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TMI Blog2018 (12) TMI 1834X X X X Extracts X X X X X X X X Extracts X X X X ..... above. The Banks have tried its level best to regularise the accounts of corporate debtor by various methods like restructuring terms of loans, further finance etc. However, the Corporate Debtor failed to act to the satisfaction of Banks. Therefore, the Banks have resorted various legal remedies available to them under SARFAESI, initiating proceedings before DRT, DRAT by the Banks and the Respondent too has filed criminal cases against the official of Bank and other people. There are serious allegations of fraud and cheating on the part Corporate Debtor in diverting funds of the Company resulting registering a case by the CBI against the personnel of Corporate Debtor. It is a settled position of law that IBC is a codified law with a particular object behind it, in order to provide speedy remedy to resolve the disputes arise in corporate sector - the account of Corporate Debtor was declared as NPA by all consortium of Banks as early as 2010 and onwards, and the efforts made by the Banks to restructure the loans were failed. So far as the contention with regard to laches and limitation is concerned, as raised on behalf of Corporate, it is to be noted that there are various procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure Pvt. Ltd., (Respondent/ Corporate Debtor/ MCPL) is Company incorporated with Registrar of Companies on 7.12.1977. Its Authorised Share Capital is 17,00,00,000/- (Rupees Seventeen Crores Only) and Paid up Capital is ₹ 15,00,00,000 (Rupees Fifteen Crores Only). 3) The Corporate Debtor, i.e., (M/S. Metal Closures Private Ltd, (hereinafter referred to as 'MCPL') is engaged in manufacturing activities of production of Metal Crown caps, Shoe Polish Containers, Composite Closures, Battery Covers, Plastic Torches etc., from time to time, was granted various credit facilities by way of financial assistance against various assets by a consortium of banks consisting of (i) State Bank of India, Specialised Mid Corporate Branch, Bengaluru ( SBI ); (ii) Punjab National Bank, Large Corporate Branch, M.G. Road C'PNB ); Bengaluru, (iii) Corporation Bank, Industrial Finance Branch, Bengaluru and (iv) UCO Bank, Mid Corporate Branch, Bengaluru, creating security interest in favour of the consortium. The credit facilities were secured in favour of the financial creditor by way of hypothecation of all its movable properties and mortgage of several immovable properties. 4) SBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led in the Sanction letter, to be shared on pari-passu basis between the Members of the SBI Consortium Banks (SBI, CB, PNB UCO Bank). In this said sanction letter, it is also made clear that exposure of the Banks are SBI -₹ 83.33 crores, PNB - ₹ 42.62 crores, Corporation Bank ₹ 24.30 crores and UCO Bank - ₹ 10 crores in the aggregate - ₹ 160.25 crores. 9) Thereafter, at the request of the Corporate Debtor, all the above financial institutions, from time to time, were renewing/ continuing/ enhancing the credit facilities. By Capital Consortium Agreement dated 18.4.2013, the Respondent has acknowledged availing various Credit facilitated in the aggregate to the extent of ₹ 128. Crores referred to in the First Schedule and a.greed to repay the same together with interest, costs and charges as stated therein. Thereafter, at the request of the Corporate Debtor, the SBI vide its sanction letter dated 07.02.2014 continues the existing credit facilities of ₹ 68.88 crores to the Corporate Debtor in the form of cash Credit, term loan, corporate loan, Bank Guarantee, etc. 10) Thereafter, by another Working Capital Consortium Agreement dated 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings held on 21.06.2014 in which Mr. Prashanth Hegde, Managing Director of MCPL was present, it was decided that concurrent auditor would be appointed if necessary, and minutes of the meeting held on 21.06.2014. On 08.07.2014, the Deputy General Manager, SBI, requested for approval for change in nonperforming asset (NPA) date of MCPL from 28.05.2014 to 31.01.2010, in view of the failure of the restructuring, and the same was approved on 10.07.2014. The Communication dated 08.07.2014 issued by the Deputy General Manager, SBI. At the consortium meeting held on 22.07.2014 in which Mr. Prashanth Hedge, Managing Director of MCPL was present, it was agreed that a concurrent auditor would be appointed at Bangalore unit to overseas all payments and receipts and that security guards would be appointed at the Bengaluru unit of the Company. On 11.08.2014, the Managing Director of MCPL addressed a letter thanking SBI for posting security at the Bangalore and Kunigal units of MCPL and requesting them to provide security in the Himachal Pradesh unit. 14) At the consortium meeting held on 16.08.2014, appointment of Sankaran Krishnan, Chartered Accountants, as concurrent auditor and Kashi Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Metal Closures Private Limited to cover three of its subsidiaries. On 07.07.2015, a letter was issued by SBI withdrawing the initiation of SARFAESI proceedings vide Section 13(2) notice dated 12.08.2014. On 15.09.2015, notice under Section 13(2) of the SARFAESI Act, 2002, was issued by SBI on behalf of the consortium of Banks calling upon MCPL to pay a sum of ₹ 190,35,73,128.31/-. 17) On 11.12.2015, possession notice was issued to MCPL regarding the Bengaluru unit. On 14.12.2015, possession notice was issued in relation to the Kunigal unit. Thereafter, on 21.01.2016, possession notice was issued in relation to the Himachal Pradesh unit of MCPL. The said possession notices were issued by SBI on behalf of the consortium of banks. And thereafter, the consortium of Banks filed petitions U/s 14 of the SARFAESI Act, 2002, seeking orders to take physical possession of the Kunigal unit, Kanakapura Road (Bengaluru) unit and Himachal Pradesh unit on 26.12.2015, 29.12.2015 and 29.02.2016 respectively. On 28.12.2015, the consortium of Banks filed O.A. No. 21/2016 seeking recovery of a sum of ₹ 200,07,06,237.21/- as on 27.12.2015 from the borrower MCPL as well as its guarantors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.31/-. The Petitioner has filed IA No. 150/2013 by seeking permission to amend the present application, and it was allowed by the Tribunal vide order dated 11.07.2018 by permitting it to carry on the amendment as prayed for. Accordingly, an amended copy was filed along with relevant documents. The Corporate debtor is due of the amount in question, and has committed default of the same as per the provisions of Insolvency and Bankruptcy Code, 2016. And the application/ petition is filed in accordance with code and thus it is a fit case to initiate Corporate Insolvency Resolution process under the Code. The date of default in the instant case is each day, when the Corporate Debtor failed to service its instalments and interest as required under the loan documents. 3. M/S. Metal Closure Pvt. Ltd (MCPL), Corporate Debtor, has filed its statement of objections dated 09.08.2018 by inter-alia contending as follows: a) The Applicant/ Petitioner has filed instant Company Petition by suppressing of material facts and the same has not filed in accordance of section 7 of the Code. The Bank has failed to mention the dates on which the total credit amount of ₹ 139.82 Crores was disb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Banks were responsible for downfall of its business leading its accounts with Banks to NPA. Therefore, the Petition is liable to be rejected. 4. Heard Shri SS Naganand, the learned Senior Counsel along with Pradeep Darak, learned Counsel for Petitioner, and Shri Anant Mandgi and Shri K.G.Raghavan, learned Senior Counsel along with Nichal Dev, Ms. T. Ridhima for the Respondent. We have carefully perused all the pleadings of the both the parties along with the material papers filed in their support and Citations filed by the parties. 5. Shri S.S.Naganand, the Learned Senior Counsel, while reiterating various averments made in the pleadings filed in support of the petitioner, has further, inter alia submitted that the instant company petition is filed in accordance with law and the initiation of proceedings under provisions of SARFAESI Act, 2002,or suit pending under Section 19 of DRT Act, 1993 or Appeal pending before DRAT are not bar to initiate CIRP under the code. As per section 7 (l) of code, a default is in respect of financial debt owed to any financial creditor of the Corporate Debtor, and it need not be a debt owed to the applicant Financial 'Creditor. As long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete, there are not disciplinary proceedings against name Resolution Professional, the Adjudicating Authority may by an order admit the case by initiating CIRP against Corporate Debtor, appointing Resolution Professional, imposing moratorium etc, failing which application can be rejected. 7. We may advert to law on the question of admission/ rejection of case filed under section 7 of Code. The Hon'ble NCLAT, vide its order dated 15th May 2017 passed in Company Appeal (AT) (Insolvency) No. 1 2/2017 in the matter of M/S Innovative Industries Ltd. Vs. ICICI Bank and another, has dealt the issue in a case filed under section 7 of Code under paras 55 to 58, which we are extracted below: 55) Process of initiation of Insolvency Resolution process by a financial creditor is provided in Section 7 of the I B Code. As per sub-section (1) of Section 7 of the I B Code, the trigger for filing of an application by a financial creditor before the Adjudicating Authority is when a default in respect of any financial debt has occurred. Sub-section (2) of Section 7 provides that the financial creditor shall make an application in prescribed form and manner and with prescribed doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Il, particulars of the proposed interim resolution professional in part Ill, 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. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7 (5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banks became NPAs right from 2010 as detailed supra. The Applicants have initiated action by filing petition under section 14 of SARFAESI Acts,2002 on 26.12.2015,29.12.15 and 29.02.2015 by seeking orders to take physical possession of Kunigal unit, Kanakapura Road, Bengaluru Unit and H.P.Unit respectively. They have also filed OA No. 21 of 2016 before DRT by seeking recovery of ₹ 200,07,06,237.21/- on 27.12.2015. And the Corporate Debtor has filed counter claim for ₹ 1299.53 crores in the same OA against the Consortium of Banks. Basing on Forensic Audit Report dated 17.03.2016 submitted by M/S Risk Ricter in respect of Corporate Debtor, it was discovered that stocks have been inflated by the borrower in order to increase the drawing limit. Accordingly, the fraud was reported to RBI vide SBI report dated 30.05.2016. The Corporate Debtor used to issue Balance Confirmation letters dated 18.04.2013, 21.06.2014 etc to the Bank by inter-alia confirming balance accounts as on 31.03.2013, 31.03.2014. Therefore, the contention of the respondent that the debt is barred by laches and limitation is not at tenable. Moreover, as long as loan disbursed not repaid, it deemed to be cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, we are tatisfied that the instant Company petition deserves to be admittecl in consonance with ratio as laid down by the Hon'ble NCLAT and the Hon ble Supreme Court in various cases as referred to above. 10. In view of the above facts and circumstances of case, and by exercising powers conferred on this Adjudicating Authority, U/ s 7 (5) (a) and other extant provisions of IBC, 2016, the following orders are passed:- 1) C.P (IB) No. 103/BB/2018 66/BB/2018 is hereby admitted by initiating CIRP in respect of M/S. Metal Closure Pvt. Ltd), Corporate Debtor; 2) Mr. Abhishek Nagori, No.330/348, 3rd Floor, Tower-A, Atlantis K- 10, Opp. Vadodara Central, Sarabhai Main Road, Vadodara390007, Gujarat, who is a qualified Resolution Professional vide Reg. No. IBBI/IPA-001/IP-P00020/2016-2017/ 10044, is hereby appointed as Interim Resolution Professional, in respect of the Corporate Debtor to carry on the functions as mentioned under the Insolvency Bankruptcy Code.2016 and various rules issued by IBBI 3) The following moratorium is declared prohibiting all of the following, namely: (a) the institution of suits or continuation of pending suits or proceedings against the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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