TaxTMI 
TaxTMI 
2024 (5) TMI 13
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....abad Bench, Prayagraj (in short 'Adjudicating Authority') in CP (IB) No. 05/ALD/2022 . 2. An I.A. No. 991 of 2023 was filed under Rule 11 r/w Rule 31 of the National Company Law Appellate Tribunal Rules, 2016 by J.C. Flowers Asset Reconstruction Private Limited ( in short the Appellant) seeking its substitution as the Appellant/ Financial Creditor in place of Yes Bank on the virtue of an assignment agreement executed between the J.C. Flowers Asset Reconstruction Private Limited and the Axis Bank on 16.12.2022 for the loan given to the Corporate Debtor by the Yest Bank which has been assigned to the Applicant. The Application was allowed by this Appellate Tribunal on 06.03.2023 and as such J.C. Flowers Asset Reconstruction Private Limited replaced the Yest Bank Limited as the Appellant. 3. Laxmi Oil and Vanaspati Private Limited the Corporate Debtor is the Respondent herein. 4. Heard the Counsel for the Parties and perused the records made available including the cited judgements. 5. It is noted that the Respondent availed credit facilities from the original Appellant vide credit facility letter bearing reference no. YBL/ DEL/ FL/ 200/ 2016-17 dated 26.03.20217 for Rs. 1....
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....uidelines, the Appellant declared the Respondent as NPA on 20.07.2020 i.e., due to non submission of stock statement by the Respondent for a continued period on 6 months as last stock statement was submitted by the Respondent for the month of December, 2019. 10. The Appellant vide letter dated 27.08.2020 issued a loan recall notice to the Respondent and vide letter dated 07.09.2020 the guarantee extended by the guarantors were also invoked. 11. The Appellant emphasised that despite several reminders and request to the Respondent, the Respondent did not honour the terms of facility agreement and the debt remained unpaid as on 31.08.2021 for Rs. 25,99,34,488/- . 12. The Appellant submitted that despite his best efforts, due to failure of the Respondent, he filed an application under Section 7 of the Code for initiating Corporate Insolvency Resolution Process (in short 'CIRP'). However, the Adjudicating Authority vide its Impugned Order dated 13.06.2022, dismissed the application holding that there is no basis for determining the date of default as 28.02.2020 and further, opined that loan recall notice had been issued on 27.08.2020 which falls between the period covered under....
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....0, which is a clear admission of the debt falling due before the period enshrined under Section 10 A of the Code and submitted that the Respondent cannot take the benefit of both the RBI circulars as well as Section 10 A of the Code. 20. The Appellant pointed out that the Circular issued by the RBI on 27.03.2020 was merely for the purpose of deferring the recovery of monies falling due between March 1, 2020 and May 31, 2020 and since the Respondent defaulted in making payment of interest due on 28.02.2020 in terms of value date as provided in the account statement of the Corporate Debtor, the same is not covered as per RBI Circular on this aspect. 21. The Appellant explained that in his banking system, the instalment become due on the last date of every month and is payable on the first day of the next month. As such the default occurred on 28.02.2020 and payable on 01.03.2020 and in this regard, the Appellant reiterated that RBI Circular is not applicable as the RBI Circular used the word 'Due' and clearly the instalment become due on 28.02.2020. 22. Concluding his remarks, the Appellant submitted that the Impugned Order is illegal and perverse and requested this Appellat....
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....t that the alleged default occurred during the prohibited period between 25.03.2020 and 31.03.2021 for which no action under Section 7 of the Code could have been taken in terms of provision of Section 10 A of the Code. 33. Concluding his arguments, the Respondent requested this Appellate tribunal to dismiss the appeal. Findings 34. We note that Section 10 A of the Code was introduced by amendment Act of 2020 dated 05.06.2020 with the purpose to support the business and industry who were adversely affected due to covid 19 pandemic. Section 10 A of the Code provides temporary suspensions on initiation of CIRP, which was provided initially for six months with the provision to be extended from time to time as notified. 35. We note that proviso to Section 10 A clearly mentions that "no application shall ever be filed" for initiation of CIRP of "for the said default occurring during the said period", which signifies that the Parliament clearly envisaged to bar initiation of any application for CIRP, in respect of default which has occurred on or after 25.03.2020 for a period as notified from time to time. 36. We also note that the explanation to Section 10 A (quoted above....
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.... be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it. 26 The date of the initiation of the CIRP is the date on which a financial creditor, operational creditor or corporate applicant makes an application to the adjudicating authority for initiating the process. On the other hand, the insolvency commencement date is the date of the admission of the application. This distinction is also evident from the provisions of sub-section (6) of Section 7, sub-section (6) of Section 9 and sub-section (5) of Section 10. Section 7 deals with the initiation of the CIRP by a financial creditor; Section 8 provides for the insolvency resolution by an operational creditor; Section 9 provides for the application for initiation of the CIRP by an operational creditor; and Section 10 provides for the initiation of the CIRP by a corporate ....
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....oot question in the present appeal would be to determine when actually the default took place and whether this was covered under Section 10A of the Code. 43. In this regard, we would like to take into consideration part (IV) of the application filed by the Appellant before the Adjudicating Authority. 44. From above is seen that in particular of financial debt, amount claimed is Rs. 25,99,34,488.25/- as on 06.09.2021 and date of default mentioned as 28.02.2020 along with date of NPA as 20.07.2020. 45. From part IV we also note that vide letter dated 20.12.2019, the Appellant asked the Respondent to comply with the requirement mentioned in the facility agreement. It is further noted that part IV mentioned that on 28.02.2020, the Corporate Debtor failed to make repayment and hence default took place. Part IV also states that as per RBI Guidelines, the Corporate Debtor was declared as NPA on 20.07.2020 and loan recall notice was issued on 27.08.2020. It is also mentioned that despite several reminder, the Corporate Debtor failed to comply the terms of facility agreement and therefore the Appellant filed an application under section 7 of the Code. 46. From above, it is furth....
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....ppened to establish default. 50. In the present appeal, the Appellant fairly stated that due occurred on the last date of February, 2020 but was payable on 01.03.2020. Hence, strictly speaking the date of default can not be 28.02.2020 as claimed by the Appellant in Part IV and at best could be as 01.03.2020 i.e., when it became payable. 51. Unless the debtor commits default, CIRP against him cannot be initiated under the Code. The words "Due and Payable" used in definition of "default" in section 3 (12) means that the default debt must be subsisting debt. The terms 'default' is defined in Section 3(12) of the Code in very wide terms as nonpayment of a 'debt' once it becomes due and payable, which includes nonpayment of even part thereof or an installment. A creditor is not only required to establish the existence of a debt but is also required to prove that the corporate debtor has defaulted in payment of the debt and if he fails to establish the same, the CIRP cannot be initiated by the Adjudicating Authority. In other words, the mere fact of a 'debt' being due and payable is not adequate to justify the initiation of CIRP at the instance of the creditor, unless the 'default'....
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.... place accordingly. 57. We have already noted earlier from the submissions of the Appellant is that the instalment became due on 01.03.2020 and the RBI Circular dated 27.03.2020 moratorium was permitted for instalment between 01.03.2020 to 31.05.2020, and this moratorium period and was later enhanced from 01.06.2020 to 31.08.2020 vide RBI/2019-20/244 Circular dated 23.05.2020. 58. We have already noted the content of Part IV of the application mention the date of default as 28.02.2020 and date of NPA as 20.07.2020 and further mentioned that loan was recalled vide letter dated 27.08.2020. 59. We would like to take into account the loan recall notice dated 27.08.2020 mentioned by the Appellant in Part IV of the application which reads as under : - 60. From Part 3 of the above loan recall notice, it is seen that it has been alleged that the Respondent did not honour the terms and conditions of the agreement and neglected to submit the 'stock statement' to the bank, which was pending since January, 2020 resulting in accounts of borrowers being declared as NPA on 20.07.2020 in accordance with the RBI Guidelines. It further stated that in these circumstances bank has becom....
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....introduction of Section 10A through amendment Act of 2020 was to protect the business from the financial distress adversely affected due to Covid 19 Pandemic and not to push such Corporate Debtor into Insolvency & Liquidation. 66. The Appellant, therefore, was not entitled to initiate the CIRP in the given background of the facts as well as various RBI guidelines and the provisions of Section 10 A of the Code. 67. Based on above analysis and considering all legal and factual issue raised by the Appellant, we are unable to accept any of his pleas and the appeal, therefore, deserves to be rejected. However, the Appellant shall have all the legal recourse and remedies as available in the law, if he choose to avail, to recover his money from the Respondent. We also note that IBC is meant for sustaining the Corporate Debtor to the extent possible and not to unnecessary send the Corporate Debtor into CIRP or liquidation. 68. In fine the Appeal fails and stand dismissed. No Costs. Interlocutory Application(s), if any, are Closed. ============= Document 1 1. TOTAL PART-IV PARTICULARS OF FINANCIAL DEBT Total amount of debt granted: AMOUNT OF DEBT GRANTED Rs. 20,....
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....one Mr Tarulata Biswas) and Exclusive Charge on the house no. 117/L/293 Naveen Nagar, Kakakdeo, Kanpur (belonging to the Borrower) were also created in addition to the existing securities as mentioned above in Part IV Point No. 2.2. Furthermore, a Deed of Hypothecation was executed on 21.02.2018. Document 3 Accordingly, Form CHG - I was uploaded on MCA by the Corporate Debtor. A photocopy of Facility Letter dated 15.02.2018, Supplementary Master Facility Agreement dated 21.02.2018, Deed of Hypothecation dated 21.02.2018 and Form CHG-1 are being filed herewith and collectively marked as ANNEXURE NO.-7 4. That Memorandum of Entry were executed on 14.03.2018 for property located at Khatain No. 175 Mouza Nayabad, JL No. 17, R.S. No. 173, P.S. Tiljala Sonarpur, District 24 Parganas and on 19.04.2018 for property located at House No. 117/L/293, Naveen Nagar, Kakadeo, Kanpur Nagar constructed over the freehold property located at Plot No. 246, Block - L, Scheme No. 1, Kakadeo, Kanpur Nagar and on 13.06.2018 for property located at Touzi No. 1131 of Alipore Railway Station, Sanarpur, Sub registry Re-Sur No. 185....
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....om the perusal of the Account Statement of Corporate Debtor, annexed herein as Annexure No. 4. 10. In view of the facts and circumstances mentioned hereinabove, it is clear that the Corporate Debtor has defaulted in repayment of the financial debt owed to the Applicant herein. Being so, the instant case is a fit case for commencement of Corporate Insolvency Resolution Process of the Corporate Debtor in terms of Section 7(5)(a) of the IBC. Document 6 à¤à¤¾à¤°à¤¤à¥€à¤¯ रिजरà¥à¤µ बैंक RESERVE BANK OF INDIA www.rbi.org.in RBI/2019-20/186 DOR.No.BP.BC.47/21.04.048/2019-20 March 27, 2020 All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks) All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks All All-India Financial Institutions All Non-Banking Financial Companies (including Housing Finance Companies) Madam / Dear Sir, COVID-19-Regulatory Package Please refer to the Statement of Development and Regulatory Policies released on March 27, 2020 where inter ali....
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.... relevant Ihavedown and every 6 noetles thereafter. Interest Payment Additional Rate of Dates: M Interest: 25% over applicable rase Exclusive Choc on by way of Equitable Mortgage Residential Land Building and 27 situated at 158 E/107 M Bye Pass Road, South 21 Parganas West Bengal- 700010 comprising Katha as total area and owned by Mr. Shih Shankar Roy with minimum cover of 1.25x • Unconditional and irrevocable Personal Guarant of Shib Shankar Buy Nipon Garg Sath Rawat and Vishal Jaiswal to renaly -valid Fleancial Covenant Special Terms Conditions Saccial Terms Conditions: Post dated Cheque/Undated Cheque (PUCAIDC") of R 100 Million from the Bower along with declaration format Yeldadan Total crslit expeare of all the cities shall utcaved INR 100 MM Ay disbunnat te de unly post security. perfection Financial Covenant •Statement of stock art bank debes to be suitted on monthly basis; Furnish to us fromcial nformation quarter Pasis within 45 days of each during the tenor of Y. facities he....
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....00 0.00 -599,017,729.94 54.00 0.00 -199,917,783.04 80,431 00 0.00 -199,998,214.34 12,000.00 -199,986,214.94 12.000.00 0.00 -199,998,214 94 CTS CLG DEL ROYAL FEEDS 000000554336 2,793,039.48 300,000.00 0.00 0.00 -202,791,25442 -203,291,254 42 BY CLOIRE INSTRUMENT OUTDATED STALE 000000554335 000 500,000.00 -202 701,254 42 02-SEP-2020 07-SEP-2020 30 SEP 2020 30-SEP-2020 01-OCT-2020 01-NOV-2020 01-DEC-2020 01-JAN-2021 01-FEB-2021 01-SEP-2020 DEBIT INTEREST CAPITALIZED 16,959,31374 0.00 02-SEP-2020 30-SEP-2020 02-SEP-2020 30-SEP-2020 31-OCT 2020 30-NOV-2020 31-DEC-2020 31-JAN-2021 01-MAR-2021 29-FEB-2021 01-APR-2021 31-MAR-2021 01-MAY-2021 30-APR-2021 25-MAY-2021 25-MAY-2021 INTEREST OF DEFERRED MORATORIUM INTEREST DEBIT INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED DEBIT I INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED DEBIT INTEREST CAPITALIZED IMPS/2021052541932383/TATA CAPITAL FINANCIRAN:114516029178U SIND BAN....
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....8 0.36 0.00 199,564,740.54 NEFT PAYMENT CHRGS FOR 11-NOV-2019 GST 18.00 0.00 -188.594,763.64 2.70 0.00 -199.994.70824 NEFT PAYMENT CHRGS FOR 08-NOV-2019 200 7.00 0.00 +599,994,773.24 126 000 0.00 -189,994,774 50 NEFT PAYMENT CHRGS FOR 13-NOV-2019 34.00 34.00 0.00 -199.994.008.50 23-NOV-2019 23-NOV-2019 23-NOV-2019 GST 6.12 0.00 23-NOV-2019 23-NOV-2019 23-NOV-2019 23-NOV-2019 23-NOV-2014 23-NOV-2019 23-NOV-2019 RTGS PAYMENT CHRGS FOR 14-NOV-2018 CST RTGS PAYMENT CHRGS FOR 11-NOV-2018 GST 200 0.00 0.00 -199,904,814.82 19.90461662 0.36 0.00 -199,994,810.98 1.00 0.00 0.18 0.09 23-NOV-2019 29-NOV-2019 23-NOV-2019 23-NOV-2019 26 NOV 2019 28-NOV-2019 28-NOV-2019 28-NOV-2015 28-NOV-2019 28-NOV-2019 20-NOV-2019 23-NOV-2019 26-NOV-2013 26-NOV-2019 28-NOV-2013 28 NOV 2019 28-NOV-2019 28-NOV-2019 ACH OF RTN CHO-3391404293-26.15- TOYOTAF CMS OST GL NEFT PAYMENT CHRGS FOR 21-NOV-2019 GST RTGS PAYMENT CHRGS FOR 08-NOV-2019 3.00 0.00 0.54 0.00 300.00 0.00 ....
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....EB-2020 28-FEB-2020 28-FEB-2020 28-FEB-2020 28-FEB-2020 25-FEB-2020 28-FEB-2020 23-FEB-2020 28-FEB-2020 BY CLGIREJEXCEEDS ARRANGEMENTOVERUNE PVT LTD-LAXMI OIL AND VANASPATI PVT LTD-ANDBR52020022700326174 NET TXN: NETOKG FT-00738400001315 058203140631 ACH IF RTN CHG-3701091520212 TOYOTAF CMS GST GL ECS IF RTN CHGS-BFL LOAN-02.12 SIFR CMS GST GL ECS OF RTN CHGS BFL LOAN 04.12 CMS GST GL ACH FRIN CHG-3708690725-05.12 HDFCBAN CMS GST GL ACH IF RTN CHG-3803539429-05-12- RLOANAX CMS GST GL ECS IF RTN CHOG-BFL LOAN 0512- 45760137 CMS GST GL ACH FRENCHG-387878592-812- 267872 615.000.00 0.00 -199,894,355.22 300.00 0.00 -199,89465622 56.00 0,00 300.00 0.00 -199.894,710.22 -190,895.010 22 34.00 0.00 300.00 0.00 -398.885,354.22 54.00 0.00 -199,895,418 22 300.00 0.00 -109895,718.22 $4,00 0.00 -199,95,772 22 300.00 000 -199.896,072 22 54.00 0.00 -199,396,125.22 300.00 0.00 -199.896.425.22 54.00 0:00 300,00 0 CO -199,895 485 22 -198.898,700.22 Page Number: 81 TRUE COPY Document....