile contract that the buyer shall pay for the goods by means of a confirmed credit, and it is then the duty of the buyer to procure Iris bank, known as the issuing or originating bank, to issue an irrevocable credit in favour of the seller by which the bank undertakes to the seller, either directly or through another bank in the seller's country known a....
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.... which were opened between the period from 17.01.2015 to 03.02.2015, were duly signed by the authorised signatory, Mr. D.C. Mohan and which were honoured and paid by the `Respondent / Corporate Debtor', `without any objections'. 23. The Learned Counsel for the Appellant proceeds to point out that the instant `Section 7 Application', under the I & B Code, 2016, was filed before the `pandemic' and there is no prohibition for initiating `Corporate Insolvency Resolution Process', against the `Respondent'. 24. The Learned Counsel for the Appellant contends that the facts of the instant case, are completely different from the decision of the Hon'ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (vide Judgment dated 12.07.2022 in Civil Appeal No. 4633 of 2021), because of the fact, in the present case, the `Appellant / Bank', by means of numerous documents had exhibited that the `Respondent / Corporate Debtor', is clearly an `Insolvent', and unable to pay its `Debt', its operations are shut with no possibility of payment, and that apart, there are no expected significant receivables, in future, as in Vidarbha's case. Appellant's Decisions: 25. The Learned ....
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.... Judgment which appears to lay down the Law more elaborately and more accurately and that mere incidence of time - whether Judgment is earlier or later could hardly be relevant'. 27. The Learned Counsel for the Appellant / Bank seeks in aid of the decision of the Hon'ble Supreme Court of India in Sesh Nath Singh & Anr. V. Baidya Bati Sheoraphuli Co-operative Bank Ltd. & Anr. (2021) 7 SCC at Page 313 at Spl Pg: 345, wherein at paragraphs 86 & 87, it is observed as under: 86. "An Adjudicating Authority under the IBC is not a substitute forum for a collection of debt in the sense it cannot reopen debts which are barred by law, or debts, recovery whereof have become time-barred. The adjudicating authority does not resolve disputes, in the manner of suits, arbitrations and similar proceedings. However, the ultimate object of an application under Section 7 or 9 IBC is the realisation of a 'debt' by invocation of the Insolvency Resolution Process. In any case, since the cause of action for initiation of an application, whether under Section 7 or under Section 9 IBC, is default on the part of the Corporate Debtor, and the provisions of the Limitation Act 1963, as far as may be, have bee....
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....orensic audit and engage in a long drawn pre-admission exercise which will have the effect of defeating the object of the 'I&B Code'. If the 'Financial Creditor' fails to provide evidence as required, the Adjudicating Authority shall be at liberty to take an appropriate decision. If the application is incomplete, it can return the same to the 'Financial Creditor' for rectifying the defect. This has to be done within 7 days of the receipt of notice from the Adjudicating Authority. However, the 'I&B Code' does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the 'Financial Creditor', 'Corporate Debtor' or any 'financial institution'. Viewed thus, the impugned order cannot be supported. Application under Section 75 of the 'I&B Code' on behalf of the 'Corporate Debtors' cannot be permitted to frustrate the provisions of the 'I&B Code' when the matter is at the stage of admission. Section 75 is a penal provision which postulates an enquiry and recording of finding in respect of culpability of the Applicant regarding commission of an offence. The same cannot be allowed to thwart the initiation of 'Corporate Insolvency Res....
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....law or in fact. 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 Company Appeal (AT) (Ins) No.441 of 2019 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." 15. From the above, it is clear that at the stage of admission of Application under Section 7, the requirement is to give limited Notice and the considerations would be to see whether or not satisfaction by Adjudicating Authority could be reflected on the basis of Sub-Section (5) of Section 7. If there is a financial debt, which is more than Rs.1 Lakh and there is a default and if the Application is complete, the Application would have to be admitted. The Corporate Debtor is entitled to point out that a default has not occurred in the sense that the 'debt' which may include a disputed claim is not due. Corporate Debtor may poin....
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....nderstood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature." Respondent's Submissions: 33. The Learned Counsel for the Respondent submits that in Vidarbha Industries case, the Hon'ble Supreme Court of India, had noted that the Existence of a `Financial Debt' and `Default', in payment thereof, only gave the `Financial Creditor', the right to `Apply' for an initiation of `Corporate Insolvency Resolution Process' and that the `I & B Code, 2016', intended on conferring a `Discretion', with the `Tribunal', to `Admit' or `Reject' an `Application', filed under Section 7 of the Code, 2016, by a `Financial Creditor', thereafter. Also, according to the Respondent, the Hon'ble Supreme Court had observed that the `Tribunal' has a `Discretionary Power', under Section 7 (5) (a) of the I & B Code, 2016, to keep an `Admission' of an `Application' of a `Financial Creditor', in abeyance as per decision of the Hon'ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Limited (Civil Appeal No. 4633 / 2021 dated 12.07.2022 - vide Paragraphs 75 to 77). 34. According to the Respondent, it is a `solvent compan....
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....he said payment, the outstanding balance of the Respondent Account was only Rs.8,77,41,619/- which is evident from the True Copy of the Ledger Account dated 07.10.2016 of the Respondent / Corporate Debtor in State Bank of India (Appellant / Bank) - vide Page 45 of the objection dated 08.04.2021 of the Respondent (Diary No. 26690 dated 09.04.2021), the Respondent further requested the appellant vide its letter dated 07.10.2016 to adjust the said outstanding CC balance of Rs.8,77,41,619/- from the Respondent's FD a/c of Rs.11,19,53,633/- in order to clear the `entire outstanding payment', and to transfer Rs.110 Crores LC facilities to `South Indian Bank'. 40. It is the version of the Respondent / Company, the `Appellant' had not responded to the request made by the Company and hence, filed W.P.No.63350-51 of 2016 (GM) against State Bank of India on 09.12.2016, seeking a direction to the `Bank', to issue a `No Objection Certificate', to migrate to the other `Bank', etc., and further, a complaint in CC No.2973 / 2017, was filed by the Respondent / Company, before the `National Consumer Dispute Redressal Commission', New Delhi, for a `Claim' of Rs.1,300 Crore, towards `Loss and Damages....
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....`Default', based on the aforesaid photocopies of the created / concocted / forged and purported `Letters of Credit'. 46. The Learned Counsel for the Respondent / Company points out that a `Forensic Audit Report', submitted by `Ernst and Young' was a `biased' and an `arbitrary' one, because the `Forensic Audit Company', itself mentions in its `Report', that the accuracy and authenticity of all the information, furnished by the `Appellant / Bank' could not be confirmed, since it had solely relied upon the documents and informations submitted by the `Appellant / Bank'. Therefore, it is the contention of the Respondent / Company that `CIBIL Report', prepared on the footing of such a `Forensic Report', cannot be a `Valid' one. 47. According to the Respondent / Company, when the sanctioned amount is Rs.20 Crores and the Principal and Interest outstanding is ZERO, the Appellant / Bank had not given any explanation as to how the Appellant / Bank had arrived at the `Outstanding Sum and Over Due'. 48. The Learned Counsel for the Respondent points out that the NeSL Records discloses that the `Debt', is disputed by the `Respondent / Company' and recorded that "the company had cleared the en....
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....smiss the instant `Appeal', filed by the Appellant with heavy costs in the interest of `Justice' and `Equity'. Respondent's Citations: 53. The Learned Counsel for the Respondent refers to the Judgment of the Hon'ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Limited (vide Civil Appeal No. 4633 of 2021 dated 12.07.2022), wherein at paragraphs 75 to 77 & 88, it is observed as under: 75. "Significantly, Legislature has in its wisdom used the word 'may' in Section 7(5)(a) of the IBC in respect of an application for CIRP initiated by a financial creditor against a Corporate Debtor but has used the expression 'shall' in the otherwise almost identical provision of Section 9(5) of the IBC relating to the initiation of CIRP by an Operational Creditor. 76. The fact that Legislature used 'may' in Section 7(5)(a) of the IBC but a different word, that is, 'shall' in the otherwise almost identical provision of Section 9(5)(a) shows that 'may' and 'shall' in the two provisions are intended to convey a different meaning. It is apparent that Legislature intended Section 9(5)(a) of the IBC to be mandatory and Section 7(5)(a) of the IBC to be discretionary. An applica....
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....n 3 (12) as non-payment of debt when whole or any part of instalment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor as the case may be. 29. We have carefully perused the record of the case, argument advanced on behalf of the parties and gone through the written submissions. Taking aforesaid facts and circumstances, we are of the view that Ld. Adjudicating Authority have failed to consider the letter dated 27.12.2018 filed before this Tribunal at Page No. 17 vide Diary No. 18698 dated 06.02.2020 whereby refer to the minutes of the consortium meeting dated 18th September, 2018 the Syndicate Bank (Respondent No. 1) agreed to open further LCs in favour of the Appellant as the Appellant was going through cash difficulties and also agreed to restore the sanctioned limits of the Appellant. The LC limits to the extent of Rs. 46.50 Crores and further it was agreed that the amount which have been deposited in TRA, the amount will be paid to Respondent No. 1 after opening the TRA. The Syndicate Bank (Respondent No. 1) constitutes a miniscule 1.64% of total outstanding debt of BVPL and PNB was a lead bank of consortium. The Responde....
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....rt of the Corporate Debtor in regard to the debt. The onus of proof of default on the part of Corporate Debtor lies on the Financial Creditor and it has to demonstrate that default has occurred on account of failure on the part of Corporate Debtor to discharge its liability. In the instant case, Corporate Debtor has been subjected to restructuring of credit facilities and the operations of the bank account of the Corporate Debtor are regulated by the 'Punjab National Bank Consortium Inter-se Agreement' dated 17th December, 2015, which has to be read in juxtaposition with 'Trust Retention Account (TRA) Agreement' dated 26th July, 2016. Under the arrangement of debt restructuring, the Corporate Debtor's deposit would go to the TRA account and it is not open to the Corporate Debtor to discharge its liability on account of financial debt to various lenders without the approval of the Lead Bank i.e. Punjab National Bank. It transpires from the record that information in this regard has already been given by the Corporate Debtor to the Lead Bank that the Financial Creditor - Syndicate Bank i.e. Respondent No. 1 has expressed its intention to trigger Corporate Insolv....
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....ent inter-se the Creditors for which the Corporate Debtor cannot be blamed. Initiation of Corporate Insolvency Resolution Process in the facts and circumstances, as noticed, cannot be appreciated as the same falls foul of the mandate of Section 7 of the I & B Code. Viewed thus, the impugned order cannot be supported. The Appeal, therefore, needs to be allowed." 55. The Learned Counsel for the Respondent, refers to the Judgment of this Tribunal, in Export Import Bank of India v. CHL Ltd., 2019 SCC Online NCLAT 25, wherein at paragraphs 22 and 24, it is observed as under: 22. "The 'principal borrower' has already made representations to the Appellant for reconciliation of account but the Appellant has not come forward to reconcile till date. Only upon this reconciliation, the Appellant is entitled to demand the recalculated interest component from the 'principal borrower', if any or adjust any surplus amount which have been received by the Appellant. If in the event, the 'principal borrower' fails to pay the interest component, if any, as per the fresh demand made on reconciliation, only then the Appellant will be entitled to invoke the 'corporate guara....
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....hich evince that on 6-10-2007, Respondent2 resigned from the Board of the Appellant Company and at that time the Respondent2 requested the Appellant Company to treat the share application money of Rs.90,00,000 as share application money of Mr. M. Krishnan and to issue shares for aforesaid value to Mr. M. Krishnan. The amount was to be treated as a personal loan from Respondent2 to Mr. M. Krishnan. A personal Loan to a Promoter or a Director of a company cannot trigger the Corporate Resolution Process under IBC. Disputes as to whether the signatures of the Respondents are forged or whether records have been fabricated can be adjudicated upon evidence including forensic evidence in a regular suit and not in proceedings under Section 7 IBC." 58. The Learned Counsel for the Respondent relies on the Judgment of this `Tribunal' in Vijaykumar v. Gopalsamy Ganesh Babu 2020 SCC Online NCLAT 936, wherein at paragraph 7, it is observed as under: 7. "Considering the object of IBC which is resolution and that effort should be made to revive the Corporate Debtor rather than to eliminate the same, we find that this is a fit case for us to exercise inherent powers under Rule 11 of National Comp....
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....nclude a `Disputed Claim', is not `Due'. A `Debt', may not be due, if it is `not payable in Law or Fact'. The `Adjudicating Authority', is not enjoined with any duty, to determine the `Sum of Default'. 67. It is to be remembered that in `Law', an `Adjudicating Authority' need not go into detail of `Fabrication' and `Forgery' of `Documents', for the purpose of consideration of an `Admission' of an `Application'. A mere pendency of a `Civil Suit', between the Parties, is no ground to `Reject' an `Application', filed under Section 7 of the I & B Code, 2016. 68. In fact, the reason for the `Inability of the Corporate Debtor', to pay its `Debt', is not required to be looked into / gone into by an `Adjudicating Authority', in a Summary Proceedings, under the I & B Code, 2016. An `Adjudicating Authority', is not a `Civil Court', to determine the `Contract', between the `Parties'. Analysis: 69. Before the Adjudicating Authority, the Appellant / Petitioner / Financial Creditor, had filed an application in `Form I', to initiate `Corporate Insolvency Resolution Process', under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating....
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.... Charge, issued by the Registrar of Companies (along with relevant forms for creation of charge before the `RoC') was also annexed, as an `Exhibit', and the copies of `Valuation Report' in respect of the properties, mentioned in the `Application', were annexed as an `Exhibit' in the `Application'. 73. The Appellant / Bank had filed `Statement of Accounts', as on 31.01.2019 in regard to Account No.30770234121 along with IT Certificate under the Bankers' Book of Evidence Act, 1891. Further, the copy of the `Deed of Guarantee', for overall limit in Form C4 dated 21.05.2009. Also, the copy of `Deed of Guarantee' for overall limit in Form C 4 dated 21.05.2019, copy of `Supplemental Deeds of Guarantee', in Form C.4-A dated 06.01.2021, 19.03.2012, Copy of `Supplemental Deed of Guarantee' for an increase in overall limit in Form C.4-A by the Company dated 25.03.2015, `Copy of Certificate of Registration' for `Modification of Charge Form CHG-1 dated 25.03.2015', Search Report on the charges on the Assets of the Respondent / Bharath Infra Exports & Imports Ltd., as on 24.10.2017, Copy of OA No.725 / 2018, filed before the `Debts Recovery Tribunal', Bengaluru, against the Corporate Debtor we....
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....ency', do not attract the `Appellant / Bank', to file an `Application', under Section 7 of the Code, since, the `Valuation' of Corporate Debtor's Assets were adequate to discharge the `Alleged Debts' in the event of Appellant / Petitioner / Financial Creditor / Bank succeeded to prove its `Claim'. 79. The Financial Creditor had filed the main CP (IB) No. 112 / BB / 2019 with a `malicious intent', attracting Section 65 of the I & B Code, 2016. Because of the `Illegal Demand' of `Free Closure Charges' and because of the `Arm Twisting Method of the Bank', the Respondent / Corporate Debtor could not avail the sanctioned facility of Rs.210 Crore from South Indian Bank. Also that, when the Corporate Debtor had demanded the Appellant / Bank to refund Rs.2.03 Crore with Interest, along with other `Illegal Debits', the `AGM' of the Bank wrote a Letter on 05.10.2016, addressed to the Senior Area Manager of SBI Life Insurance Co. Ltd. for Closure of SBI Life Insurance Policy and refund the aforesaid amount to the Corporate Debtor. 80. Indeed, the AGM of the Appellant / Bank had `Renewed' / `Revived' the `Working Capital Facilities' on the same date evening, as per Letter dated 05.10.2016 an....
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....t `Letter of Credits' were not countersigned by the `Authorised Person' of the `Respondent / Corporate Debtor', is an `incorrect' and `baseless' one. 84. To fortify the stand of the Appellant / Bank that LCs' availed by the Respondent before 07.10.2016 were all honoured subsequently, on the due dates, the following details, will belie the stand point of the Respondent, and the same runs as follows: Date of Issuance LC Number Bill Reference Number Date of Devolvement Amount 28.07.2016 0505316LC0000737 0505316LU0001096 20.10.2016 12,05,40,000.00 03.08.2016 0505316LC0000758 0505316LU0001120 26.10.2016 10,05,32,000.00 10.08.2016 0505316LC0000766 0505316LU0001158 03.11.2016 7,64,56,800.00 18.08.2016 0505316LC0000792 0505316LU0001175 08.11.2016 7,59,64,800.00 24.08.2016 0505316LC0000813 0505316LU0001196 15.11.2016 10,87,97,600.00 03.09.2016 0505316LC0000839 0505316LU0001233 24.11.2016 10,76,82,400.00 16.09.2016 0505316LC0000854 0505316LU0001273 05.12.2016 11,22,46,525.00 22.09.2016 0505316LC0000889 0505316LU0001303 13.12.2016 10,49,27,200.00 28.09.2016 0505316LC0000902 0505316LU0001321 19.12.2016 10,24,67,200.00 05.10.2016 0505316LC000....
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.... Sundry Debtors Invoices Outstanding Statement as on 30.09.2016 4 Sundry Creditors Invoices Outstanding Statement as on 30.09.2016 5 X VAT - BNG Returns for AUG - 2016 6 Cash Flow for Projections 7 Accrued Liability towards Acceptance of Bills - as on 30.09.2016 89. Likewise, `Statement of Hypothecated Assets as on 31.10.2016', was sent by the Respondent / Corporate Debtor's Authorised Signatory through Letter dated 09.11.2016 to the `Appellant / Bank'. Further, the `Chairman and the Managing Director' of the Corporate Debtor, had addressed a Letter dated 21.10.2016, enclosing the Balance Sheet of the Respondent / Corporate Debtor for the Financial Year 2015-2016. As a matter of fact, in the `Notes to Financial Statement for the year ended 31.03.2016', under the Caption `Total of Short Term Borrowings' (`Particulars'), the following was mentioned: Particulars 31.03.2016 31.03.2015 Security details, Interest Rate & Repayment terms SBI 8,05,27,411 7,19,87,039 Interest rate : 11.05% Security included with other Credit Facilities extended by SBI Primary Security of Hypothecation of all Stocks, receivables and Other Current Assets Collateral Security. Personal Guaran....
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....st 7-8 years, that is from the first date of operation. We request you to depute a proper team to evaluate the strength of the company, after evaluating if the bank feels we are a good client the bank can continue business with us, if not, we are very much open to go for multi banking with the consent of the bank or a golden hand shake, but without any further delay credit all the extra charges which is debited from our account as stated above which can help in smooth settlements." 93. In the aforesaid Letter dated 06.10.2016, of the Respondent / Corporate Debtor, addressed to the Appellant / Bank, it was mentioned that the Respondent / Corporate Debtor is having a `Sanction' of Rs.157.22 Crore Credit Facilities through the Bank's Sanction Letter dated 23.03.2015, etc. 94. Besides the above, the Respondent / Corporate Debtor in its Letter dated 03.11.2016, addressed to the `Asst. General Manager' of the Appellant / Bank, on the subject `Regarding opening of LCs on Bharath Infra Exports and Imports Limited (with reference to Bank's Letter dated 20.10.2016, 02.11.2016 and 03.11.2016 and the Respondent's Letter dated 06.10.2016, 13.10.2016, 18.10.2016, 25.10.2016 and 27.10.2016) had....
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....rative and substantial evidence as per `Law', relating to the alleged `Letters of Credit' and in fact, the Appellant / Bank, had arbitrarily `Renewed' the `Working Capital Facilities', through Letter dated 05.10.2016 by irrationally increasing `Letter of Credit Margin', from Rs. 10% to 15%' and also `Illegally Modified', the terms of the other `Facilities' against `Reserve Bank of India' norms, which is not accepted by the `Respondent / Corporate Debtor'. 99. According to the Respondent / Corporate Debtor, when the `Forensic Audit' company itself states that the `Accuracy' and `Authenticity' of all the information, provided by the `Appellant /Bank', could not be confirmed, then the `CIBIL Report', prepared on the basis of such `Report', is not a `Valid' one, etc. 100. The contention of the Respondent /Corporate Debtor is that the `Tribunal', had disposed of the main `Petition' CP(IB) No.112/BB/2019, filed by the `Appellant / Bank', by issuing `Directions', for a detailed `Joint Scrutiny' and `Reconciliation of Accounts' and the `Demands', raised by the `Appellant / Bank', in a timebound manner and as expeditiously as possible. Further, in the instant case on hand, no `Debt' exist....
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....of Rs.20.00 crores as a sub limit of NFBWC (Inland LC) at the existing level till 31.10.2016 ; (e) Continuation of forward contract / Derivative limit with reduction from existing levels of Rs.2.22 crore to Rs.0.26 crore. (f) Substitution of personal guarantee of Mr. Thimma Reddy BN, father of Managing Director of the company with Mr. Bharat Dayanand and with personal guarantee of legal heirs of Late Mr. Thimma Reddy. (g) Increase in LC margin from existing 10% to 15%; The above facilities were sanctioned with the following conditions: (i) No further investments in Associates and Subsidiaries to be made without prior approval of the Bank; (ii) Completion of proper due diligence on suppliers; (iii) Penal Interest is applicable for delay in submission of audited balance sheet." 106. On 04.11.2016, the Appellant / Bank, had informed the Managing Director of the Respondent / Corporate Debtor, in regard to the `Devolvement of LCs : irregularity in Cash Credit Account'. 107. On 28.11.2016, the Appellant / Bank's Asst. General Manager, had inter alia mentioned that the present Balance in Respondent's Account was Rs.78,94,20,873.03, it was irregular by Rs.58,94,20,873.03. Th....
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....bserved that `during the Hearing on 19.06.2019, the MD of the Respondent / Corporate Debtor stated that if any dues are payable inspite of all the payments made, then, he can settle the dues, provided the Correct Amount is worked out, after proper reconciliation'. 115. Besides the above, the `Adjudicating Authority, at Paragraph 39 of the `impugned order', had observed that `......we have to take notice of the impact of the present financial distress caused by the global Novel Corona virus pandemic necessitating a nationwide lockdown in the last about 8 months that has paralysed businesses across the country. Major decisions have been taken to protect industry from its effects, to inject economic stimulus and to revive the economy, on 24.03.2020, the minimum threshold of default was increased from Rs.1 Lakh to Rs.1 Crore etc. Modifications and suspension of various provisions of the Code have been initiated so that companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP, else in the present scenario they may end up in liquidation and lose value further, which is not the objection of the Code. IBC itself has been suspended. Debts are b....
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....al'. Also that, an `Adjudicating Authority', is not required to go into the details of fabrication and forgery of documents, etc., admitting an `Application', under Section 7 of the Code. 120. As per Section 7 (4) of the Code, an `Adjudicating Authority' (`Tribunal'), is `to ascertain an existence of a Debt', within 14 days. In fact, as per Section 7 (5) (a) of the Code, an `Adjudicating Authority', is either to `Admit' an `Application' or `Reject' the `Application', as per Section 7 (5) (b) of the `Code'. 121. As far as the instant case is concerned, the Respondent / Corporate Debtor had committed the `Default of the Debt', arising on `Devolvement of Letters of Credits', and in fact, the Respondent / Corporate Debtor's Statement of Accounts (from 02.12.2015 to 31.12.2016; 01.01.2017 to 21.03.2018 and the Total Due as on 31.01.2019, evidences the `Default' in respect of Account No.30770234121). Also, the `CIBIL Report', clearly exhibits the `existence of Debt', by the Respondent / Corporate Debtor. 122. The Respondent / Corporate Debtor had acknowledged the `Debt' / `subject Letters of Credits', in their Statements dated 07.10.2016 and 09.11.2016. The Balance Sheet for the years....
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....together with the Company Seal of the Respondent / Corporate Debtor (vide Volume II of the Appeal at Pages 291, 301, 308, 315, 325, 327, 348, 365, 375, 391, 405 and 417). As such, the contra plea taken on the Respondent / Corporate Debtor is negatived by this `Tribunal'. 127. Coming to the aspect of `Letters of Credits', were not countersigned by the Authorised Representative (Dr. D.C. Mohan) of the Respondent / Corporate Debtor, this `Tribunal', pertinently points out that from 17.01.2015 to 03.02.2015, the Seven LCs were opened and signed by the said Dr. D.C. Mohan (Authorised Signatory) and they were honoured and paid by the Respondent, without any demur. In short, the said Dr. D.C. Mohan (Authorised Representative), had signed the subject Ten LC Documents. In short, through the `Board Resolution', the `Authorised Signatory' Dr. D.C. Mohan was authorised by the Respondent / Corporate Debtor, to sign the Documents pertaining to the `Letters of Credit'. Therefore, the contra plea taken on behalf of the Respondent / Corporate Debtor, is `unworthy of acceptance'. 128. One cannot brush aside the prime fact that the `Letters of Credits', were availed by the Respondent / Corporate De....