2024 (3) TMI 1237 - AT - Insolvency and Bankruptcy

Admission of Section 7 application - It is the case of the Appellant that after restructuring the debt was not due on alleged default dates claimed by the Respondent, as such the admission of Section 7 application by the Adjudicating Authority was illegal and perverse - HELD THAT - The Corporate Debtor requested for restructuring benefit being MSME and the Respondent sanctioned the same vide sanction letter dated 30.03.2019 as per their guidelines dated 15.01.2019 applicable to all MSME including the Corporate Debtor. We have taken into consideration the pleadings of the parties and note that for restructured Funded Interest Terms Loan (FITL) and Working Capital Term Loan (WCTL), moratorium was indeed allowed, however the said moratorium was only for principal amounts and not for interests whereas the Appellant has taken the plea that the moratorium was blanket for both principal amount as well as for the interest component and therefore, the moratorium was absolute. As regard, the different date of default as alleged by the Appellant, both the parties during the pleadings, brought out that the Adjudicating Authority had asked the Respondent to file a supplemental affidavit which was filed on 16.04.2019 where the Respondent elaborated that the Corporate Debtor committed first default in 2018 the loan accounts of the Corporate Debtor were classified as NPA on 30.04.2018, however, on payment of over due amount the account of the Corporate Debtor were upgraded to the standard category. The Corporate Debtor, having not deposited the interest from time to time, defaulted and outstanding balance remained continuously in excess of sanction limit, entitling the Respondent bank to classify the loan accounts of the Corporate Debtor as NPA - there are no strength in the arguments of the Appellant regarding alleged wrong date of defaults which has been consciously elaborated in the Impugned Order. Thus, the grounds of the Appellant that there was no default whatsoever is not found to be true in view of various loans agreements, restructuring approvals letters, supplemental terms loan agreements, various statement of accounts provided by the banks w.r.t to the Corporate Debtor. There was clear default on the part of the Corporate Debtor to the Respondent Bank - there are no error in the Impugned Order which has gone into details of all the facts and came to the clear conclusion that there has been default on the part of the Corporate Debtor. Appeal dismissed.

Summary

Issues Involved:
1. Whether there was a default by the Corporate Debtor.
2. Whether the date of default was correctly reflected in the application filed under Section 7 of the Insolvency & Bankruptcy Code, 2016.
3. Whether the Corporate Debtor was entitled to the benefit of restructuring under RBI Circular dated 17.03.2016.
4. Whether the classification of the loan account as Non-Performing Asset (NPA) was correct.

Summary:

1. Default by Corporate Debtor:
The Appellant, Designated Partner of Suryadeep Multipurpose Cold Storage LLP, contended that there was no default as the debt was not due. However, the Respondent (Bank of India) argued that despite restructuring, the Corporate Debtor failed to meet its financial obligations. The Tribunal noted that the Corporate Debtor had acknowledged its default in a letter dated 19.10.2020, admitting the NPA status as of 30.09.2019. The Tribunal found that the Corporate Debtor had defaulted on interest payments, which was not covered by the moratorium, and thus, there was a clear default.

2. Date of Default:
The Appellant argued that the date of default was unclear, with different dates mentioned (01.06.2019 and 01.04.2019). The Tribunal observed that the loan accounts were classified as NPA on 30.09.2019 due to non-payment of interest, which was consistent with the RBI Prudential Norms. The Tribunal found the arguments about different default dates unconvincing, as the loan accounts were regularized and then defaulted again.

3. Benefit of Restructuring:
The Appellant claimed that the Corporate Debtor, being an MSME, was entitled to restructuring benefits under the RBI Circular dated 17.03.2016. The Respondent clarified that the restructuring was granted, but the moratorium applied only to the principal amount, not the interest. The Tribunal agreed with the Respondent, noting that the restructuring letter dated 30.03.2019 clearly stipulated that interest was to be paid monthly.

4. Classification as NPA:
The Appellant contended that the classification of the loan account as NPA on 30.09.2019 was incorrect. The Respondent maintained that the classification was in line with RBI Prudential Norms due to non-payment of interest. The Tribunal found that the loan accounts were correctly classified as NPA, as the Corporate Debtor had failed to meet its repayment obligations.

Conclusion:
The Tribunal found no error in the Impugned Order, which had considered all facts and concluded that there was a default by the Corporate Debtor. The Appeal was dismissed with no costs, and any Interlocutory Applications were closed.