TaxTMI 
TaxTMI 
2023 (1) TMI 1489
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Petition. 3. The present Petition was filed before this Adjudicating Authority on the ground that the Respondent has defaulted in repayment of monies to the tune of Rs. 1413,47,38,878/- (Rupees One Thousand Four Hundred Thirteen Crore Forty-Seven Lakh Thirty-Eight Thousand Eight Hundred Seventy Eight Only). 4. The Corporate Debtor is a company engaged in providing Manufacturers of Computer Aided Systems, Networking Services, and Export of Software Consultancy. 5. The date of Default is stated to be 31.01.2018, (Affidavit @ Page 437 forming part of Petition, particularly Para (i)@ Pg. 440 onwards) whereas the particulars of debt of the Petitioners is detailed as under: Sr. No. Account No. Type Principal outstanding Rate of Interest % Unrecorded interest Unapplied interest Penal interest Total dues 1. 495805010028001 Cash Credit 167558359 13.70 0.00 42598913 6274755 216432027 2. 495806310001104 WCTL I 2400000000 14.10 90177458.00 692110502 91923288 3274211247 3. 495806310001106 WCTL II 1845000000 14.35 76229723.00 590828431 70925172 2582983327 4. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to time and on the terms and conditions as set out in the respective sanctions and duly agreed upon by the Corporate Debtor. 9. The Corporate Debtor has executed Copy of Deed of Hypothecation cum Charge on 27th October, 2016; Memorandum of Entry on the 3rd November, 2016; & Declaration of Mortgage by deposit of Title Deeds. 10. The Financial Creditor by its Letter of Sanction dated 26th September 2016 for Rs. 240 crores (WCTL-I) and 19th June, 2017 for Rs. 185.00 crores (WCTL-II), sanctioned the facilities, subject to the terms and conditions which were accepted by the Corporate Debtor in the Board Meeting held on the 24th October 2016 and 21 June, 2017 respectively. (Exhibit Z1 & Z2). 11. By its further Revival Letter dated 25th May, 2018, the Corporate Debtor confirmed the liabilities. (Exhibit-Z6) 12. In the Joint Lenders meeting held on the 1 February, 2018, 16th March, 2018, 17th May, 2018 & 7th August, 2018, held between the Lenders and the Corporate Debtor to work out possibilities of settlement and revival of smooth financial working of the Corporate Debtor. The minutes of the Joint Lenders meeting are annexed as (Exhibits- Z7 to Z9). 13. The Applic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eview of credit facilities [Exhibit M@ Page 110] g. Letter dated 28th May 2011 providing concession in rate of interest on WCDL, CC and Term Loan [Exhibit N@Page 112] h. Sanction letter dated 2nd April 2012 renewing/enhancing the credit facilities to 835 crores [Page 113). New limits- - LC-12.50 - Letter of guarantee - 87.50 - WCDL - 128 (from 80) - CC-32 (from 20) - Term Loan - 100 - ECB - 475 (from 240) i. Sanction letter dated 3rd April 2012 sanctioning SBLC of 100 crores. [Exhibit O @ Page 116] j. Letter dated 22nd June 2012 from FC to CD for modification of sanction terms and conditions qua SBLC upon request of CD, providing a concession of 50% in processing charges. [Exhibit P @ Page 118] k. Memorandum of confirmation of interest agreement between FC, Bank of India, Central Bank of India and Bank of Baroda [Exhibit Q @ Page 119] l. Sanction letter dated 22nd July 2013 renewing/enhancing the credit facilities to 933.57 crores [Exhibit - R @ Page 120]. New limits- - LC 12.50 - Letter of guarantee - 87.50 - SBLC-68.75 - WCDL - 128 - CC-32 - Term ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the CD before the Hon'ble Supreme Court challenging the RBI circular dated 12.02.2018, following admissions were made- [Page Z13@ Page 223] Page 233 - "4. To transform its business model, the Petitioner raised financing from Indian public sector banks including the Respondent No. 2. Part of the working capital finance availed by the Petitioner was in the form of a consortium lending which consisted of Respondent No. 3 to 6.." Page 234- "8. However, due to certain external factors which were beyond the control of Petitioner, the Petitioner was not able to repay its debt, as per the repayment schedule stipulated at the time of sanction..." Page 235-"10. The total outstanding payable by the Petitioner being more than Rs. 3500 crores as on 28th February 2018, the Petitioner submitted its Resolution Plan before the lenders prescribed under the Impugned Circular..." - Pages 238, 239, 259,260,271,274 6. Reports: a. CIBIL Report dated 12th April 2018 [Exhibit-DI@ Page 28] b. CRILC Report dated 31st October 2019 [Exhibit-D2 @Page 36] Submissions made by the learned Counsel of the Corporate Debtor: 16. The Respondent is opposing the admission of the Comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. 20. As per the Form prescribed under Rule 4 of the AA Rules, one of such necessary particulars is the "Date on which Default occurred" as required at Sr. 2 under Part IV of Form 1. The Present Petition fails to meet the test and standard under Section 7 since it is defective in form as well as substance, and as such is incomplete. 21. It is for these reasons that an applicant is required to bring a complete f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... against a corporate debtor before the Adjudicating Authority, on behalf of financial creditor; a. A guardian; b. An executor or administrator of an estate; c. A trustee (including a debenture trustee); d. A person duly authorised by the Board of Directors of a company. 26. It is submitted that the Signatory is not a 'person authorized to submit application" as the said Power of Attorney holder cannot file proceedings for initiating corporate insolvency resolution process under the Code. 27. The Hon'ble National Company Law Appellate Tribunal has in the case of Palogix Infrastructure Private Limited vs. ICICI Bank Limited held as follows: "32. The 'I & B Code' is a complete Code by itself. The provision of the Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a particular act should be done by a person in the manner as prescribed thereunder. 33. Therefore, we hold that a 'Power of Attorney Holder' is not competent to file an application on behalf of a 'Financial Creditor' or 'Operational Creditor' or 'Corporate Applicant'." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In such cases, the corporate debtor cannot take the plea that while the officer has power to sanction the loan, such officer has no power to recover the loan amount or to initiate corporate insolvency resolution process, in spite of default in repayment. We approve the view taken by the NCLAT in Palogix Infrastructure (supra). C. POWER OF ATTORNEY IS INSUFFICIENTLY STAMPED: 29. The Corporate Debtor taken defence that Powers of Attorney is insufficiently stamped and cannot be acted upon in addition to the aforesaid, as per the provisions of Section 18 of the Maharashtra Stamp Act, 1958 ("Stamp Act'), every instrument executed outside the State of Maharashtra ought to be stamped within three months after it has been first received in this State, Section 18 of the Stamp Act is reproduced hereinbelow: "(1) Every instrument chargeable with duty executed only out of this State may be stamped within three months after it has been first received in this State. (2) Where any such instrument cannot, with reference to the description of stamp prescribed therefore, be duly stamped by a private person, it may be taken within the said period of three months to the Col....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 33. An application under Section 7 of the Code, unlike any pleading before a civil court, must present all necessary proofs and documents to evidence existence of debt, disbursement and default. An application under Section 7 of the Code is liable to be admitted only when the same supplies such proofs through solid documentary evidence, upon examination of which the adjudicating authority would be satisfied (without any inference of facts or presumption) that debt, disbursement and default demonstrably exist. 34. In the present case, the Petitioner has failed to produce documents and sufficient evidence which would establish existence of default or date of default. Infact, the Petitioner has failed to supply documentary evidence which would prove or demonstrate: a. default has occurred with respect to the amount disbursed; b. date on which default has taken place; 35. In the present case, the Petitioner has not produced any document or proof which would attest to the assertions with respect to default or the date of default for the purposes of the Code. The documents produced by the Petitioner do not prove any of the above factors, and thus lacks the nece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which period a team of MOD headed by serving personnel of rank Major General would visit the establishment and facilities of Respondent every fortnight to review the progress and cost being incurred for the Project. The MOD was endeavoring to complete the prototype of the Project by end of 2018, and thus was showing great urgency in the matter. In view of the above, the Respondent made investment of Rs. 3,800 Crores towards R&D without taking any bank facility by utilizing its surplus cash flows and the investments so made would were treated as Work In Progress (WIP) in the accounts of Respondent. 42. As per policy of MOD, once the prototype is submitted for final testing and acceptance, an amount equivalent to 80% of the project would be reimbursed by MOD. Therefore, the Respondent was expecting to receive more than Rs. 3,000 Crores by end of 2018. In this process, the Respondent also incurred huge liabilities from its bankers and financiers with the expectation that the same would be repaid once the windfall from the MOD is received at the conclusion of the prototype testing. Furthermore, after final testing of the prototype, MOD would have placed orders with Respondent for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll security interest of the nation. Rebuttal of the Financial Creditor to the Corporate Debtor: 48. Broadly, there were two contentions raised by the Respondent in the present case. i. That the Petition does not disclose the date of default and no document is annexed to the Petition disclosing the date of default; ii. That the Power of Attorney is not complete and is insufficiently stamped. This contention was raised on the basis of the judgment of Palogix Infrastructure Pvt. Ltd. v ICICI Bank Limited, 2017 SCC OnLine NCLAT 266 by the Hon'ble National Company Law Appellate Tribunal (NCLAT). 49. The contentions deserve to be rejected inter alia for following reasons: a. As far as the date of default is concerned, the date of NPA is taken as the date of default i.e., 31 January 2018. It is true that in the Form, the date of default was cross referred to an Annexure which remained to be exhibited. However, as demonstrated during the course of arguments, in the accompanying Affidavit to the Petition which was filed along with the Petition and as part of the Petition, it is clearly stated at page 436 that the date of default and the date of NPA is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;Corporate Applicant' in favour of its officer, which can be delegated even by designation. In such case, officer delegated with power can claim to be the 'Authorized Representative' for the purpose of filing any application under section 7 or Section 9 or Section 10 of '1&B Code'." e. This judgment further came up for consideration before the Hon'ble Supreme Court in the matter of Rajendra Narrotamdas Sheth v/s. Chandraprakash Jain (2022) 5 SCC 600 (relevant paragraphs 12, 13, 14 and 15). The Hon'ble Supreme Court approved findings given in paragraph 41 of the judgment of the Hon'ble NCLAT. The Hon'ble NCLAT in case of a bank conclusively held that even if a Power of Attorney is not an instrument on the basis of which an Application under Section 7 can be filed, a Power of Attorney can always be treated as letter of authorization which permits an Application to be filed. Therefore, in the case of ICICI on which the Respondent relies, the Hon'ble NCLAT permitted a bank to maintain an application on the basis of Power of Attorney treating it to be an authorization letter authorizing its officer to file an application. On this ground i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rimary defence raised by the Corporate Debtor that the petition is incomplete and defective, the Petitioner has failed to state the date of default in Part IV of Form I. This Adjudicating Authority relies upon judgement of Hon'ble NCLAT in Bishal Jaiswal Vs. Asset Reconstruction Company (India) Ltd. Company Appeal (AT) (Insolvency) No. 385 of 2020 relevant paragraphs are as follows: 17. The NCLT Rules, 2016 defines 'pleadings' in a very distinct manner. Rule 2 of the sub-Rule (19), which defines 'pleadings' provides as follows: "(19) "pleadings" means and includes application including interlocutory application, petition, appeal, revision, reply, rejoinder, statement, counter claim, additional statement supplementing the original application and reply statement under these rules and as may be permitted by the Tribunal;" 18. Even supplementary affidavit or additional affidavit filed before Adjudicating Authority will be covered by the definition of 'pleadings'. The present case is a case where there was no mention about the date of default in Section 7 Application, nor under Part-IV or Part-V of Form-1, no balance sheets of the Corporate Debtor was mention....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Financial Creditor has stated that the Corporate Debtor was classified as NPA on 31.01.2018. In this regard, the Hon'ble NCLAT in Jagdish Prasad Sarada v. Allahabad Bank Company Appeal (AT) (Insolvency) No. 183 of 2020 has held as under: "The Hon'ble Supreme Court has already observed in Civil Appeal No. 439, 436, 3137, 4979, 5819 & 7289 of 2018 in B.K. Educational Services Pvt. Ltd Vs. Parag Gupta and Associates dated 11.10.2019 that the limitation period for application under section 7 of the Code is 3 years as provided by Article 137 of the Limitation Act, 1963 which commences from the date of default and is extendable only by application of section 5 of Limitation Act, 1963 if any case for condonation of delay is made out. The view taken by the Hon'ble Apex Court in 'B.K.Educational Services Private Limited Vs. Parag Gupta and Associates' that the limitation period for application under Section 7 of the I&B Code is three years as provided by Article 137 of the Limitation Act, which commences from the date of default and is extendable only by application of Section 5 of The Limitation Act, 1963 if any case for condonation of delay is carved out, has again been reiterate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ject 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. 25. In Innoventive Industries (supra), a two-judge Bench of this Court has explained the ambit of Section 7 of the IBC, and held that the Adjudicating Authority only has to determine whether a "default" has occurred, i.e., whether the "debt" (which may still be disputed) was due and remained unpaid. If the Adjudicating Authority is of the opinion that a "default" has occurred, it has to admit the application unless it is incomplete. Speaking through Justice Rohinton F Nariman, the Court has observed: "28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....authority may reject an application and not otherwise." (emphasis supplied) 56. Therefore, at this juncture it is essential to ascertain that the default has been committed in respect of a debt is due and payable. The Respondent in light of Vidarbha Industries Power Limited Vs. Axis Bank Limited [Civil appeal No. 4633 of 2021] has contended that discretion be exercised as the company is a going concern. The said judgement is not applicable in present case as the Hon'ble Apex Court in Vidarbha Industries has held that if there are good reasons to keep admission of the Corporate debtor in abeyance and the Corporate debtor has carved out a case against its admission on its own merits, this Adjudicating Authority can exercise its discretion. "87. Ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit an application under Section 7 of the IBC of the IBC and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition. 88. The Adjudicating Authority (NCLT) has to consider the grounds made out by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (iii) Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002; (iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. (c) Notwithstanding the above, during the period of moratorium: - (i) The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period; (ii) That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Governm....