TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 70
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....ction 7 application filed by the Bank of Baroda. We need to notice first background facts of the case necessary to be noted for deciding this Appeal. 2.1. The Bank of India sanctioned several financial facilities to the Corporate Debtor. Two credit facilities of Rs. 700 Lakhs were sanctioned in the year 2014 with term loan facility of Rs. 190 Cr. In the year 2014 after taking account of the Corporate Debtor from other financial creditors on request of Corporate Debtor for enhancement of credit facility, the credit facility given to the Corporate Debtor was reviewed and memorandum was prepared on 05.08.2017. Meeting of ZLCC was held on 13.09.2017 which recommended extension of credit facility with some modification. ZLCC meeting minutes dated 13.09.2017 also noticed certain outstanding dues on the part of the Corporate Debtor. The Bank of India declared the account of the Corporate Debtor as NPA on 30.09.2017. A notice dated 06.11.2017 was issued by the Bank of India under Section 13(2) of the SARFAESI Act, 2002 to the Corporate Debtor as well as the personal guarantors claiming outstanding amount of Rs. 172.71 Lakhs towards term loan and Rs. 793.51 and Rs. 99.99 Lakhs towards tw....
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....t was filed by the Corporate Debtor. Adjudicating Authority vide order dated 04.04.2024 after hearing the parties admitted Section 7 application against which order Company Appeal (AT) (Insolvency) No.720 of 2024 was filed by the Appellant which Appeal came to be allowed by this Tribunal on 26.04.2024 remanding the matter back to the Adjudicating Authority to specifically consider the objections raised by the Appellant. After the remand, both the parties filed their written submissions and by impugned order dated 02.05.2025, Section 7 application has been admitted. Adjudicating Authority in order dated 02.05.2025 framed five issues for consideration in paragraph 14 and considered separately all the issues and after deciding the issues framed found existence of debt and default on the part of the Corporate Debtor. After returning finding of debt and default, Section 7 application has been admitted, aggrieved by which order this Appeal has been filed. 3. We have heard Learned Counsel for the Appellant as well as Learned Counsel appearing for the Bank of Baroda. 4. Counsel for the Appellant challenging the impugned order submits that basis of Section 7 application was declaratio....
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....n accordance with law has not been correctly appreciated. The impugned order is non-speaking despite remanded by this Tribunal has not considered the objections of the Corporate Debtor. The beneficial and retrospective nature of the RBI Circular dated 07.02.2018 has been ignored and it has been wrongly held to be prospective. The Corporate Debtor is a going concern which need not be pushed into insolvency. 5. Counsel for the Bank refuting the submissions of the Counsel for the Appellant submits that the Corporate Debtor having committed default, Bank has rightly mentioned date of default as 30.09.2017. There were over dues in loan account on 30.09.2017. Cash credit account was also irregular and not regularised. Corporate Debtor having not serviced the loan and being in default, Section 7 proceeding was rightly initiated by the Bank. It is submitted that the RBI Circular dated 07.02.2018 is not applicable with respect to declaration of NPA on 30.09.2017, the Circular being only prospective. It is submitted that the reliance on minutes of the ZLCC meeting dated 13.09.2017 is misplaced. In the said ZLCC meeting, it was noticed that there was overdue in the account of the Corporate....
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....ed by the Bank of Baroda for the second time on 04.04.2024 was challenged by means of Company Appeal (AT) (Insolvency) No.720 of 2024 which has been allowed by this Tribunal vide its order and judgment dated 26.04.2024. In the judgment dated 26.04.2024, this Tribunal was of the view that the case requires re-look by the Adjudicating Authority on the evidence which has been brought on the record. In paragraphs 10 to 13, following has been held by this Tribunal:- "10. Consequently, we are of the considered opinion that this case requires a relook by the Adjudicating Authority on the evidence which has been brought on record to judge about two basic issues i.e. debt and default having been committed by the Appellant for the purpose of attracting Section 7 of the Code. 11. As a result thereof, the appeal succeeds and the impugned order is set aside. The matter is remanded back to the Adjudicating Authority to redecide the issue after taking into consideration the contentions of both the parties by recording categoric finding on the issue which has been raised so that it may facilitate a judicial review by the Appellate Tribunal if any. 12. The parties are dir....
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....ebtor failed to repay instalments in the Term Loan Account and exceeded sanctioned limits of the Cash Credit Accounts, and failed to regularize repayments as evidenced by the account statement. Further, there was a default on the date of NPA on 30.09.2017. We are of the view that the law requires the occurrence of a default, and the same is established by the Applicant. The main defence of the Corporate Debtor questioning the NPA based on the RBI Circular or certificates issued does not support its case. It has not been proved that a default had not occurred. 16.21. Further, the Applicant has established a default exceeding Rs. 1.00 Crore, satisfying the threshold under Section 7 of the IBC, 2016." 10. Issue No. (D) & (E) regarding maintainability and limitation has also been answered in favour of the Financial Creditor. It was held that Applicant has established the existence of financial debt of Rs. 11,57,89,697/- in paragraph 18. Paragraph 18 of the judgment is as follows:- "18. The Applicant has established the existence of a financial debt of Rs. 11,57,89,697/- owed by the Corporate Debtor, supported by loan documents, bank statements, and a CIBIL report. ....
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....ed over dues of Rs. 79.22 Lacs cash credit and the term loan account is overdue by Rs. 10.54 Lacs from July 2017 onwards. It is true that recommendation was made for reviewing the account for the sake of good orders but when minutes are read as whole minutes clearly noticed over dues since July 2017 and further it was subject to over dues in the account to be recovered immediately. Thus, the submission of the Appellant that over dues is not substantiated from the minutes cannot be accepted. The fact that ZLCC meeting minutes recommended for review of credit limits cannot lead to conclusion that there was no over dues and Corporate Debtor was complying with all terms and conditions. Decision to review the account was in the interest of the Corporate Debtor but over dues as noted in the minutes specifically cannot be overlooked. At this stage, we need to notice the letter which has been brought on the record of the Corporate Debtor and were also part of the reply of the Corporate Debtor filed before the Adjudicating Authority under Section 7. As noted above, there being default on the part of the Corporate Debtor and the account having been declared as NPA on 30.09.2017. Notice under....
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....ng period for repayment of Principal of proposed term loan and existing term loan. 3. Allowing us to serve interest part only for proposed holding period. The above requests, if considered positively, will definitely help our Company in regularizing our accounts. Please allow us for a time period of 10-12 days for submission of Restructure Proposal with Detailed Project Report. We also request you to hold any or all further action to be taken against our Company for recovery of Bank Dues. As you are aware that we are dealing with Big Corporates and MNCs like Aditya Birla Retail Limited, Pillsbury, Max Hypermarket and Patanjali Ayurveda Limited, any negative publicity will impact the entire business and harm the existing long term supply agreements with immediate effect. So kindly consider our request of suspending all corrosive action against our Company and allow our proposal of restructure proposal for repaying the bank over dues positively. We will be very grateful to you for the same, it considered in our favour. Looking forward to our long term relationship and the future of an upcoming industry, we expect your kind cooperation in t....
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.... of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and NBFCs. As a measure of support to these entities in their transition to a formalised business environment, it has been decided that the exposure of banks and NBFCs to a borrower classified as micro, small and medium enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, shall continue to be classified as a standard asset in the books of banks and NBFCs subject to the following conditions: (i) The borrower is registered under the GST regime as on January 31, 2018. (ii) The aggregate exposure, including non-fund based facilities, of banks and NBFCs, to the borrower does not exceed 250 million as on January 31, 2018. (iii) The borrower's account was standard as on August 31, 2017. (iv) The amount from the borrower overdue as on September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates. (v) A provision of 5% shall be made by the banks/NBFCs against the exposur....
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....nt 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. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 IBC enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liab....
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....amount of Rs. 33,72,643/- and Rs. 3,33,18,262.12/- were deposited between 01.09.2017 to 30.11.2018 which was sufficient deposit into the cash credit account for servicing the term loan facilities. The above submission of the Appellant was also raised before the Adjudicating Authority and considered. The Adjudicating Authority has held that cash credit accounts have no unutilized limits sufficient to cover the term loan instalments. Adjudicating Authority has returned following findings in paragraphs 16.10, 16.15 & 16.16:- "16.10. The Corporate Debtor's reliance on Cash Credit deposits is misplaced. The primary obligation was to repay the Term Loan, and the Applicant's practice of debiting Cash Credit Accounts was contingent on available limits. The Corporate Debtor provides no evidence that the Cash Credit Accounts had unutilized limits sufficient to cover the Term Loan instalments. 16.15. The Corporate Debtor's obligation was to ensure repayment of the Term Loan and maintain Cash Credit Accounts within sanctioned limits. The Applicant's practice of debiting Cash Credit Accounts was not mandatory, and the Corporate Debtor provides no evidence of su....
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....Magistrate for taking possession of the assets of the Corporate Debtor. The letter dated 03.06.2019 written by the Bank to Additional District Magistrate, District Dewas has been brought on the record as Annexure A-20. The letter mentioned that Bank does not want to pursue the application for taking possession under Section 14 of the SARFAESI Act. Letter dated 03.06.2019 addressed to Additional District Magistrate, Dewas mentioned as follows:- "BOI Bank of India VIJAY NAGAR BRANCH: UG 2, 3, 4, Om Gurudev Complex, Scheme No. 54, Opposite Rajshree Apollo Hospital, Vijay Nagar, Indore-452 010, Phone: 0731- 2558159, 2551235, Email: [email protected] Dated: 03/06/2019 Hon'ble Additional District Magistrate, Court District Magistrate, Dewas District Dewas (MP) Subject: To withdraw the case presented by our office in your court. Creditor- M/s M.P. Agro BRK Energy Foods Ltd. Mortgaged Property- 1. House No. 26, Bajar Nagar Colony, Ward No. 9, Dewas 2. Lease hold commercial land and factory building, plot no. 71-D2, Industrial Area No. 1, A. B. Road, Dewas 3. Lease hold com....