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TMI Blog2017 (10) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... ement) Rules, 2002 and again published in Indian Express and Andhra Jyothy in April, 2017, Notice Prior to Sale under Rule 8(5) and 8(6) of Security Interest (Enforcement) Rules in May 2017 and E-auction sale notice in July, 2017 etc, which involved substantial cost to the Financial Creditor/Bank. Therefore, we impose a cost of ₹ 10 lakhs on the Corporate Debtor. - C.P. (I.B.) NO.128/10/HDB/2017 - - - Dated:- 14-8-2017 - MR. RAJESWARA RAO VITTANALA AND MR. RAVIKUMAR DURAISAMY, JJ. For The Applicant : A.S. Prashanth, G. Siva Kumar and Amir Bavani, Advs. For The Respondent : G. Durga Bose, Adv. ORDER Per : Rajeswara Rao Vittanala, Member (J) 1. The Company petition bearing C.P. No. (IB)/128/10/HDB/2017 is filed by Neeta Chemicals (I) Pvt. Ltd, (herein after referred to as Corporate Debtor/NCI PL), under Section 10 of the Insolvency and Bankruptcy Code, 2016 ('IBC') read with Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ('Rules') by seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of Neeta Chemicals (I) Pvt. Ltd under IBC, 2016. 2. Brief facts of the case, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - be paid within sixty (60) days from the date of the Demand Notice. The Demand Notice also put the Corporate Debtor and the Guarantors to notice, under Section 13(13) of the SARFAESI Act as not to dispose of any of the mortgaged properties. The Demand Notice was also got published in Deccan Chronicle, English daily newspaper, and Eenadu, Telugu daily newspaper, on 10th January 2017 and 13th January 2017. (7) Instead of paying the outstanding due amount or regularizing the loan account, the Corporate Debtor got issued a Reply Notice dated January 3, 2017 to the Demand Notice by denying the outstanding due amount, execution of the loan documents etc. In reply, the Bank got issued a Rejoinder on March 4, 2017 to the Demand Notice disputing all the allegations made in the Reply to the Demand Notice, and again called upon the Corporate Debtor and the Guarantors to discharge the outstanding due amount. (8) The Corporate Debtor had not made any payment of the outstanding due amount. So Financial Creditor/ the Bank got issued the Possession Notice dated April 17, 2017 under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 and has also taken possession of the properties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also the statutory authorities. Details of defaults towards SBI: Declaration of account of the Corporate Debtor as Non-Performing Asset ('NPA') on 26.12.2013. Demand Notice dated 22.11.2016 issued by SBI. Notice under Section 13(2) of SARFAESI Act, 2002 issued by SBI. Possession Notices dated 17.04.2017 and 18.04.2017 issued by SBI. Notice prior to sale dated 03.05.2017 issued by SBI. Apart from the above proof of defaults, the SBI has itself admitted/submitted in its Reply dated 03.08.2017 that the Corporate Debtor has consistently defaulted in making payments to SBI. Financials of the Company are supported by the following documents : Independent Auditors' for the year ending 31.03.2016/Default by the Company. Balance Sheet as at 31.03.2016. Provisional Balance Sheet as at 31.03.2017. Provisional Balance Sheet as at 15.06.2017. SARFAESI proceedings initiated by SBI: SBI has declared the account of Corporate Debtor as Non-Performing Asset on 26.12.2013. SBI has further issued notice dated 01.12.2016 under Section 13(2) of the SARFAESI Act. SBI has further issued Possession Notices dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. This Bench has no legislative authority to expand the meaning of the term, its even under the umbrella of 'Ejusdem generis 8. The outcome of this discussion is that the Moratorium shall prohibit the action against the properties reflected in the Balance Sheet of the Corporate Debtor. The Moratorium has no application on the properties beyond the ownership of the Corporate Debtor. For the sake of completeness, it is worth to refer that the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (the SARFAESI Act) may be having different criteria for enforcement of recovery of outstanding debt, which is not the subject matter of this Bench. Before I part with it is necessary to clarify my humble view that the SARFAESI Act may come within the ambits of Moratorium if an action is to foreclose or to recover or to create any interest in respect of the property belonged to or owned by a Corporate Debtor, otherwise not. 9. To conclude the Application under Section 10 of the Code is hereby Admitted subject to the exception as carved out supra . 6. In the light of above facts, provisions of IBC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not entail automatic admission if all the criteria laid down in that section are technically satisfied/fulfilled. (g) It is also stated that the Tribunal has power to impose fine for malicious or fraudulent initiation of proceedings. The Corporate Debtor is very well aware of all the steps taken by Financial Creditor to recover the loan amount due, has initiated the instant CIRP with mala fide intention to stifle the proceedings initiated under the SARFAESI Act and with an intention to harass Financial Creditor. Since notification has already been given for E-Auction to be held on August 28, 2017, the present petition should not be entertained by the Tribunal. It is, therefore, prayed that Tribunal may dismiss the application with a penalty as provided for in Section 65 of the IBC, in the interest of justice. (h) He has relied upon the decision of NCLT /Mumbai Bench passed on 22nd June, 2017 in the case of Leo Duct Engineers Consultants Ltd. Wherein, after discussing the merits of case filed under Section 10 of IBC, the Adjudicating Authority has dismissed the case. 8. In the light of above facts and circumstances of the case, the fundamental issue arise for considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Corporate applicant (M/s Neeta Chemicals) dated 14.12.2016 (Annexure -8(v) pages 87 to 92 ). The said legal notice 22nd November, 2016 (Annexure 8(iii) pages 65 to 72 ) issued on behalf of SBI, by giving all details of loans and various mortgages, called upon the Corporate Debtor to discharge outstanding balance of ₹ 324, 64,55,653/ together with ₹ 10,000/ towards cost of the notice within 15 days from the date of receipt of notice with a stipulation that they would initiate appropriate legal proceedings apart from invoking provisions of SARFAESI ACT, in case they failed to pay the outstanding amount. In the reply to the said notice, a reply dated 14th December, 2016 (Annexure 8(v) page 87 to 92) got issued by the Corporate Debtor, through their counsel Mr. B. Sreenivas Reddy, Advocate. In the legal notice, all the claims of Bank with regard to outstanding amount, security assets and the declaration of account as NPA etc are totally denied, and on the contrary and surprisingly, asked the Bank to prove its claims with Corporate Debtor within seven days by furnishing all relevant documents with regard to sanction of loans, mortgages etc made with them etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the entire loans extended by the Bank and assets mortgaged are disputed issues and the Bank has to prove its bona fide in extending loans to the Corporate Debtor. And top of it, they are threatening the Bank with legal consequences for initiating action under SARFAESI Act, 2002. However, the learned counsel for the Corporate Debtor, contrary to the above documentary evidence, in order to maintain the present petition under IBC, is asserting that there is an admitted debt and default in question, and the application deemed to be admitted as a matter of right. 15. As per the statement (Annexure 14, page 185-186) the sole financial Creditor is State Bank of India/Financial Creditor with total outstanding amount is ₹ 324 Crores as on 15.06.2017. The total trade liabilities are ₹ 9,25,67,891/ (pages 187 188). And the total statutory liabilities consisting of Income tax, Commercial tax, sales tax are ₹ 2,17,900,360/- (page 189). So these details of debt clearly show that there will be no purpose to initiate CIRP in question. Ultimately, it is the Bank's propriety prevails even in Insolvency process proposed to be initiated by Corporate Debtor. As stated sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We have no doubt in our mind that the present application is filed on frivolous and mischievous grounds with a mala fide intention and un-clean hands to take advantage of provisions of IBC, 2016. Therefore, it is a fit case to impose exemplary costs for invoking provisions of IBC. 18. As stated supra, it is not the case of Corporate Debtor that in the decisions relied upon, the Adjudicating Authority has not concluded the issue raised therein is decided mechanically without application of mind to facts and the circumstances as available in that case. The Hon'ble NCLAT has subsequently examined the legality of decision(s) rendered by the Adjudicating Authority in particular case(s). As detailed supra, we have given our anxious thought to the issue in question in the light of various provisions of IBC and come to conclusion as explained in this order. 19. In the above circumstances, we are of the considered view that the Corporate Debtor has failed to satisfy the Adjudicating Authority as per various provisions especially Section 10 of IBC, for admission of the case. Therefore, it is not a fit case to admit the case. 20. As stated supra, the account of Corporate Debto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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